<PAGE>
 
                                                                      Exhibit 13
                                                                      ----------

 
                                                                 DRAFT: 03/05/96



                                     1995


                                 ANNUAL REPORT


                              FINANCIAL SECTIONS
 
<TABLE>
<CAPTION>
                                                                    PAGE
                                                                    ----
               <S>                                                 <C>
 
               Consolidated Financial Highlights (Inside Cover)    2
               Contents of Financial Section                       3
               MD&A                                                4 - 43
               Management's and Accountants' Reports               44 - 46
               Audited Financial Statements                        47 - 81
               Supplemental Data                                   81 - 95
</TABLE>

                                       1

<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollar amounts in thousands, except per share)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                                  1995            1994      
                                                                      ----------       --------   
<S>                                                                   <C>              <C>        
EARNINGS AND DIVIDENDS APPLICABLE TO COMMON SHARES                                                
Income before cumulative effect of a                                                              
change in accounting principle (a)............................          $ 452,237       $248,792  
Net income....................................................            452,237        245,362  
Cash dividends declared.......................................            201,895        175,103  
                                                                                                  
PER SHARE                                                                                         
Income before cumulative effect of a                                      
  change in accounting principle (a)..........................            $  3.22         $ 1.75                           
Net income....................................................               3.22           1.73  
Cash dividends declared.......................................               1.44           1.24  
Book value....................................................              17.24          16.22  
                                                                                                  
SELECTED FINANCIAL RATIOS                                                                         
Return on average total assets (a)(b).........................               1.59%          0.90% 
Return on average common shareholders' equity (a)(b)..........              19.59          10.96  
Net interest margin...........................................               5.97           5.80  
Tier 1 leverage ratio.........................................               7.62           7.79  
Tier 1 capital ratio..........................................               8.41           8.64  
Total capital ratio...........................................              12.09          12.43  
Allowance for loan losses to loans............................               2.35           2.44  
Non-performing assets to loans plus OREO......................               0.81           1.51  
Non-performing assets to total assets.........................               0.58           1.06  
Allowance for loan losses to non-performing loans.............              341.8          203.3  
                                                                                                  
                                                                                                  
                                                                                                  
FINANCIAL POSITION AT DECEMBER 31,                                        1995           1994     
                                                                      -----------    -----------  
                                                                                                  
Assets........................................................        $29,620,616    $29,325,136  
                                                                      ===========    ===========  
Loans.........................................................        $21,046,535    $20,526,216  
                                                                      ===========    ===========  
Deposits......................................................        $21,502,433    $22,040,886  
                                                                      ===========    ===========  
Shareholders' equity..........................................        $ 2,379,419    $ 2,350,114  
                                                                      ===========    ===========   
</TABLE>

___________________________
(a)  Selected financial results, excluding a net after-tax restructuring charge
     of  $62.5 million, or $0.44 per share related to a process redesign and an
     after-tax gain of  $11.8 million, or $0.08 per share related to a change in
     ownership interests in an affiliate joint venture, both recorded in 1995,
     and after-tax merger-related charges of  $167.4 million, or $1.17 per
     share, recorded in 1994, were as follows:

<TABLE>
<CAPTION>
                                                                        1995          1994   
                                                                      ---------     --------
     <S>                                                              <C>           <C>     
     Income before cumulative effect of a
      change in accounting principle..........................        $ 502,951     $416,239 
     Per share................................................            $3.58        $2.92
     Return on average total assets (b).......................             1.77%        1.50%
     Return on average common shareholders'                                                  
      equity (b)..............................................            21.78        18.34
</TABLE>

(b)  Return on average total assets and return on average common shareholders'
     equity are calculated on income before cumulative effect of a change in
     accounting principle.

                                       2
<PAGE>
 
1995 ANNUAL REPORT



CORESTATES FINANCIAL CORP AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONTENTS OF FINANCIAL SECTION                                                                            PAGE
                                                                                                         ----
<S>                                                                                                      <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                                                          
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................           4
                                                                                                 
FINANCIAL STATEMENTS                                                                             
                                                                                                 
Management's Report on Internal Controls Over Financial Reporting...............................          44
Independent Accountants' Report and Report of Independent Auditors..............................         45-46
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993..........          47
Consolidated Balance Sheets as of December 31, 1995 and 1994....................................          48
Consolidated Statements of Changes in Shareholders' Equity for the years ended                   
   December 31, 1995, 1994 and 1993.............................................................          49
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993......         50-51
Notes to the Consolidated Financial Statements..................................................         52-80
                                                                                                 
SUPPLEMENTAL FINANCIAL DATA                                                                      
                                                                                                 
Five Year Average Balance Sheet, Statement of Income and Balance Sheet..........................         81-86
Rate/Volume Analysis Taxable Equivalent Basis...................................................          87
Loan Portfolio, Risk Elements and Allowance for Loan Losses Data................................         88-92
Selected Maturity and Interest Sensitivity Data.................................................         92-95
</TABLE>

                                       3
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

A primary strategic focus for CoreStates Financial Corp ("CoreStates") in 1995
involved Building Exceptional Service Together ("BEST"), its corporate-wide
process redesign.  Another major strategic accomplishment in 1995 was the
signing on October 10, 1995 of a definitive agreement to acquire the $14.8
billion asset Meridian Bancorp, Inc., in a transaction which is expected to
enhance shareholder value, strategic growth in products and markets, and
franchise value.  See "Strategic Actions in 1995" beginning on page 7.

EARNINGS - In 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
BEST. CoreStates' "operating earnings" for 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 in 1994. Operating
earnings for 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 in 1995, compared to net income of $245.4 million,
or $1.73 per share in 1994.

Operating results, key performance ratios and per share information are
summarized in the following table (in millions, except per share):

<TABLE>
<CAPTION>
                                                                                                           Percentage
                                                                                                      Increase (Decrease)
                                                                                                    ----------------------
                                                        1995          1994           1993           '95/'94        '94/'93
                                                      --------      --------       --------         -------        -------

<S>                                                   <C>           <C>            <C>              <C>            <C>
Net interest income (taxable equivalent basis)...     $1,505.8      $1,410.6       $1,351.8           6.7%           4.4%
                                                      ========      ========       ========
Income before the cumulative effect of a
     change in accounting principle..............     $  452.2      $  248.8       $  362.4          81.8          (31.3)
Exclude after-tax effects of:
     Net restructuring charge....................         62.5             -              -
     Gain on joint venture.......................        (11.8)            -              -
     Merger-related charges......................            -         167.4              -
                                                      --------      --------       --------
Operating earnings...............................     $  502.9      $  416.2       $  362.4          20.8           14.8
                                                      ========      ========       ========

Operating earnings per share.....................     $   3.58      $   2.92       $   2.49          22.6           17.3
                                                      ========      ========       ========

Return on average assets (a).....................         1.77%         1.50%          1.31%
Return on average equity (a).....................        21.78         18.34          16.49
Net interest margin..............................         5.97          5.80           5.59
Expense/revenue ratio............................        56.22         60.99          62.70

Average common shares outstanding................      140.600       142.498        145.398
</TABLE>

_________________
(a)  Calculated based on "Operating earnings."

                                       4
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

OVERVIEW - continued

The largest contributor to the $86.7 million improvement in operating earnings
for 1995 was a $95.2 million, or 6.7% increase in taxable equivalent net
interest income. The net interest margin for 1995 was 5.97%, 17 basis points
above 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
("Congress Financial"), CoreStates' commercial finance subsidiary. Of
CoreStates' two sources of operating revenue, net interest income and non-
interest income, net interest income is the largest, comprising 71% of total
revenue in both 1995 and 1994. 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. For a detailed description of
CoreStates' interest rate risk management practices, see the "Asset and
Liability Management" section beginning on page 25.

Also contributing to the improvement in 1995 operating earnings was a $26.7
million, or 2.2%, decrease in non-financial expenses excluding significant and
unusual items as discussed on page 41, and a $13.7 million, or 2.4%, increase in
non-interest income, excluding the significant and unusual items as discussed on
page 39. The financial impact of those aspects of the process redesign
implemented during 1995 was to increase revenue by $6.1 million and decrease 
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.

Key performance measures based on operating earnings improved again in 1995 and
are at their highest in CoreStates history and among the highest in the banking
industry. Returns on average equity and assets were 21.78% and 1.77%,
respectively, in 1995, compared to 18.34% and 1.50%, respectively, in 1994. The
1995 Salomon Brothers Superregional Bank composites for returns on average
equity and assets were 16.90% and 1.33%, respectively. The Salomon Brothers
Superregional Bank composite includes CoreStates and is comprised of 19 U.S.
Superregional banking companies.

CoreStates' expense/revenue ratio (total operating expenses, excluding other
real estate owned expenses, as a percentage of total revenues) was 56.2% in
1995. This compares to an expense ratio of 61.0% in 1994. The expense/revenue
ratio improved throughout each quarter of 1995 as a result of the process
redesign and merger-related efficiencies.

The business line segment experiencing the highest growth in 1995 was Consumer
Financial Services, which generated a $55.7 million, or 45.5%, increase in its
net income for 1995, reflecting a $63.5 million, or 9.4%, increase in net
interest income and a $27.0 million, or 4.5%, decline in non-financial expenses.
Consumer Financial Services' growth in net interest income was primarily driven
by higher average credit card balances and wider deposit spreads. The decline in
non-financial expenses resulted from the impact of the process redesign and
reduced FDIC premiums. The Wholesale Banking segment, the largest contributor to
net income, also made a strong contribution to 1995 operating earnings growth,
improving net income by $43.5 million, or 20.4%. For a more detailed analysis of
the performance of CoreStates' business lines, refer to the "Business Line
Results" section beginning on page 10.

     RESTRUCTURING CHARGE - In March 1995, CoreStates completed an intensive
     --------------------                                                   
review of its operations and businesses and announced a corporate-wide process
redesign plan, which restructured its banking services around customers and
enhanced employees' authority to make decisions to benefit customers. As a
result of this process redesign, CoreStates recorded a $110.0 million pre-tax
restructuring charge, $70.0 million after-tax or $0.49 per share in March 1995.
In subsequent quarters, CoreStates recorded restructuring credits of $11.8
million, $7.5 million after-tax or $0.05 per share, primarily related to gains
on the curtailment of pension benefits associated with employees displaced
during 1995 and gains on the sale of branches which were sold as a result of the
process redesign. For a more detailed discussion of the process redesign and
related restructuring charge, see "Strategic Action in 1995 - Process Redesign"
beginning on page 8.

                                       5
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

OVERVIEW - continued

     GAIN ON AFFILIATE JOINT VENTURE - In March 1995, Electronic Payment
     -------------------------------
Services, Inc. ("EPS"), an 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 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.

     NON-PERFORMING ASSETS - Non-performing assets at December 31, 1995 totaled
     ---------------------                                                     
$171.5 million, a decline of $139.4 million or 44.8% from December 31, 1994. 
Non-performing real estate assets were down $78.4 million or 40.5% and non-
performing commercial loans were down $35.1 million or 40.3%. At December 31,
1995 the allowance for loan losses of $495.1 million was 341.8% of non-
performing loans. This compares to $500.6 million and 203.3% at December 31,
1994.

     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 writedown of
purchased mortgage servicing rights and related assets, and $63.7 million for
expenses directly attributable to the acquisitions including $13.0 million of
severance costs related to approximately 715 employees.

COMPARISON OF 1994 TO 1993 - CoreStates' operating earnings for 1994 of $416.2
--------------------------                                                     
million, or $2.92 per share, grew 17.3% on a per share basis when compared to
$362.4 million or $2.49 per share in 1993.  The growth in 1994 operating
earnings was primarily due to a $58.8 million, or 4.4% increase in taxable
equivalent net interest income, improved credit quality resulting in a $19.3
million, or 15.9%, reduction in the provision for losses on loans (excluding the
$145.0 million of merger-related provisions recorded in 1994) and a $33.0
million decline in non-financial expenses excluding merger-related charges.

ACCOUNTING CHANGES AFFECTING PRIOR YEARS' INCOME - 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 ("the FASB") 1994 interpretation of
Statement of Financial Accounting Standards No. 115 ("FAS 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.

Effective January 1, 1993, CoreStates adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("FAS
112"). FAS 112 requires that employers accrue the costs associated with
providing benefits, such as salary and benefit continuation under disability
plans, when payment of the benefits is probable and the amount of the obligation
can be reasonably estimated. CoreStates recognized the January 1, 1993
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 in 1993.

                                       6
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

STRATEGIC ACTIONS IN 1995

ACQUISITIONS

CoreStates' strategy for growth focuses first on servicing existing customers
and second on expanding its businesses and customer base. CoreStates evaluates
merger and acquisition opportunities of both banks and non-banks where potential
for shareholder value enhancement, strategic growth and franchise development
exist. CoreStates makes acquisitions to supplement corporate and business line
strategies, not solely to drive earnings growth. Emphasis is placed on
opportunities which extend existing markets into adjacent geography and deepen
market share within existing markets. Acquisition opportunities are evaluated by
a specialized staff aided by teams of business line managers who are responsible
for planning and executing due diligence and integration activities.

PENDING ACQUISITION OF MERIDIAN - On October 10, 1995, CoreStates and Meridian
-------------------------------                                               
Bancorp, Inc. ("Meridian") announced a definitive agreement to merge. Meridian
is a Pennsylvania bank holding company with approximately $14.8 billion in
assets and $11.2 billion in deposits. Approval by shareholders of both companies
was received on February 6, 1996 and assuming approval by regulators, the
transaction is expected to close during the first half of 1996. For each
Meridian common share outstanding, 1.225 shares of CoreStates common stock will
be issued. Based on the October 9, 1995 closing share price, the transaction
would be valued at approximately $3.2 billion. The transaction is expected to be
accounted for under the pooling of interests method of accounting.

Strategically, this acquisition will: combine two strong performing banking
companies; create a leading market position in the region that includes the
prime economic centers of eastern Pennsylvania, northern Delaware, and central
New Jersey; extend the combined company's market to 47 counties in the three
states; and create a company with $3.7 billion of equity having the resources
and capital to support investments in growth and in improved services to
customers.

Similar to CoreStates, in June 1995 Meridian completed an internal review of its
operations and businesses and announced a company-wide plan ("59.9") designed to
improve its operating performance and competitive position. Implementation of
the Meridian plan began at the end of the second quarter of 1995 and will
continue over approximately the next twelve months from that date. At the end of
that period, this process is expected to reduce net operating expenses on an
annualized pre-tax basis by $55 million, while providing recurring revenue
enhancements of $13 million, increasing Meridian's net income on an annual basis
by $0.78 per Meridian common share.

In addition to the cost efficiencies and revenue enhancements expected from
implementation of BEST and "59.9", CoreStates expects this in-market acquisition
to achieve pre-tax operating efficiencies of approximately $186.0 million, and
to add to earnings per share in 1997. Excluding 1996 credit and merger-related
charges of approximately $175.0 million, this transaction is expected to be
approximately 7% dilutive to 1996 earnings per share.

On February 23, 1996, Meridian acquired United Counties Bancorporation ("United
Counties"), a $1.6 billion asset New Jersey bank holding company in a
transaction accounted for as a pooling of interests. For each United Counties
common share outstanding, 5.0 shares of Meridian's common stock were issued.

Pending regulatory approvals, consolidations of bank subsidiaries and operations
are expected to begin in the third quarter of 1996 with the consolidation of
Meridian's Pennsylvania bank subsidiary into CoreStates' lead Pennsylvania bank,
CoreStates Bank, N.A. ("CBNA"). Other consolidations also scheduled for the
third quarter of 1996 include the combination of Meridian Bank NJ and United
Counties Bank into CoreStates New Jersey National Bank ("NJNB") and the
consolidation of Meridian's Delaware Trust Company into CBNA. The interstate
consolidation of CBNA and NJNB, previously scheduled for January 1996, has been
postponed until the fourth quarter of 1996 in order to accommodate the
consolidations of the Meridian bank subsidiaries.

                                       7
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

STRATEGIC ACTIONS IN 1995 - continued


A summary of 1995 selected unaudited financial information for Meridian and
United Counties follows:

OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands, except per share)                                  

<TABLE> 
<CAPTION> 
                                                                                United
                                                              Meridian          Counties
                                                              --------          --------
<S>                                                           <C>              <C>
Net income............................................        $169,814 (a)     $32,189 (b)
Per common share......................................            2.98 (a)       15.00 (b)
Average common shares outstanding.....................          55,951           2,146
Excluding Meridian's restructuring
 charge/United Counties' securities gains:
      Net income......................................        $199,591         $23,551
      Per common share................................            3.51           10.97
      Return on average total assets..................            1.36%           1.47%
      Return on average common                                   
       shareholders' equity...........................           16.08            12.2 

BALANCE SHEET AT DECEMBER 31, 1995
(in millions, except per share)

Assets................................................        $ 14,758         $ 1,621
Loans.................................................          10,164             387
Deposits..............................................          11,150           1,312
Shareholders' equity..................................           1,306             205
Book value per share..................................           23.24           95.19
</TABLE>

_______________
(a)  As a result of "59.9", Meridian recorded a restructuring charge in the
     second quarter of 1995 of $32.0 million ($20.8 million after-tax or $0.37
     per Meridian common share).
(b)  Includes gains of $13.8 million ($8.6 million after-tax or $4.03 per
     United Counties share) on the exchange of investment securities.

NATIONWIDE REMITTANCE CENTERS - On January 27, 1995, CoreStates acquired
-----------------------------                                           
Nationwide Remittance Centers, Inc. ("NRC"), the largest independent remittance
processor in the United States. Fees earned by NRC were approximately $20
million.  NRC was merged into CoreStates' third-party remittance processing
company, CashFlex, a subsidiary of CBNA, creating the second largest lockbox
processor in the country at the time of the acquisition.  With the addition of
NRC, CashFlex services more than 60 major financial institutions and processes
approximately 300 million payment items annually.  This acquisition affirmed
CoreStates' commitment to growing its fee-based businesses and to building on
its expertise in cash management.

PROCESS REDESIGN

In order to build upon CoreStates' strong financial condition and sustain
previous financial successes in the competitive financial services environment
in which CoreStates operates, management commenced an intensive review of all
aspects of CoreStates' operations and businesses in September 1994. The
objectives of the process redesign were: (i) to enhance CoreStates' customer
focus; (ii) to accelerate the culture change already in progress at CoreStates;
and (iii) to improve productivity.  In March 1995, CoreStates completed its
review and approved and announced a corporate-wide process redesign plan, which
restructured its banking services around customers and enhanced employees'
authority to make decisions to benefit customers.

                                       8
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED


STRATEGIC ACTIONS IN 1995 - continued

As a result of the process redesign, CoreStates recorded a $110 million
restructuring charge, $70 million after-tax or $0.49 per share, in March 1995.
When complete, the process redesign will result in the elimination of 2,800
positions, or 2,600 full-time equivalent employees.  The breakdown of the
eliminated positions is as follows: (i) 450 positions resulting from a hiring
freeze in place from September 1994 to April 1995; (ii) 530 positions resulting
from expected attrition during implementation of the process redesign; (iii) 930
employees who have elected to accept an enhanced severance package; and (iv) 890
layoffs.  At December 31, 1995, CoreStates had 13,598 full-time equivalent
employees which includes reductions for the impact of the hiring freeze,
attrition and 1,600 employee displacements.  The components of the restructuring
charge and related cash outflow were as follows (in millions):

<TABLE>
<CAPTION>
                                                Restructuring Charge
                                             --------------------------
                                                             Requiring             Cash
                                                               Cash              Outflow
                                             Total            Outflow           To-date(a)
                                             -----            -------           ----------
<S>                                          <C>             <C>                <C>
Severance costs........................      $  72              $72                $28
Office reconfiguration costs...........         16                7                  -
Branch closing costs...................         15                7                  2
Outplacement costs.....................          3                3                  2
Miscellaneous..........................          4                2                  1
                                             -----              ---                ---
        Total..........................      $ 110 (b)          $91                $33
                                             =====              ===                ===
</TABLE>

______________________________________
(a)  CoreStates' liquidity has not been significantly affected by these cash
     outflows.
(b)  Subsequent to recording the $110 million restructuring charge, CoreStates
     recorded restructuring credits of $11.8 million, $7.5 million after-tax or
     $0.05 per share, primarily related to gains on the curtailment of pension
     benefits associated with employees displaced during 1995 and gains on the
     sale of branches which were sold as a result of the process redesign plan.
     The net restructuring charge recorded in 1995 was $98.2 million, or $0.44
     per share.

The severance charge relates to the separation package which will be paid to
those employees who have elected to accept that package and to those employees
laid off. Cash payments under separation packages commenced in April 1995 and
will continue for varying terms. No lump sum severance payments will be made.
The office reconfiguration charge relates to the costs of asset write-offs and
lease buyouts that will be incurred principally in the process of streamlining
and consolidating center city Philadelphia operations. This streamlining and
consolidating process will occur over the 18-month period which began in April
1995. The branch closing charge relates to asset write-offs and lease buyouts
incurred in the process of consolidating and closing 37 branch offices.

Future cash outflows to be incurred in implementing the process redesign plan,
which in accordance with generally accepted accounting principles were not
included in the restructuring charge, will include approximately $12 million for
capital expenditures and approximately $17 million in operating expenses. Since
April 1995, the amount of capital expenditures related to the process redesign
were approximately $8 million and the amount of incremental operating expenses
that were incurred related to the process redesign were approximately $8
million.

     The principal themes of the process redesign plan are as follows:

       .  Redefine the organizational structure around customers, customer
          segments and markets, not products;
       .  Streamline and consolidate functions and processes;
       .  Vacate 1.2 million square feet of occupied space in 45 buildings,
          including the 37 branches;
       .  Use technology to automate services and processes; and
       .  Employ tiered pricing strategies and streamline product pricing.

                                       9
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

STRATEGIC ACTIONS IN 1995 - CONTINUED

     Implementation of the process redesign plan is expected to occur within an
18-month period which began in April 1995. By mid 1996, the process redesign is
expected to generate cost reductions of approximately $180 million and revenue
enhancements which will yield additional revenue of approximately $30 million,
combining to improve CoreStates' net income at an annual rate of $0.90 per
share. The process redesign was originally expected to have a positive impact on
net income of approximately $0.16 per share in 1995 (excluding the restructuring
charge and subsequent credits) and $0.72 per share in 1996. Due to timing, the
impact of the process redesign on 1995 net income was approximately $0.28 per
share, exceeding the original estimate for 1995 by $0.12 per share. The
favorable variance to original projections for 1995 is principally related to
personnel savings and mostly due to the realization of benefits earlier than
planned. CoreStates does not anticipate exceeding the annual run rate of $0.90
per share. A breakdown of expected expense reductions is as follows: personnel
related - $98 million; professional and outside services - $20 million;
occupancy - $18 million; office supplies - $9 million; telecommunications - $5
million; travel and entertainment - $5 million; furnishings - $4 million; and
all other - $21 million. As with any estimates, there are factors beyond
CoreStates' control that could influence the actual results for 1996, such as
changes in economic conditions. As a result, the actual results could differ
materially from these estimates.

BUSINESS LINE RESULTS

     CoreStates utilizes a value-based reporting methodology to facilitate
management's analysis of performance by defined business lines. This process
supports CoreStates' strategic objective of creating superior growth in
shareholder value by focusing on the performance and value creation potential of
CoreStates' component businesses.

     This section of management's discussion and analysis presents the
performance results of CoreStates' four core businesses: Wholesale Banking;
Consumer Financial Services; Trust and Investment Management; and Electronic
Payment Services, Inc. ("EPS"), an affiliate. Each core business is comprised of
well-defined business lines with market or product specific missions.

     Corporate overhead, processing and support costs, and the loan loss
provision are allocated along with the impact of balance sheet management and
hedging activities of CoreStates. A matched maturity transfer pricing system is
used to allocate interest income and interest expense. All business lines in the
four core businesses are allocated equity utilizing regulatory risk-based
capital guidelines as well as each business line's fixed assets and other
capital investment requirements. Intangible assets and associated costs are also
allocated to relevant business units. The development of these allocation
methodologies is a continuous process at CoreStates and as a result, certain
amounts in prior years have been reclassified for comparative purposes.

     The Corporate category includes the income and expense impact of
unallocated equity, unusual or non-recurring items not attributable to the
operating activities of the major business areas, emerging business activities
not directly related to the four major business areas, and miscellaneous items.

     The earnings contribution of these core businesses is reflected in the
table below (in millions):

                                       10
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:  CONTINUED

BUSINESS LINE RESULTS - continued

<TABLE>
<CAPTION>
                                                                               CONSUMER                         TRUST AND
                                               WHOLESALE                       FINANCIAL                        INVESTMENT
(Taxable equivalent basis)                      BANKING                        SERVICES                         MANAGEMENT
                                       -----------------------        ---------------------------       ----------------------------

                                         1995            1994            1995            1994              1995             1994
                                       -------         -------        ----------      ----------        ----------       ----------
<S>                                   <C>              <C>            <C>             <C>               <C>              <C>
Net interest income................   $  666.0         $ 637.5        $   739.3       $   675.8         $   27.4         $   30.4
Provision for losses on loans......       44.6            44.2             59.4            56.6              1.0              1.1
Non-interest income................      229.9           219.9            171.6           175.5             96.6             98.3
Non-financial expenses.............      436.7           462.1            567.5           594.5            100.3            112.9
                                       -------         -------        ---------        --------          -------          -------
Income before income taxes.........      414.6           351.1            284.0           200.2             22.7             14.7
Income tax expense.................      157.8           137.8            106.0            77.9              8.5              5.5
                                       -------         -------        ---------        --------          -------          -------
Net income.........................    $ 256.8         $ 213.3        $   178.0       $   122.3         $   14.2         $    9.2
                                       =======         =======        =========        ========          =======          =======

Return on average assets...........       1.58 %          1.39%            2.24%           1.66%            2.03 %           1.33%

Return on average equity(a)........      27.09           25.01            49.86           34.07            54.62            34.07
Average assets.....................    $16,261         $15,396        $   7,953       $   7,364         $    699         $    692
Average equity(a)..................        948             853              357             359               26               27
</TABLE>

<TABLE>
<CAPTION>
                                              EPS, INC.
                                              AFFILIATE                         CORPORATE                        TOTAL  
                                       ------------------------        ---------------------------       -----------------------
                                          1995           1994              1995           1994(d)           1995         1994      
                                       ---------      ---------        ----------      -----------       ---------     ---------   
<S>................................    <C>            <C>               <C>            <C>              <C>            <C>         
Net interest income................    $  (5.3)       $   (6.0)         $  78.4        $   72.9         $1,505.8       $1,410.6    
Provision for losses on loans......         -               -                 -           145.0            105.0          246.9    
Non-interest income................       49.1 (b)        31.8             58.4            42.0            605.6          567.5    
Non-financial expenses.............         -               -             169.9 (c)       148.1 (d)      1,274.4        1,317.6    
                                       -------         -------           ------        --------         --------       --------    
Income (loss) before income taxes..       43.8            25.8            (33.1)         (178.2)           732.0          413.6    
Income tax expense (benefit).......       15.8             9.1             (8.3)          (65.5)           279.8          164.8    
                                       -------         -------           -------       --------         --------       --------    
Net income (loss)..................    $  28.0         $  16.7          $ (24.8)       $ (112.7)        $  452.2       $  248.8 (e)
                                       =======         =======           =======       ========         ========       ========

Return on assets...................      37.33  %        21.41  %          (0.72) %       (2.72)  %        1.59%            .90  %
Return on equity(a)................     700.00          417.50             (2.55)        (10.97)           19.59          10.96
Average assets.....................        $75             $78          $  3,458       $  4,137         $ 28,446       $ 27,667
Average equity(a)..................          4               4               974          1,027            2,309          2,270 
</TABLE>       

__________________________
(a)  Equity is allocated to business lines in the four core business segments by
     applying a factor of 5.0% against average risk-weighted assets and adding
     intangible assets.
(b)  Includes a gain of  $19.0 million pre-tax, $11.8 million after-tax, related
     to changes in CoreStates' investment in the EPS, Inc. Affiliate joint
     venture.
(c)  Includes a net restructuring charge of  $98.2 million pre-tax, $62.5
     million after-tax, related to a corporate-wide process redesign.
(d)  Includes $120.0 million in the provision for losses on loans and $75.0
     million in other operating expenses related to the Constellation
     acquisition and $25.0 million in the provision for loan losses and $33.7
     million in other operating expenses related to the Independence
     acquisition. The combined after-tax impact was $167.4 million.
(e)  Based on income before cumulative effect of a change in accounting
     principle.

                                       11
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:  CONTINUED

BUSINESS LINE RESULTS - continued


WHOLESALE BANKING is organized into six business lines for reporting purposes:
Corporate Middle Market, Corporate and Institutional Banking, Investment
Banking, Cash Management, International Banking, and Specialized Banking.
Wholesale Banking continued its strong performance in 1995 as net income
increased $43.5 million or 20.4% above 1994. Contributing to this increase was
growth in net interest income, growth in non-interest income, and a decline in
non-financial expenses. Net interest income was $28.5 million or 4.5% above 1994
due to higher loan volumes, lower levels of non-performing loans, and higher
loan fees. Average loan outstandings increased 6.0% from the prior year. Average
non-performing loans declined 41.3% from the prior year. Cash management
revenues (including international service fees) were 7.2% above 1994. Growth in
international fees, and the value of collected deposits more than offset an $8.3
million decline in service charges. Non-financial expenses declined $25.4
million or 5.5% largely due to a $3.6 million decline in FDIC expense and
expense reductions related to the impact of BEST.

Net income contributed to Wholesale Banking by Congress Financial increased
$11.3 million for 1995, primarily due to an increase in net interest income
resulting from loan growth, partially offset by an increase in the loan loss
provision of Congress Financial.

CONSUMER FINANCIAL SERVICES includes the following business lines: Community
Banking, Specialty Products and Mortgage Banking. Specialty Products ("SPG")
includes Credit Card, Student Lending, CardLinx (CoreStates' merchant credit
card processing business) and SynapQuest (CoreStates' credit card processing
subsidiary). Results for December 1994 and the full year of 1995 include the
acquisition of Germantown Savings Bank ("GSB"). Since the GSB transaction was
accounted for under the purchase method, restatement of financial information
prior to the acquisition was not required.

Net income for Consumer Financial Services of $178.0 million in 1995 was $55.7
million or 45.5% over 1994. The increase was primarily experienced in the
Community Banking and SPG business lines. The growth in net income was driven by
a $63.5 million or 9.4% increase in net interest income along with a $27.0
million or 4.5% decline in non-financial expenses. This growth was partially
offset by a decrease in non-interest income of $3.9 million or 2.2% and an
increase in the loan loss provision related to increased charge-offs in the
credit card portfolio.

The increase in net interest income of $63.5 million in 1995 included a $32.8
million increase related to GSB. Net interest income growth of $14.0 million in
the credit card portfolio resulted from a $195 million, or 15.3% increase in
average credit card outstandings, partially offset by the impact of a 50 basis
point reduction in credit card interest rate spreads. In addition to the growth
due to the GSB acquisition, net interest income in Community Banking increased
$11.4 million, or 2.1%. Favorable deposit spreads in Community Banking, up 24
basis points, generated a $31.8 million increase which was partially offset by
declines due to a $460 million decrease in deposits equating to a $13.2 million
reduction and narrowing loan spreads, down 25 basis points, for a $12.2 million
reduction.

Non-interest income was down $3.9 million, or 2.2%. Mortgage Banking income
declined by $4.2 million primarily the result of the sale of the Constellation
servicing portfolio in 1994. In addition, in March of 1994, Community Banking
sold its Marine lending portfolio at a gain of $1.5 million. Revenue generated
from third-party sales of annuities and mutual funds was down $0.9 million. A
full year of non-interest income in 1995 from the GSB acquisition resulted in an
additional $3.4 million when compared to 1994.

Non-financial expenses declined by $27.0 million, or 4.5%. Ideas implemented
relating to BEST generated savings of $31.9 million. A June 1, 1995 reduction in
FDIC premiums from $0.23 to $0.04 per $100 of deposits resulted in an expense
decrease of approximately $12.0 million. A full year of expenses in 1995 from
the GSB acquisition resulted in an $18.4 million increase in year-to-year
expenses.

                                       12
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

BUSINESS LINE RESULTS - continued

TRUST AND INVESTMENT MANAGEMENT is organized into four business lines:
Institutional Trust, Personal Trust, Private Banking, and Investment Management.
The Corporate Trust business, included in Institutional Trust, was divided into
its Pennsylvania and New Jersey components and sold to Mellon Bank and Bank of
New York, respectively, in October 1995. CoreStates recognized a $7.4 million
pre-tax gain on these sales during the fourth quarter of 1995 which is reflected
in the Corporate Category. The Corporate Trust transactions provide for
potential additional gains in 1996, pending determination of customer retention
by the buyers.

Net income of $14.2 million in 1995 was $5.0 million above 1994. Net interest
income declined by $3.0 million or 9.9% primarily due to lower demand balances
in Institutional Custody and Corporate Trust. During the first six months of
1995, Corporate Trust experienced lower balances compared to 1994 due to higher
levels of refinancings in 1994. As a result of the Corporate Trust sale,
Institutional Trust also experienced lower balances versus 1994 during the last
quarter.

Non-interest income declined by $1.7 million primarily due to the loss of fourth
quarter fee revenues related to the sale of Corporate Trust. Also contributing
to the decline was customer attrition in Institutional Trust and lower non-
recurring fees in Personal Trust. Partially offsetting these shortfalls was new
business and fee growth in Institutional Custody, the impact of 9.6% asset
growth in the CoreFund family of mutual funds and approximately $700 thousand of
BEST revenue enhancements. Expenses were $12.6 million or 11.2% below 1994
levels due principally to the impact of the BEST program and expense savings
related to the sale of Corporate Trust.

ELECTRONIC PAYMENT SERVICES, INC. ("EPS") was formed in December 1992 through
the contribution of the consumer electronic transaction processing businesses of
CoreStates, Banc One Corporation, PNC Bank Corp and KeyCorp. EPS is one of the
nation's leading providers of ATM and POS processing services. CoreStates
received cash, preferred stock and common stock for the contribution of its MAC
ATM network and BUYPASS POS businesses. CoreStates' ownership at formation was
31%.

In December 1993, CoreStates and EPS mutually agreed to enter into a
recapitalization of EPS involving the EPS preferred stock held by CoreStates. In
exchange for substantially all of the preferred stock, CoreStates received from
EPS a ten-year 6.45% note providing for equal principal payments over the life
of the note. The recapitalization did not affect the amount of the deferred gain
generated in the 1992 contribution of the business lines to EPS, but changed the
timing of the recognition of that $138 million deferred gain from a five-year
period beginning in 1996 to a ten-year period which began in 1994.

On March 27, 1995, National City Corp was added as a partner and KeyCorp
increased its investment to become a full partner, resulting in a decrease in
CoreStates' share of ownership in EPS from 31% to 20%. As a direct result of
this change in ownership interests, CoreStates recognized a pre-tax gain of
$19.0 million, $11.8 million after-tax in 1995.

Net income in 1995 from CoreStates' investment in EPS totaled $28.0 million,
including the $11.8 million gain. Excluding the gain, net income in 1995 was
substantially unchanged from net income in 1994 as lower interest income
realized from the promissory note was offset by higher equity earnings. The 1995
results included $30.1 million of non-interest income from CoreStates' equity
interest in EPS' net income, deferred gain recognition, and promissory note
interest income, partly offset by interest carrying charges on the net
investment in EPS.

                                       13
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

BUSINESS LINE RESULTS - continued

THE CORPORATE CATEGORY'S net income for 1995 includes the net restructuring
charge of $62.5 million after-tax related to BEST. After adjusting for the BEST
restructuring charge and 1994 merger-related costs, the Corporate Category's net
income was below 1994 by $17.0 million. The most noteworthy variances year-to-
year were a $15.2 million decline in securities gains, partially offset by a
$7.4 million gain recognized on the sale of the Corporate Trust business in
1995. Additionally, increases in non-interest income and non-financial expenses,
resulted from growth in CoreStates' third party remittance processing company,
CashFlex, which, as an emerging business, is currently included in the Corporate
Category. The largest contributing factor to CashFlex's growth was the
acquisition of NRC in January 1995. Fees earned by NRC were approximately $20
million and expenses added by NRC were approximately $20 million. In 1994, net
income includes $167.4 million in merger-related charges recorded in the first
half of 1994 for the acquisitions of Constellation and Independence. The merger-
related charges included a $145 million loan loss provision. The merger-related
charges had an after-tax impact of $127.8 million for Constellation and $39.6
million for Independence.

CAPITAL STRENGTH

Capital strength must be evaluated in the context of business risk exposures,
including asset quality, interest sensitivity, liquidity and earnings
diversification.  CoreStates places a significant emphasis on the maintenance of
strong capital which promotes investor confidence, helps provide access to the
credit markets under favorable terms and enhances the flexibility to capitalize
on business growth and acquisition opportunities.  Capital is managed for each
CoreStates subsidiary based on its respective risks and growth opportunities, as
well as regulatory requirements.  CoreStates is positioned to take advantage of
market opportunities to strengthen capital.  A shelf registration, which is in
place, provides for the issuance of a wide-range of securities including:
senior and subordinated debt, straight and convertible preferred securities and
equity.  The relative strength of CoreStates' capital is reflected in the chart
"Average Common Equity/Assets".

<TABLE>
<CAPTION>
         Average Common Equity/Assets
         ----------------------------
         Plotting Points for Graph                       Average Common
         -------------------------                       Equity/Assets
         (in percent)                             ---------------------------
                                                                Superregional
                                                  CoreStates     Composite *
                                                  ----------    -------------
         <S>                                      <C>           <C>
               1995                                   8.12%          7.51%
               1994                                   8.20           7.46
               1993                                   7.94           7.34
               1992                                   7.08           6.67
               1991                                   6.50           6.14
</TABLE>

     * The Salomon Brothers Superregional Bank Composite

At December 31, 1995, common shareholders' equity totaled $2,379 million or 8.0%
of total assets, compared with $2,350 million or 8.0% at year-end 1994.  The
year-end 1995 equity to assets ratio for the Salomon Brothers Superregional Bank
Composite was 7.7%. CoreStates has achieved steady internal capital generation
throughout the past five years.  Common shareholders' equity increased over the
five years ended December 31, 1995 at a compound annual growth rate of 5.4%,
while dividends paid increased at a compound annual growth rate of 7.2%.

During 1995, CoreStates increased its quarterly dividend by 23.5% to $0.42 per
share beginning January 1996. CoreStates declared dividends on its common stock
of  $1.44 per share in 1995, $1.24 per share in 1994 and $1.14 per share in
1993.  The common dividend payout ratio on an operating earnings basis was 40.2%
for 1995, compared to 42.5% for 1994.

                                       14
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CAPITAL STRENGTH - CONTINUED

In March 1995, the Board of Directors approved an expansion of CoreStates'
common stock repurchase program from an annual maximum of 2% of outstanding
shares to an annual maximum of 5%, excluding purchases for employee benefit
plans and CoreStates' dividend reinvestment plan.  Given the pending acquisition
of Meridian, the common stock repurchase program was suspended indefinitely due
to constraints associated with the pooling of interests method of accounting
that CoreStates expects to utilize to account for the acquisition of Meridian.
During 1995, CoreStates repurchased approximately 10.3 million shares of its
common stock and reissued 3.5 million treasury shares under employee benefit
plans and the dividend reinvestment plan.

CoreStates and its bank subsidiaries are subject to minimum risk-based and
leverage capital guidelines issued by the Federal Reserve Board and Comptroller
of the Currency.  The measurement of risk-based capital takes into account the
credit risk of both balance sheet assets and off-balance sheet exposures.  These
guidelines require minimum risk-based capital ratios of 4% for Tier 1 capital
and 8% for total capital.  In addition, a minimum leverage ratio of Tier 1
capital to quarterly average total assets of 3% is required for banking
organizations that are rated as strong.  Internal capital generation continues
to be strong and to exceed internal growth requirements.  However, capital
ratios declined slightly in 1995 due to the common stock repurchase program
previously mentioned.  The following table illustrates CoreStates' risk-based
and leverage capital ratios at December 31, 1995 and 1994:


RISK-BASED AND LEVERAGE CAPITAL RATIOS
--------------------------------------
At December 31,
---------------
(in millions)

<TABLE>
<CAPTION>
                                                      1995           1994
                                                      ----           ----
<S>                                                 <C>           <C>
CAPITAL                                                     
Tier 1 capital (a)..............................    $ 2,161       $ 2,129
Tier 2 capital (b)..............................        949           935
Total qualifying capital........................      3,110         3,064

ASSETS                                                      

Risk-adjusted assets............................     25,714        24,645
Average assets-leverage capital basis...........     28,368        27,316

RATIOS                                                      

Tier 1 capital ratio............................        8.4%          8.6%
Total capital ratio.............................       12.1          12.4
Tier 1 leverage ratio...........................        7.6           7.8
</TABLE>
_______________
(a)  Consists primarily of common shareholders' equity, less goodwill and
     certain intangible assets.
(b)  Consists primarily of qualifying subordinated debt and the allowance for
     loan losses, within permitted limits.

     Bank regulators apply substantially the same capital requirements to
CoreStates' banking subsidiaries. A bank is considered "well capitalized", the
highest regulatory category, if it has minimum Tier 1 and Total risk-based
capital ratios of 6% and 10%, respectively, and a minimum Tier 1 leverage ratio
of 5%. As illustrated in the following table, all of CoreStates' banking
subsidiaries qualified as "well capitalized" at December 31, 1995.

<TABLE>
<CAPTION>
BANK REGULATORY CAPITAL RATIOS                          Capital Ratios
------------------------------               ---------------------------------
At December 31, 1995                            Tier 1      Total     Leverage
--------------------                         ------------   -----     --------
<S>                                          <C>            <C>       <C>
CoreStates Bank, N.A. .................           7.6%       10.6%        6.8%
New Jersey National Bank...............          12.1        15.3         7.6
CoreStates Bank of Delaware, N.A.......           6.6        11.2         6.3
</TABLE>

                                       15
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

RISK MANAGEMENT

Risk management at CoreStates encompasses the oversight of a broad range of
risks undertaken by the company including credit, market, product, processing,
systems and general business risk. During 1995, the management of these risks
was further integrated within the Risk Policy Office following the BEST process
redesign. Also as a result of the process redesign, risk officer positions were
created within technology/operations and capital markets to sharpen the focus of
risk management within these areas. CoreStates' ongoing evolution of its risk
management practices takes place within the framework of a corporate risk
management program. The objective of the program is a continued strengthening of
CoreStates' risk management culture and its policies, processes and controls for
managing risk on an integrated basis throughout the company. The discussion of
risk management is covered further in the following sections on "Credit Quality"
and "Asset and Liability Management."


CREDIT QUALITY

CREDIT RISK MANAGEMENT

The management of credit risk at CoreStates relies on maintaining a diversified
loan portfolio, limiting exposures to a given industry or market segment, and on
a well-established credit culture. Early identification and communication of
deterioration/problems in the portfolio, early recognition of non-performing
assets and charge-offs, maintaining reserves that are strong, and a credit
advisory team process that provides all lenders in both wholesale and consumer
businesses access to the most senior and experienced credit officers in the
organization, are key components of this credit culture. Underlying this credit
culture is a tradition of extensive and ongoing credit training and
comprehensive and well-communicated policies and procedures. In 1995, a
reorganization of the credit process was put into place which moved decision
making closer to the customer while maintaining CoreStates' traditional and
successful quality maintenance processes. One way this was accomplished was
combining the Chief Risk Policy Office and the Chief Lending Offices and by
delegating Chief Lending Office authority to a cadre of CoreStates' most
experienced credit personnel throughout the organization for exercise in each
business group or market. Further, while continuing a successful process of
managing individual credits, greater emphasis has been placed on portfolio
management issues.

In acquiring a company whose businesses include the extension of credit, it is a
priority of CoreStates to extend its credit culture to the newly acquired
institution. In planning for the integration of Meridian into CoreStates in
1996, CoreStates will continue this policy. CoreStates' credit policies,
together with the more informal practices and standards of conduct which define
CoreStates' existing credit culture, will be extended to the combined
organization through a formal communications and training program. The extensive
credit officer structure in place at CoreStates will also be extended to the
combined organization. Each significant market will have at least one assigned
senior credit officer who would be supported by one or more credit officers.
Extension of the CoreStates credit culture to the Meridian organization will
also be facilitated through cross fertilization of key personnel. The loan
quality process in place at CoreStates, which is designed as an early warning
system for problem loan identification and portfolio issues, will be used in the
combined organization. CoreStates' favorable experience with these processes and
their successful use in the integration of other organizations, along with a
stringent due diligence process and early integration of the acquired bank's
portfolio, ensure that CoreStates' credit quality standards continue to be
maintained.

The maintenance of CoreStates' asset quality standards is supported by a
comprehensive and independent assessment of credit quality and portfolio
management by a Credit Review department, which reports to the Audit Committee
of the Board of Directors. The consultative role played by Credit Review with
respect to line management and the Risk Policy Office was further enhanced
during 1995, broadening the nature of counsel provided to lenders in the area of
portfolio review.

WHOLESALE LOAN PORTFOLIO

CoreStates has traditionally maintained limits on industry, market and borrower
concentrations as a way to diversify and manage credit risk. Management's
current policy is to limit industry concentrations to 50% of total equity and to
limit market segment concentrations to 10% of total assets. CoreStates manages
industry concentrations by applying these dollar limits to a family of
industries that have common risk characteristics. This management process is
reflected in the following chart, which illustrates each industry that exceeds
10% of total shareholders' equity.

                                       16
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

 
CREDIT QUALITY - CONTINUED


<TABLE>
<CAPTION>
WHOLESALE LOANS BY INDUSTRY
---------------------------
At December 31, 1995                    Outstandings          % of
--------------------
Plotting Points for a Graph                as a %         Outstandings
---------------------------
                                         of equity       non-performing
                                        -------------    --------------
<S>                                     <C>              <C>
Non-bank Finance (a)..............           35.8              0.6
Communications....................           33.8               -
Retail Trade......................           32.2              0.7
Depository Institutions...........           22.1               -
Healthcare........................           21.6              0.6
Trucking and Auto Leasing.........           19.5              0.4
Agri-finance......................           17.5              0.4
Apparel Manufacturing.............           16.7              0.6
Real Estate Construction..........           15.4              1.9
Chemical..........................           13.7              0.7
Automobile Dealers................           13.1              0.3
Paper Manufacturing...............           12.6               -
</TABLE>

_____________
(a)  Includes insurance, mortgage, mutual funds and finance companies.

The discussion below highlights the following wholesale portfolios: retailing
and apparel because of the challenges in these industries today; the Congress
Financial portfolio, because of the continued growth in the commercial finance
segment;  the international financial institutions portfolio, as this is a
significant growth business; and real estate loans, due to the overall size of
the combined commercial and residential portfolios.

     Retailing and Apparel - This specialized lending, which includes the retail
trade, apparel manufacturing and food retailing industries, is directed to
local, regional and national retailing chains and apparel manufacturing.  Credit
extensions are a major part of an overall product strategy to develop multi-
faceted relationships and are primarily used to support  customers' working
capital requirements. Additionally, emphasis is placed on providing short-term
trade letters of credit to customers who purchase product off-shore.  The
largest concentrations in the portfolio are in apparel retailing and
manufacturing, food retailing, specialty stores and general merchandise.
Furthermore, the challenges in these industries today present an excellent
growth opportunity for Congress Financial.

     The following table summarizes CoreStates' outstandings in retailing and
apparel at December 31, 1995 and 1994.

<TABLE>
<CAPTION>
RETAILING AND APPAREL
---------------------
At December 31,
(in millions)                                           1995                                          1994
                                        --------------------------------------        -------------------------------------
                                                            NON-         % OF                             Non-         % of
                                        OUTSTANDINGS     PERFORMING      LOANS        Outstandings     performing     loans
                                        ------------     ----------      -----        ------------     ----------     -----
<S>                                     <C>              <C>             <C>          <C>              <C>            <C>
Congress Financial, various (a)......     $   647.1            $3.0       0.5%            $  663.3         $ 6.4        1.0%
Apparel..............................         212.2             1.8       0.8                213.5          32.2       15.1
Food Retailing.......................         124.8             0.5       0.4                137.7           8.5        6.2
Specialty Stores.....................          84.5             2.9       3.4                 67.4           3.4        5.0
General Merchandise..................          48.9               -         -                 67.2           0.3        0.4
Miscellaneous Retail.................         173.4             0.4       0.2                134.6           0.9        0.7
                                           --------            ----                       --------         -----
    Total............................      $1,290.9            $8.6       0.7             $1,283.7         $51.7        4.0
                                           ========            ====                       ========         =====
</TABLE>

_____________
(a)  Includes commercial finance outstandings of $173.9 million and factoring
     receivables of $473.2 million at December 31, 1995; comparable amounts at
     December 31, 1994 were $119.8 million and $543.5 million, respectively.

                                       17
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CREDIT QUALITY - CONTINUED

     CONGRESS FINANCIAL - Congress Financial's loan portfolio is a combination
of factoring receivables and commercial finance, a significant growth business.
The commercial finance portfolio continued to experience strong, geographically
diverse growth, increasing 16.3% on a year-to-year basis. Credit quality
continues to be consistent with Congress Financial's lending philosophy and
historical trends.

     The ability to structure and syndicate large, complex transactions
primarily collateralized by accounts receivable and inventory, remains a
mainstay of Congress Financial's loan growth.

<TABLE>
<CAPTION>
CONGRESS FINANCIAL PORTFOLIO
----------------------------
At December 31,
---------------
(in millions)                              1995        1994  
                                         --------    --------

<S>                                      <C>         <C> 
Commercial finance portfolio:    
 Loans.........................          $2,068.4    $1,778.7
 Non-performing................              11.4        16.9
  % of loans plus OREO.........               0.6%        0.9%
Factoring receivables (a)......          $  557.3    $  622.4
</TABLE>

________________
(a)  There were no non-performing factoring receivables at December 31, 1995 and
     1994.

     INTERNATIONAL FINANCIAL INSTITUTIONS - Lending activities within
International Financial Institutions consist principally of dollar-denominated
short-term, trade-related credit transactions aimed at enhancing CoreStates'
cash management-based relationships with correspondents worldwide.

Exposure (which is defined as time balances, loans outstanding, bankers
acceptance and letters of credit) in International Financial Institutions at
December 31, 1995 and 1994 was distributed geographically as follows (in
millions):

<TABLE>
<CAPTION>
                                    1995                   1994             
                             --------------------    -----------------
                                            % OF                 % of 
                             EXPOSURE       TOTAL    Exposure    total
                             --------       -----    --------    -----
<S>                          <C>            <C>      <C>         <C>
Europe.................      $1,120.8       39%      $1,290.0    56%
Asia...................       1,016.6       35          515.1    22
Americas...............         681.1       24          453.0    20
Middle East............          73.3        2           35.0     2
                             --------      ---       --------   ---
     Total exposure....      $2,891.8      100%      $2,293.1   100%
                             ========      ===       ========   ===
</TABLE>

CoreStates' financial analysis focuses on the performance of individual
institutions (liquidity, profitability, asset quality, capitalization,
management and ownership), the unique attributes of individual markets (banking
regulations, central bank support, the domestic economic and political context,
balance of payment flows and reserve levels) and the interdependencies of those
markets. In higher risk markets, CoreStates' exposure is mitigated through
insurance or guarantees of the U.S. Export-Import Bank. The increase in Asia and
the Americas was due to the improved political and economic situations in some
countries, as well as a concerted and focused marketing effort through our Asian
branch network.

The following table summarizes CoreStates' exposure by type to international
financial institutions at December 31, 1995 and 1994. There were no non-
performing loans for the periods presented.

                                       18
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CREDIT QUALITY - CONTINUED

<TABLE> 
<CAPTION> 
INTERNATIONAL FINANCIAL INSTITUTIONS' EXPOSURE
----------------------------------------------
At December 31,
---------------
(in millions)
                                             1995          1994    
                                           --------      --------
<S>                                        <C>           <C> 
Time deposits............                  $1,538.8      $1,396.0
Acceptances..............                     510.3         261.1
Loans outstanding........                     535.3         395.0
Letters of credit........                     307.4         241.0
                                           --------      --------
  Total..................                  $2,891.8      $2,293.1
                                           ========      ========
</TABLE>

     REAL ESTATE LOANS - Although continuing to improve, the regional real
estate market in which CoreStates operates is still experiencing some problems,
particularly in the commercial segment. In this segment, tenant downsizing
continues to plague the office building market raising particular concern with
current and future office building usage and values. Also, the retail sector
continues to require close monitoring due to problems in the retail industry. In
the residential market, although home sales leveled off in late 1995 after a
surge in mid-year, sales continue at a sufficient pace and the multi-family
market continues to be strong.

     Total real estate related loans outstanding were $5,516 million at December
31, 1995, compared to $6,491 million at December 31, 1994. The decline from 
year-end 1994 was principally due to the sale of residential mortgage loans.
Included within the broad classification of real estate loans are a number of
different lending categories with distinctly different risk factors and
performance. The construction and development loan portfolio was $367 million or
1.7% of total loans at December 31, 1995. At December 31, 1995, 2.2% of
CoreStates' construction and development loan portfolio was non-performing,
compared to 1.6% for the remaining real estate loan portfolio. The table below
summarizes CoreStates' real estate loans outstanding.

<TABLE>
<CAPTION>
REAL ESTATE LOANS
-----------------
At December 31,                                            Completed
---------------                                            projects/                                           Total
(in millions)                          Construction/       investment                                          real
                                        development      properties (a)     Residential       Other (b)       estate
                                        -----------      --------------     -----------      ---------      ---------
<S>                                    <C>               <C>                <C>               <C>            <C>
1995
----
Year-end outstandings..............       $ 367              $  800           $2,572            $1,777         $5,516
Average loans outstanding..........         340                 933            2,751             1,870          5,894
Non-performing loans...............           8                   5               29                47             89
  % of year-end loans..............         2.2%                0.6%             1.1%              2.6%           1.6%
Net charge-offs....................       $   1              $   10           $    9            $    9         $   29
  % of average loans...............         0.2%                1.1%             0.3%              0.5%           0.5%

1994
----
Year-end outstandings..............       $ 331              $1,021           $3,180            $1,959         $6,491
Average loans outstanding..........         341               1,195            2,912             1,817          6,265
Non-performing loans...............          11                  33               37                48            129
  % of year-end loans..............         3.2%                3.2%             1.2%              2.5%           2.0%
Net charge-offs....................       $  10              $   32           $   25            $   46         $  113
  % of average loans...............         2.9%                2.7%             0.9%              2.5%           1.8%
         
</TABLE>

_______________________
(a)  Completed projects/investment properties included $214 million at December
     31, 1995 related to loans on completed projects for which net rental
     receipts are not sufficient to cover 115% of debt service.
(b)  Principally commercial loans secured by owner-occupied real estate.

                                       19
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CREDIT QUALITY - continued

     The largest category within real estate loans is residential mortgages,
which includes home equity loans of $1,465 million and multi-family residential
mortgages of $82 million. Total residential mortgages were $2,572 million or
12.2% of total loans at December 31, 1995. Loans in the Other real estate loans
category, primarily commercial loans collateralized by owner-occupied real
estate, accounted for 32.2% of total real estate loans and 8.4% of total loans.

     Another key to risk management in this portfolio is diversification by
project type. The following table illustrates CoreStates' construction and
development portfolio and completed projects/investment properties portfolio by
project type.

CONSTRUCTION/DEVELOPMENT AND COMPLETED PROJECTS/INVESTMENT PROPERTIES
---------------------------------------------------------------------
LOANS OUTSTANDING BY PROJECT TYPE
---------------------------------
At December 31,
(in millions)

<TABLE> 
<CAPTION> 
                                                Construction/               Completed projects/
                                                development                investment properties                   Total
                                         -------------------------     ----------------------------     ---------------------------
                                            Loans         % Non-           Loans           % Non           Loans           % Non
1995                                      outstanding    performing      outstanding     performing      outstanding     performing
----                                      -----------    ----------     -------------    -----------     ------------    -----------
<S>                                      <C>            <C>            <C>              <C>             <C>             <C>
Residential development..................      $149.3           2.6%                                        $  149.3         2.6%
                                               ------                                                       --------
Commercial:
   Land and site development..............       41.6             -                                             41.6           -
   Apartments.............................        1.3             -         $  114.8           0.2%            116.1         0.2
   Light industrial.......................       14.2          19.0             92.2             -             106.4         2.5
   Hotels.................................          -             -             21.0           6.7              21.0         6.7
   Office buildings.......................       34.1             -            279.6           0.5             313.7         0.4
   Shopping centers.......................       31.0             -            211.3           0.2             242.3         0.2
   Miscellaneous..........................       95.2           0.2             80.8           1.6             175.9         0.9
                                               ------                       --------                        --------
      Total commercial....................      217.3           1.3            799.7           0.6           1,017.0         0.7
                                               ------                       --------                        --------
          Total...........................     $366.6           1.9         $  799.7           0.6          $1,166.3         1.0
                                               ======                       ========                        ========

1994
----
Residential development...................     $197.4           3.7%                                        $  197.4         3.7%
                                               ------                                                       --------
Commercial:
   Land and site development..............       58.8           2.0                                             58.8         2.0
   Apartments.............................        0.9             -         $  111.8           1.8%            112.7         1.8
   Light industrial.......................       11.2          18.8            149.2           6.8             160.4         7.6
   Hotels.................................          -             -             25.2           9.1              25.2         9.1
   Office buildings.......................        6.4             -            352.3           2.4             358.7         2.3
   Shopping centers.......................        1.7             -            242.3           0.9             244.0         0.9
   Miscellaneous..........................       55.0           0.4            140.0           5.8             195.0         4.3
                                               ------                       --------                        --------
      Total commercial....................      134.0           2.5          1,020.8           3.2           1,154.8         3.1
                                               ------                       --------                        --------
          Total...........................     $331.4           3.2         $1,020.8           3.2          $1,352.2         3.2
                                               ======                       ========                        ========
</TABLE>

     Geographically, $1,115.8 million or 96% of CoreStates'
construction/development loans and completed projects/investment properties at
December 31, 1995 are financing real estate in CoreStates' market area of
Pennsylvania, New Jersey and Maryland/Delaware.

                                       20
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES               
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                  
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED
                                                         
CREDIT QUALITY - continued                               
                                                         
CONSUMER LENDING PORTFOLIO                               
                                                         
Consumer loan outstandings (excluding credit card) decreased by $97.5 million or
2.7% from year-end 1994 and 1.0% on average.  The declines primarily reflect
sales of approximately $87 million of student loans and approximately $136
million of home equity loans on the secondary market.  The home equity loans
were sold for asset and liability management purposes.

Net loan charge-offs as a percentage of the average portfolio outstandings
increased from 23 basis points in 1994 to 38 basis points in 1995.  Although
higher in 1995, net credit losses in this portfolio are below the average of our
competitors.  This is an indication of the fundamental strength of CoreStates'
credit policies and ability to identify and mitigate risk factors in these
retail loan products.

CONSUMER LENDING PORTFOLIO
--------------------------
At December 31,
---------------
(in millions)

<TABLE> 
<CAPTION> 
                                         1995        1994   
                                       --------    --------
<S>                                    <C>         <C>
Year-end outstandings:       
    Home equity..................      $1,465.2    $1,534.6
    Indirect installment.........         857.0       891.8
    Direct installment...........         474.4       495.0
    Auto leasing.................         737.6       710.3
                                       --------    --------
     Total.......................      $3,534.2    $3,631.7
                                       ========    ========
Average loans outstanding........      $3,463.8    $3,499.6
Net charge-offs..................          13.1         8.1
   % of average loans............          0.38%       0.23%
</TABLE> 

CREDIT CARD PORTFOLIO
---------------------
At December 31,
---------------
(in millions)

<TABLE> 
<CAPTION> 
                                         1995        1994   
                                       --------    --------
<S>                                    <C>         <C> 
Year-end outstandings............      $1,546.9    $1,374.6
Average loans outstanding........       1,472.0     1,277.0
Net charge-offs..................          54.3        29.3
   % of average loans............           3.7%        2.3%
</TABLE>

Credit card outstandings increased 12.5% from $1,374.6 million at 1994 year end
to $1,546.9 million at 1995 year end.  Average balance per active account
increased by 14.9% to $2,547.  Beginning in the fall of 1994, marketing
campaigns shifted from pre-approved to invitations-to-apply, to further control
risk within the portfolio.

Economic conditions have negatively impacted credit card delinquency, bankruptcy
and credit losses.  Net charge-offs have increased to 3.7% of average loans,
which is consistent with industry averages.  CoreStates' credit policies and
procedures related to the credit card portfolio have been strengthened in
anticipation of the economic slowdown.

                                       21
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CREDIT QUALITY - CONTINUED

ALLOWANCE FOR LOAN LOSSES

     In CoreStates' methodology for determining appropriate levels of allowance
for loan losses ("ALLL"), each subsidiary which extends credit maintains an
allowance sufficient to absorb the anticipated loss inherent in its credit
portfolio. Factors included in management's determination of an adequate level
of ALLL are a statistical analysis of historical loss levels throughout an
economic cycle and one year of projected charge-offs, establishing a minimum
level below which a bank's ALLL is considered inadequate and a maximum level
above which is considered inappropriate. A quarterly evaluation of loss
potential on specific credits, products, industries, portfolios and markets as
well as indicators for loan growth, the economic environment and concentrations
assist in validating the position of the ALLL within those boundaries.
Management's evaluation of the adequacy of the ALLL is independently tested by
Credit Review. Prompt recognition of problem situations and prompt write-downs
of these assets to net realizable value is an important source of protection
against problems in the portfolio. Accordingly, over an economic cycle,
CoreStates has experienced relatively high levels of recoveries of prior charge-
offs, recovering approximately 38% of prior year loan charge-offs in 1995 and
approxiamtely 31% in 1994.

     In May 1993, the FASB issued Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114") and in
October 1994, the FASB issued Statement No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures" ("FAS 118"). FAS 114
addresses accounting for impairment of certain loans and requires that impaired
loans within the scope of FAS 114 be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate, or be
measured at the loan's observable market price or the fair value of its
collateral. FAS 118 amended FAS 114's income recognition policies and clarifies
FAS 114's disclosure requirements. As required, CoreStates adopted FAS 114 and
118 in the first quarter of 1995. The adoption of these standards did not have
an impact on CoreStates' provision for loan losses or allowance for loan losses,
nor change CoreStates' methodology for recognizing income on impaired loans.

     The year-end 1995 allowance for loan losses totaled $495.1 million and
represented 2.35% of loans. This compares with a loan loss allowance at year-end
1994 of $500.6 million, or 2.44% of loans. The December 31, 1995 and 1994
Salomon Brothers Superregional Bank Composites for allowance for loan losses as
a percentage of loans were 2.16% and 2.40%, respectively. The allowance for loan
losses at year-end 1995 was 341.8% of non-performing loans, an increase over the
year-end 1994 coverage ratio of 203.3% and a reflection of the lower level of
non-performing loans at year-end 1995.

     CoreStates' provision for loan losses in 1995 was $105.0 million, an
increase of $3.1 million from the $101.9 million, excluding $145.0 million of
Constellation and Independence merger-related provisions for losses on loans
provided in 1994. The increase in the provision for losses on loans was in
response to loan growth and higher charge-offs on credit card outstandings. Net
loan charge-offs in 1995 were $110.6 million or 0.5% of average loans. Net
charge-offs in 1994, excluding $103.1 million of loan charge-offs recorded in
the second quarter of 1994 related to problem assets acquired with
Constellation, were $117.8 million or 0.6% of average loans.

     During 1994, Constellation and Independence recorded provisions for loan
losses of $120.0 million and $25.0 million, respectively, in connection with a
change in strategy related to problem assets, and to conform their consumer
lending charge-off policies to those of CoreStates.

                                       22
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

CREDIT QUALITY - continued

    The following table reflects the distribution of 1995 and 1994 net charge-
offs by loan type:

DISTRIBUTION OF NET CHARGE-OFFS
-------------------------------
For the Year Ended December 31,
-------------------------------

<TABLE>
<CAPTION>
(in millions)                                        1995                                  1994
                                      ----------------------------------    ----------------------------------
                                                                  % OF                                 % of
                                                                 TOTAL                                 Total
                                        NET          % OF         NET         Net         % of          net
                                      CHARGE-      AVERAGE      CHARGE-     charge-      Average      charge-
Loan type                              OFFS       LOAN TYPE       OFFS       offs       loan type      offs
---------                             -------     ---------     -------     -------     ---------     ------- 
<S>                                   <C>         <C>           <C>         <C>         <C>           <C>
Domestic:
  Commercial
    and industrial.................    $ 13.9           0.1  %     12.6  %   $ 75.1           0.9%       34.0%
  Real estate:
    Construction...................       0.7           0.2         0.6         9.7           2.9         4.4
    Other..........................      28.2           0.5        25.5       102.9           1.7        46.6
  Consumer:
    Credit card....................      54.3           3.7        49.1        29.3           2.3        13.3
    Installment....................      10.5           0.8         9.5         5.8           0.4         2.6
  Other (a)........................       3.3           0.2         3.0         0.7             -         0.3
                                       ------                    ------      ------                     -----
      Total domestic...............     110.9           0.6       100.3       223.5           1.2       101.2
 Foreign...........................      (0.3)            -        (0.3)       (2.6)         (0.4)       (1.2)
                                       ------                    ------      ------                     -----
     Total net charge-offs.........    $110.6           0.5       100.0  %   $220.9           1.1       100.0%
                                       ======                    ======      ======                     =====
</TABLE>

___________________________
(a)  Includes loans to financial institutions and lease financing.

NON-PERFORMING ASSETS

     Non-performing assets at year-end 1995 were $171.5 million, or 0.8% of
total loans plus other real estate owned ("OREO") and 0.6% of total assets.
These levels compared to total non-performing assets at year-end 1994 of $310.9
million, 1.5% of total loans plus OREO and 1.1% of total assets.

     At year-end 1995, total non-performing assets were comprised of $143.2
million of non-accrual loans, $1.6 million of renegotiated loans and $26.7
million of OREO. The $139.4 million, or 44.8%, decline in total non-performing
assets as compared to year-end 1994 was principally experienced in CoreStates'
two largest portfolios; the commercial loan portfolio, declining $35.1 million,
or 40.3%, and the real estate portfolio which declined $78.4 million, or 40.5%.
Most of the decline in non-performing assets in these two portfolios was
attributable to improved credit quality and the receipt of payment against two
large non-performing credits.

     CoreStates monitors the movements within the non-performing portfolio
closely. The following table illustrates the components of the changes in non-
performing assets during 1995, 1994 and 1993:

                                       23
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED
 
CREDIT QUALITY - continued

CHANGES IN NON-PERFORMING ASSETS
--------------------------------
(in millions)

<TABLE>
<CAPTION>
                                     1995       1994       1993
                                     ----       ----       ----
<S>                                 <C>        <C>        <C> 
Balance January 1,...........       $ 311      $ 439      $ 672
Additions....................         170        393        247
Return to accrual............         (12)       (53)       (83)
Payments.....................        (224)      (226)      (236)
Charge-offs..................         (73)      (242)      (161)
                                    -----      -----      -----
Net change...................        (139)      (128)      (233)
                                    -----      -----      -----
  Balance December 31,.......       $ 172      $ 311      $ 439
                                    =====      =====      =====
</TABLE>

The following table reflects the distribution of non-performing assets by loan
type at December 31, 1995 and 1994:

<TABLE>
<CAPTION>

DISTRIBUTION OF NON-PERFORMING ASSETS
-------------------------------------
At December 31,
---------------
(in millions)                                                   1995                                1994
                                                  -----------------------------------     -------------------------------
                                                                 % OF       % TOTAL                    % of    % Total
                                                     NON-        LOAN        NON-            Non-      Loan      non-
Loan type                                         PERFORMING     TYPE     PERFORMING      performing   type   performing
---------                                         -----------    -----    -----------     -----------  -----  -----------
<S>                                               <C>            <C>      <C>             <C>          <C>    <C>
Domestic:
 Commercial  and industrial.............            $ 52.1        0.5%       30.3%          $ 87.2      1.0%      28.1%
 Real estate:
     Construction.......................               8.0        2.2         4.7             10.7      3.2        3.4
     Other loans........................              80.5        1.6        46.9            118.2      1.9       38.0
     OREO...............................              26.7          -        15.6             64.7        -       20.8
 Consumer...............................                 -          -           -              0.7        -        0.2
 Other domestic loans (a)...............               4.2        0.2         2.5             29.2      2.1        9.4
                                                    ------                  -----           ------               -----
     Total domestic.....................             171.5        0.9       100.0            310.7      1.6       99.9
 Foreign loans..........................                 -          -           -              0.2        -        0.1
                                                    ------                  -----           ------               -----
     Total non-performing assets (b)....            $171.5        0.8       100.0%          $310.9      1.5      100.0%
                                                    ======                  =====           ======               =====
     % of total assets..................               0.6%                                    1.1 %
                                                       ===                                     ===
</TABLE>

________________________
(a)  Includes loans to financial institutions and lease financing.
(b)  The table does not include loans of $59 million and $53 million at December
     31, 1995 and 1994, respectively, that are past due 90 days or more as to
     principal or interest, but which remain on full accrual since such loans
     are well secured and in the process of collection.

Non-performing assets at year-end 1994 declined $127.8 million, or 29.1%, as
compared to year-end 1993.  The 1994 decline primarily reflected decreases in
non-performing assets in the real estate portfolio which declined $119.4 million
or 38.1%.  Much of the decline in real estate non-performing assets resulted
from a $28 million addition to the Constellation OREO reserve in the first
quarter of 1994 and the subsequent bulk sale of problem loans and OREO acquired
with Constellation.

                                       24
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT

     Asset and liability management is the process of directing and coordinating
activities that effectively control liquidity and interest rate risk.
CoreStates' philosophy includes a disciplined approach to asset and liability
management which calls for minimizing interest rate risk, maintaining a strong
balance sheet and a focus on achieving appropriate product spreads. This
disciplined approach contributes to the stability and strength of CoreStates'
net interest margin. CoreStates' asset and liability management is centralized
and individual subsidiaries are managed within the context of overall corporate
policies.

     CoreStates' management emphasizes stable net interest income throughout
rate cycles, with the result that intermediate and longer term considerations
take precedence over short-term profitability. This commitment is evidenced by
the consistency of CoreStates' net interest margin over time. During the past
five years, a period of significant changes in economic conditions, competition
and interest rates, CoreStates' net interest margin has remained consistently
above industry averages as illustrated in the chart "Net Interest Margin".

Net Interest Margin
-------------------
Plotting Points for a Graph         
--------------------------- 
(In percent)                

<TABLE>
<CAPTION>
                                          Net interest margin
                                      --------------------------
                                                   Superregional
                                      CoreStates    Composite *
                                      ----------   -------------
<S>                                   <C>          <C>
1995                                     5.97%         4.62%
1994                                     5.80          4.72
1993                                     5.59          4.86
1992                                     5.32          4.82
1991                                     5.16          4.45
</TABLE>


      * The Salomon Brothers Superregional Bank Composite

     CoreStates' net interest margin reflects relationship business activities
rather than interest rate risk taking. The strength of CoreStates' net interest
margin comes from the combination of healthy spreads on both loans and deposits
and a balance sheet which has a relatively high portion of loans and a large
base of non-interest bearing funds. (See Charts "Earning Asset Mix" and "Funding
Mix" on pages 36.) Areas of business such as credit card, middle market lending,
specialized lending and commercial finance at Congress Financial produce
attractive lending spreads. CoreStates' cash management business provides a
significant source of non-interest bearing funds, while the retail franchise
includes a substantial base of low cost funding. Emphasis on profitable
relationship business is supported by CoreStates' management practices.
CoreStates uses a matched maturity funds transfer pricing system which focuses
business managers on profitability, appropriate compensation for embedded risks
and overall pricing discipline. In addition to providing a pricing tool,
transfer pricing supports performance measurement and analysis of net interest
margin components.

                                       25
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

INTEREST RATE RISK MANAGEMENT

     Interest rate risk refers to potential changes in current and future net
interest income resulting from changes in interest rates, product spreads and
mismatches in the repricing between interest rate sensitive assets and
liabilities. At CoreStates, measurement of near term interest rate risk focuses
on potential changes in net interest income identified through computer
simulations against both rising and falling interest rates. Longer term
repricing risks are measured using potential changes in the present value of
future income streams inherent in current positions. Gap analysis is used to
manage strategy execution. All measurements of interest rate risk include the
impact of off-balance sheet activities. Under CoreStates' policy, rate changes
of at least 200 basis points in either direction over a six-month period are
simulated with rate related negative net interest income volatility over a
twelve-month horizon limited to 4% of shareholders' equity. Changes are measured
relative to a base forecast in which rates remain constant at current levels.
Based on historical data, 95% of the time rates have moved less than 200 basis
points over a six-month period. Included in these simulations are all
contractual repricing risks, the impact of prepayments in the loan and
securities portfolios, potential spread and volume changes on consumer deposits
and fluctuations in the value of non-interest bearing funding sources.
CoreStates believes that the spread between the prime rate and financial market
rates is a function of both interest rates and credit conditions. While changes
in the prime spread are included in simulations, only that portion believed to
be interest rate related is subject to the policy guidelines. Estimated changes
in the present value are based on a 200 basis point parallel shift of the yield
curve and negative changes are limited to 10% of equity.

     As a matter of practice, positions are generally managed to produce
significantly lower volatility than policy guidelines would permit. Current net
interest income simulations using a 200 basis point change in short term
interest rates show that CoreStates' net interest income volatility over the
next twelve months would be relatively neutral or less than 1% of shareholders'
equity. That level is representative of simulations performed throughout the
year. Recognizing that the simulation process is based on a variety of
assumptions, management reviews results by category of risk as well as by
product and tests the sensitivity of the results to key assumptions.

     There are two main elements to CoreStates' interest rate risk. The first is
the broad mismatch between the rate sensitivity of the assets and liabilities in
its core businesses, and the second is the spread risk between the rates on
those products and financial market rates.

     CoreStates' core wholesale and retail businesses generate a large portfolio
of prime and other short-term rate related assets. Characteristic of a regional
banking company, CoreStates also has a significant funding base of consumer
deposits with indefinite maturities and non-contractual rates such as savings,
NOW and money market accounts. The repricing characteristics of those deposits
tend to be longer term; traditionally, pricing has been relatively stable for
long periods and pricing changes lag changes in financial market rates. While
this mix of relationship assets and liabilities provides excellent liquidity, it
results in considerable interest rate risk. This inherent mismatch (the
"relationship gap") of longer term fixed-rate liabilities funding short-term
rate sensitive assets generates significant exposure to declining interest rates
if not hedged.

     CoreStates hedges this relationship gap through the use of both on and off-
balance sheet discretionary assets and liabilities. The typical offsetting
position is created by purchasing fixed-rate investment securities funded by
short-term liabilities, or by entering into interest rate swaps in which
CoreStates receives a fixed rate and pays a variable rate. The following
excerpts from the Interest Sensitivity Analysis shown on page 94 demonstrates
the basic mismatch of the relationship portfolios and the offsetting
discretionary position. In keeping with CoreStates' interest rate risk
discipline, the combined position is relatively balanced so that there is
minimal impact on earnings from an interest rate move in either direction.

                                       26
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

<TABLE>
<CAPTION>
SELECTED INTEREST SENSITIVITY BALANCES
--------------------------------------
At December 31, 1995
--------------------
(in millions)
                                                     Months                             Years
                                        -------------------------------     ------------------------------

                                            0-3         4-6        7-12         1-2         2-5     over 5      Total
                                           ----        ----        ----        ----        ----     ------     -------
<S>                                   <C>           <C>         <C>         <C>         <C>         <C>        <C>
RELATIONSHIP PORTFOLIOS:
Total loans.........................    $15,031     $ 1,240     $ 1,077     $ 1,432     $ 1,871     $  396      $21,047
Total consumer
      deposits, net non-
      interest funding..............      6,800       1,516       2,732       2,271       2,950      4,068       20,337
Adjustments.........................        727        (726)       (586)       (655)     (1,977)     3,217            0
                                        -------     -------     -------     -------     -------     ------      -------
  Relationship gap..................      8,958      (1,002)     (2,241)     (1,494)     (3,056)      (455)         710
                                        -------     -------     -------     -------     -------     ------      -------

DISCRETIONARY PORTFOLIOS:
Assets..............................      2,906       1,390       2,480       1,576       3,227      1,039       12,618
Liabilities.........................     11,738         402         248          74         236        630       13,327
                                        -------     -------     -------     -------     -------     ------      -------
  Discretionary gap.................     (8,832)        988       2,232       1,502       2,991        409         (710)
                                        -------     -------     -------     -------     -------     ------      -------

  Combined gap......................    $   126     $   (14)    $    (9)    $     8     $   (65)    $  (46)     $     0
                                        =======     =======     =======     =======     =======     ======      =======
  Cumulative gap....................    $   126     $   112     $   103     $   111     $    46     $    0      $     0
                                        =======     =======     =======     =======     =======     ======      =======
</TABLE>

The second major element of CoreStates' interest rate risk is the spread risk
between product rates and financial market rates. These spreads are a function
of competitive and other factors as well as interest rate levels. CoreStates
simulates the behavior of individual products under various rate scenarios to
determine an appropriate investment or funding strategy to provide a stable
spread.

     Consumer deposit spreads are a key element of net interest income. Rates on
savings and similar products have not risen as much as other financial market
rates, suggesting less room to lower rates if market rates decline. During 1995,
deposit balances shifted from more liquid products to certificates and non-bank
alternatives with higher rates. Looking ahead, the spread on total consumer
deposits is subject to continued internal shifting to products with narrower
spreads such as certificates, balance runoff and potential pricing pressure on
liquid deposit accounts. Simulations include assumptions regarding runoff,
shifting across products as well as upward repricing of savings type accounts in
rising rate scenarios. Narrower spreads are generally assumed in falling rate
environments due to limited repricing opportunities. Those assumptions are
developed in conjunction with the business managers and, while management
believes its current simulation assumptions are realistic, it recognizes that
this is an area of potential volatility.

     The spread between the prime rate and short-term market rates, such as
LIBOR, is also an important component of net interest income. That spread has
widened over the last several years compared to historic levels. While the risk
of a narrowing of the prime spread is not unique to CoreStates, a contraction in
that spread would reduce net interest income. CoreStates has approximately $7.3
billion in loans subject to changes in prime, excluding $1.5 billion in credit
card outstandings which historically have been priced with a prime-related
formula. CoreStates currently is in the process of revising the basis for
pricing credit cards from prime to LIBOR, to reduce exposure to the prime
spread.

                                       27
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

OFF-BALANCE SHEET INSTRUMENTS AND DERIVATIVE ACTIVITIES - CoreStates uses off-
balance sheet derivative instruments primarily to manage CoreStates' interest
rate risk.  CoreStates believes that interest rate risk management must be
coordinated with the management of liquidity and capital.  Therefore, CoreStates
uses off-balance sheet instruments to modify its rate sensitivity and
consequently, avoids the unnecessary leverage and liquidity impairment which
would result from on-balance sheet alternatives.  CoreStates also uses interest
rate contracts to provide risk management services for its customers.
CoreStates does not use off-balance sheet derivative instruments for speculative
investment.

Credit risk exists in a derivative transaction to the extent that there is a
favorable move in interest rates and the counterparty fails to perform.   The
current credit exposure in a derivative transaction is the estimated cost to
replace the transaction at current market rates, while potential exposure is the
estimated cost to replace the transaction at future interest rates.  CoreStates
monitors both the current and potential risk.  CoreStates evaluates the credit
worthiness of all off-balance sheet counterparties using the same standards
applied in any other loan or credit transaction.  In addition, CoreStates
requires collateral from counterparties when the risk exceeds an acceptable
threshold.  Collateral agreements are determined based on the quality of
individual counterparties.  As of December 31, 1995, the current cost to replace
CoreStates' derivatives portfolio was $236 million.  This assumes that only
counterparties for whom it would be favorable to default would do so.

INTEREST RATE RISK RELATED DERIVATIVE ACTIVITIES - CoreStates' use of
derivatives for interest rate risk management falls into three categories:
interest sensitivity adjustments, spread protection and the hedging of
anticipated asset sales.  The following schedule reflects by interest rate risk
management category, the outstanding derivative positions as of December 31,
1995, the major balance sheet category to which they relate, and the associated
unrealized gains/losses:

                                       28
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

<TABLE>
<CAPTION>
OUTSTANDING INTEREST RATE RISK RELATED DERIVATIVES
--------------------------------------------------
At December 31, 1995                            INTEREST    INTEREST   INTEREST
--------------------
(in millions)                                     RATE        RATE     RATE CAPS      OTHER
                                                 SWAPS      FUTURES   AND FLOORS   DERIVATIVES     TOTAL
                                                ------      -------   ----------   -----------     -----
<S>                                             <C>         <C>       <C>          <C>             <C>
Interest Sensitivity Adjustment:
  Assets (primarily loans):
    Notional amount........................     $3,115        $619       $ 10                     $3,744
    Unrealized gains.......................        117           1                                   118
    Unrealized losses......................         (1)                                               (1)
  Deposits and other borrowings:
    Notional amount........................      3,762                                             3,762
    Unrealized gains.......................         72                                                72
    Unrealized losses......................         (5)                                               (5)
  Long-term debt:
    Notional amount........................        589                     25                        614
    Unrealized gains.......................         24                                                24
    Unrealized losses......................         (8)                                               (8)
Spread Protection:
  Assets (primarily loans)
    Notional amount........................                               426                        426
    Unrealized gains.......................                                 2                          2
    Unrealized losses......................                                (1)                        (1)
  Deposits and other borrowings:
    Notional amount........................                               100                        100
    Unrealized gains.......................                                 1                          1
    Unrealized losses......................
Anticipated Asset Sales:
    Notional amount........................         75                                $106           181
    Unrealized gains.......................
    Unrealized losses......................         (1)                                 (2)           (3)
Total:
    Notional amount........................     $7,541        $619       $561         $106        $8,827
                                                ======        ====       ====         ====        ======
    Unrealized gains.......................     $  213        $  1       $  3         $  -        $  217
                                                ======        ====       ====         ====        ======
    Unrealized losses......................     $  (15)       $  -       $ (1)        $ (2)       $  (18)
                                                ======        ====       ====         ====        ======
    Net unrealized gains (losses)..........     $  198        $  1       $  2         $ (2)       $  199
                                                ======        ====       ====         ====        ======
</TABLE>

Although the value of the various derivative instruments will change with
interest rates, CoreStates does not consider changes in individual portfolio
values to be significant given that the portfolios are used to offset specific
risks.  As of December 31, 1995, CoreStates' use of off-balance sheet derivative
instruments which carry a leveraged exposure to either rising or falling rates
or have other complex features is not material.

                                       29
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

Interest sensitivity adjustments account for the majority of CoreStates'
derivative activities.  CoreStates has a naturally asset sensitive balance sheet
as a result of its basic loan and deposit businesses.  Commercial and consumer
loan activities tend to have short-term repricing characteristics versus the
longer term repricing nature of CoreStates' funding sources.  These relationship
portfolios have a positive effect on earnings in a rising rate environment and a
negative effect in a falling rate environment. Therefore, CoreStates uses fixed
rate assets or off-balance sheet instruments with characteristics similar to
fixed rate assets to offset this risk.  When off-balance sheet instruments are
used, cash balances are invested in shorter time periods and interest rate swaps
or other derivatives are used to "fix" the rate for longer terms similar to
those of CoreStates' liabilities.  By using swaps and futures in this manner,
leverage is reduced and liquidity is enhanced.  If derivative instruments were
not used, CoreStates would invest in longer term assets based on its disciplined
interest rate risk management practice of strict matching of asset and liability
terms.  Therefore, the impact of derivatives on pre-tax income is confined to
the spread between the derivative instrument and other instruments of similar
terms.  Management estimates that this spread is not material relative to pre-
tax income.

CoreStates also uses derivative instruments to protect spreads on certain
balance sheet products.  CoreStates' loan and securities  portfolios include
adjustable rate mortgages which carry interest rate caps limiting the amount of
rate increase per year as well as over the life of the mortgage.  As interest
rates rise and funding costs increase, the spread on that portfolio will
compress.  CoreStates holds $326 million of interest rate caps which offset that
risk by limiting the potential increase in funding costs.

For accounting purposes, the income effects of futures or swaps used to adjust
interest sensitivity or to protect a product spread are associated with either
the asset or the liability being managed.  The amount recorded in net interest
income related to derivative financial instruments was $41.3 million in 1995 and
$82.1 million in 1994.  The following table shows the impact of derivatives
income on average interest rates:

IMPACT OF DERIVATIVES INCOME ON YIELDS AND COSTS
------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,                              1995                                         1994
                                        -----------------------------------------------  -------------------------------------------
(in millions)                                       REPORTED                  IMPACT                Reported               Impact
                                         AVERAGE     YIELD/     PRODUCT         OF        Average    Yield/    Product       of
                                         BALANCE      COST        RATE      DERIVATIVES   Balance     Cost       Rate    Derivatives
                                        --------    --------    -------     -----------   -------   --------   -------  ------------
<S>                                     <C>         <C>         <C>         <C>           <C>       <C>        <C>       <C>
EARNING ASSETS
Time deposits........................    $ 1,843      6.33%      6.33%                    $ 1,520      4.37%     4.37%
Federal funds sold & trading
  account............................        231      6.31       6.31                         168      4.72      4.72
Investment Securities................      2,367      6.11       5.96          0.15%        3,014      5.50      5.53        (0.03)%
Loans................................     20,770      9.65       9.56          0.09        19,601      8.73      8.59          0.14
                                         -------                                          -------

TOTAL EARNING ASSETS.................    $25,211      9.04       8.95          0.09       $24,303      8.02      7.92          0.10
                                         =======                                          =======

INTEREST BEARING FUNDS
Savings, NOW, regular MMA............    $ 6,028      1.81       1.94         (0.13)      $ 6,653      1.17      1.75         (0.58)
Premium MMA..........................      2,143      3.92       3.92             -         2,140      2.89      2.89            -
Certificates.........................      5,529      5.17       5.33         (0.16)        4,361      4.28      4.36         (0.08)
                                         -------                                          -------
   Total retail......................     13,700      3.47       3.59         (0.12)       13,154      2.48      2.80         (0.32)
                                         -------                                          -------

Commercial & foreign deposits........      1,191      4.78       4.97         (0.19)        1,073      3.58      3.63         (0.05)
Federal funds purchased &
  short-term borrowings..............      2,073      5.77       5.75          0.02         1,928      4.42      4.42            -
Long-term debt.......................      1,814      6.69       6.71         (0.02)        1,657      5.54      6.32         (0.88)
                                         -------                                          -------
   Total wholesale...................      5,078      5.87       5.91         (0.04)        4,658      4.59      4.92         (0.33)
                                         -------                                          -------

TOTAL INTEREST BEARING FUNDS.........    $18,778      4.12       4.22         (0.10)      $17,812      3.03      3.35         (0.32)
                                         =======                                          =======
</TABLE>

                                       30
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

It is important to note that derivatives usage, its impact on individual balance
sheet items and fluctuations in fair value should be viewed in the context of
overall risk management.  As previously stated, if CoreStates did not use
derivatives, it would adjust cash positions to create the same interest
sensitivity position with approximately the same income results.  However, if
cash transactions were used, the income of those activities would not be carried
as an income adjustment to other balance sheet products.  Fluctuations in the
impact of derivatives shown on the above table are a function of market
conditions and do not indicate changes in risk positions.

The third category of derivative activity is the hedging of anticipated asset
sales.  As fixed rate assets are accumulated for future sale, CoreStates is
exposed to a decline in sale price due to rising interest rates.  Therefore,
CoreStates will enter into an interest rate swap or a forward rate agreement
which will increase in value if rates rise.  The increased value on the
derivative is used to offset the decline in value of the cash asset.
Gains/losses on the derivative are deferred until the asset sale and recognized
as part of the sale transaction.  In 1995, CoreStates sold fixed rate mortgages;
those sales were hedged primarily with fixed-pay mortgage swaps which amortized
with a reference portfolio of mortgage-backed securities.  These swaps were
terminated as the mortgages were sold.  CoreStates securitizes and sells its
longer term fixed-rate home equity loans and fixed-rate mortgages on a recurring
basis.  Home equity loans are held for several months prior to sale  while
sufficient volume for securitization is accumulated.  Forward rate locks are
used to hedge rate changes during that warehouse period.  Options on mortgage-
backed securities as well as both mandatory and optional forward sale
commitments are used to hedge the mortgage pipeline.

Interest rate swaps are agreements between two parties to exchange interest cash
flows.  Generally, one party receives a fixed rate and pays a variable rate,
while the counterparty pays the fixed rate and receives the variable rate.  As
of December 31, 1995, the rates CoreStates has contracted to receive are fixed
for longer time periods than the rates CoreStates has contracted to pay.
Therefore, if interest rates fall, this portfolio will provide higher interest
income, offsetting a decline in interest income in relationship portfolios;
conversely if rates rise, the swap portfolio will produce less interest income
which will be offset by increased interest income in the relationship
portfolios.  CoreStates also uses interest rate futures in a similar manner.
While swaps are used in both short and long term maturities, futures are used
primarily to extend the rate sensitivity of short-term assets to periods less
than one year.  CoreStates' use of financial futures is largely concentrated in
Eurodollar and LIBOR contracts.  Given the direction of its natural interest
sensitivity, CoreStates has not historically paid fixed rates on interest rate
swaps or used off-balance sheet instruments to extend its liabilities.

The repricing schedule below summarizes the notional amount and associated
interest rate of CoreStates' interest rate swaps categorized by whether
CoreStates receives or pays the rate shown.  The swaps are stratified by
repricing date or maturity depending on whether the payments are floating or
fixed, respectively.  Floating rates included in the repricing schedule are
based on the rates in effect on December 31, 1995.

                                       31
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued


REPRICING SCHEDULE OF INTEREST RATE SWAPS
-----------------------------------------
At December 31, 1995
--------------------
(in millions)

<TABLE> 
<CAPTION> 
                                                                          YEARS
                                               -----------------------------------------------------------
                                               0-1        1-2        2-3        3-4        4-5      OVER 5      TOTAL  
                                               ---        ---        ---        ---        ---      ------      -----  
<S>                                           <C>        <C>        <C>        <C>        <C>       <C>        <C>    
Receive Fixed/Pay Floating:                                                                                            
  Receive       Notional................      $2,646     $1,054     $ 774      $ 969      $ 605      $ 902     $6,950 
                Rate....................        6.92%      6.62%     6.46%      7.11%      6.62%      7.08%      6.84% 
  Pay           Notional................      $6,950                                                           $6,950 
                Rate....................        5.96%                                                            5.96% 
Pay Fixed/Receive Floating:                                                                                            
  Pay           Notional................      $  105                $  20                 $  25                $  150 
                Rate....................        7.57%                8.60%                 9.24%                 7.99% 
  Receive       Notional................      $  150                                                           $  150 
                Rate....................        5.48%                                                            5.48% 
Receive Floating/Pay Floating:                                                                                         
(Basis Swaps)                                                                                                          
                Notional................      $   31                                                           $   31 
  Receive       Rate....................        4.77%                                                            4.77% 
  Pay           Rate....................        5.38%                                                            5.38% 
Receive Fixed/Pay Floating(a):                                                                                         
(Forward Start)                                                                                                        
  Receive       Notional................                            $ 205      $  30      $ 175                $  410
                Rate....................                             6.32%      6.38%      7.03%                 6.62%
  Start Date    Notional................      $  260                $ 100      $  50                           $  410 
</TABLE>

_____________________________________
(a)  Pay rate will be determined on forward start date.

                                       32
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

The following schedule illustrates CoreStates' interest rate risk related
derivative activity during 1995:

ACTIVITY IN DERIVATIVES PRODUCTS
--------------------------------
Year Ended December 31, 1995
----------------------------
(in millions)

<TABLE> 
<CAPTION> 
                                            INTEREST   INTEREST    INTEREST
                                              RATE       RATE     RATE CAPS       OTHER
Notional Amounts                             SWAPS     FUTURES    AND FLOORS   DERIVATIVES    TOTAL  
----------------                            --------   --------   ----------   -----------   --------
<S>                                         <C>        <C>        <C>          <C>           <C>
As of December 31, 1994.............        $ 7,850    $ 1,043      $1,053        $ 295       $10,241
Additions...........................          1,875      3,688          58          246         5,867
Terminated contracts(a).............           (580)    (4,112)          -         (125)       (4,817)
Maturities/amortization.............         (1,604)         -        (550)        (310)       (2,464)
                                            -------    -------      ------        -----       -------
As of December 31, 1995.............        $ 7,541    $   619      $  561        $ 106       $ 8,827
                                            =======    =======      ======        =====       =======
</TABLE>

(a)  As of December 31, 1995, CoreStates had no material deferred gains or
     losses related to terminated derivative contracts.

CoreStates' use of off-balance sheet instruments declined during 1995.  As
various asset sales were consummated (primarily mortgage assets), the related
interest rate swaps and/or other derivatives used to protect the sales value
were terminated or allowed to expire.  In addition, during the latter half of
1995, shifts in funding mix and increased loan volumes resulted in reduced need
for fixed rate asset sensitivity.  Therefore, matured swaps were not fully
replaced and certain interest rate swaps were terminated.

CUSTOMER RELATED DERIVATIVE ACTIVITIES - CoreStates also engages in derivative
market activities to provide risk management services for its customers.  These
services include interest rate swaps, caps, and floors.  CoreStates offsets
protection sold to customers through purchases of similar protection.  Customer
related derivative activity is marked to market.  The following schedule details
the outstanding notional amounts and related fair values of customer related
derivative transactions as of December 31, 1995 and 1994.

CUSTOMER RELATED DERIVATIVES
----------------------------
At December 31,
--------------
(in millions)

<TABLE>
<CAPTION>
                                                                 1995                                  1994
                                                     ------------------------------          --------------------------
                                                     NOTIONAL         NET ASSETS             Notional     Net assets
Interest Rate Swaps:                                  AMOUNT         (LIABILITY)(a)           amount     (liability)(a)
                                                     --------        --------------          --------    --------------
<S>                                                  <C>             <C>                     <C>          <C>
  CoreStates receives fixed...................        $  115                $ 1               $  192           $(4)
  CoreStates pays fixed.......................           115                 (1)                 192             4
Rate Locks:
  CoreStates receives fixed...................            15                  -                    -             -
  CoreStates pays fixed.......................            15                  -                    -             -
Interest Rate Caps/Floors:
  Sold........................................           517                 (1)                 424            (5)
  Purchased...................................           517                  1                  424             5
Foreign exchange contracts....................         1,660(b)               2(c)             1,817             2
                                                       -----                ----              ------           ---
Total Customer Related Derivatives............        $2,954                 $2               $3,049           $ 2
                                                      ======                ====              ======           ===
</TABLE> 

_______________________________
(a)  Average net assets (liabilities) during 1995 and 1994 was substantially the
     same as the net assets (liabilities) at December 31, 1995 and 1994,
     respectively.
(b)  Foreign exchange contracts purchased and sold at December 31, 1995 were
     $834 million and $826 million, respectively.
(c)  Gross assets and (liabilities) on foreign exchange contracts at December
     31, 1995 were $16 million and $(14) million, respectively.

                                       33
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

LIQUIDITY

     Liquidity management allows a financial institution to meet potential cash
needs at a reasonable price under various operating conditions. Liquidity comes
from a variety of sources: the maturing of short-term assets, readily marketable
unpledged securities, and the ability to attract new funds. The ability to
securitize or sell other assets, such as loans, also enhances liquidity, as does
the structure and stability of existing funding sources. It is CoreStates'
practice to maintain a high degree of liquidity through a strong funding base of
core deposits combined with modest and diversified use of market sources and
relatively short-term maturities of discretionary asset portfolios.

     CoreStates maintains sufficient liquidity to meet its obligations in a
timely and cost-effective manner. Management monitors current and projected cash
flows, and adjusts positions as necessary to maintain adequate levels of
liquidity. CoreStates emphasizes diversification of funding sources. By using a
variety of markets, limiting funds borrowed from a single investor, and
staggering maturities, the risk of potential funding pressure is significantly
reduced. Management also maintains a detailed liquidity contingency plan
designed to adequately respond to situations such as a decline in asset quality
or credit ratings, which could lead to liquidity concerns. Management analyzes
potential changes in major funding sources during difficult times, the amount of
runoff that may be expected, as well as available options to replace those
funds. The plan includes specific action steps to be taken in the event of
funding disturbances.

     The cornerstone of CoreStates' liquidity position is a sizable and stable
base of core deposits acquired through customer relationships. Core deposits are
comprised of interest-bearing consumer savings products as well as non-interest
bearing consumer and commercial deposits. Core deposits averaged 68.6% of assets
in 1995 compared to 69.7% in 1994.

     Core deposits are supplemented by discretionary funding sources from direct
customer contacts in both the domestic and international markets. These sources
include large denomination certificates of deposit, deposits in foreign branches
as well as federal funds, repurchase agreements, commercial paper and long-term
debt. Commercial paper is used primarily to fund Congress Financial. In addition
to commercial paper, Congress Financial is funded through the issuance of 
medium-term notes and long-term debt. Growth in loans at Congress Financial
during 1995 accounted for most of the growth in discretionary funding sources.
At December 31, 1995, CoreStates had a $650 million revolving credit facility
from unrelated banks. The facility was established in support of commercial
paper borrowings, medium-term notes and general corporate purposes. There were
no borrowings under this facility at year-end 1995. CoreStates' liquidity is
further enhanced by its ability to raise funds in a variety of domestic and
international money and capital markets.

     Under an existing shelf registration filed with the Securities and Exchange
Commission ("the SEC"), CoreStates had a broad range of debt and capital
securities that were registered but unissued of approximately $294 million at
December 31, 1995. During 1995, approximately $430 million of debt having
various terms and interest rates was issued under the shelf registration.
Maturities and retirements of long-term debt during 1995 were approximately $520
million. A new shelf registration statement will be filed with the SEC in the
first half of 1996 increasing registered but unissued debt and capital
securities to $1.75 billion.

     The tables on pages 93, 95 and 96 illustrate the maturity characteristics
of CoreStates' domestic certificates of deposit over $100 thousand, loan
portfolio and investment portfolio, respectively. For information regarding the
maturity characteristics of CoreStates' short-term funds borrowed and long-term
debt, see notes 10 and 11 to the financial statements.

                                       34
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ASSET AND LIABILITY MANAGEMENT - continued

INVESTMENT PORTFOLIO

     Within the context of the policies and practices previously outlined,
CoreStates maintains a portfolio of marketable debt securities to contribute to
a balanced interest rate risk position and to provide liquidity reserves.
Interest rate risk management disciplines require strict matching of interest
rate sensitivities and, therefore, CoreStates generally does not consider
changes in the market value of individual portfolios as significant to the
management of its interest sensitivity. The investment securities portfolio at
December 31, 1995 consisted of investments held-to-maturity with a carrying
value of $1,016 million and investments available-for-sale with a carrying value
of $975 million, compared to $2,455 million and $426 million, respectively on
December 31, 1994. Most of the decline in the investment portfolio from 1994
resulted from maturities. Late in 1995, the FASB permitted all institutions to
reassess the appropriateness of the designation of investment securities as 
held-to-maturity, and reclassify such securities to available-for-sale.
CoreStates reclassified $607 million in securities to available-for-sale. The
net unrealized gain on the securities reclassified was $0.3 million, for a $0.2
million net of tax increase to shareholders' equity. The available-for-sale
portfolio also includes a bank stock portfolio and other marketable equity
securities. The accumulated net unrealized gain on available-for-sale securities
was $35 million at December 31, 1995, compared to $11 million at December 31,
1994. The increase in the net unrealized gain was primarily due to the decline
in interest rates and appreciation in the bank stock portfolio.

SOURCES AND USES OF FUNDS

     Total assets were $29.6 billion at year-end 1995, an increase of $295
million, or 1.0% , from year-end 1994. The increase in year-end 1995 assets
principally reflects the net $520 million, or 2.5%, growth experienced in the
loan portfolio, particularly in asset-based loans at Congress Financial and
credit card outstandings. Loan growth at banking subsidiaries was funded by
maturities of investment securities, as the investment portfolio was reduced by
$890 million, or 30.9%, from year-end 1994. The book value of loans sold during
1995 was approximately $750 million and was comprised of approximately $530
million of residential mortgages and $136 million of fixed-rate home equity
loans. The impact of loan sales on results of operations was not material.

     Total deposits declined $538 million, or 2.4%, from year-end 1994. Domestic
interest-bearing deposits declined $903 million, or 6.2%, from year-end 1994
principally as a result of merger-related attrition and the impact of lower
interest rates. Domestic demand deposits increased $338 million, or 5.3%,
reflecting a year-end 1995 increase in customer activity. The net decline in
deposits was offset by loan sales, the decline in the investment portfolio and a
$546 million, or 35.3%, increase in short-term borrowings. The increase in 
short-term borrowings was also used to fund loan growth at Congress Financial.

                                       35
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

SOURCES AND USES OF FUNDS - continued

     Total assets averaged $28.4 billion in 1995, up $779 million, or 2.8%, from
1994. Average loans increased $1.2 billion, or 6.0%, while average investment
securities decreased $647 million or 21.5%. As reflected in the chart on
"Earning Asset Mix", loans comprised 82.4% of CoreStates' average earning assets
in 1995, compared to 80.7% in 1994. A $664 million, or 4.7% increase in average
interest bearing deposits resulted primarily from the GSB acquisition in
December 1994.

Earning Asset Mix
-----------------
Plotting Points for a Graph
---------------------------
(percentage of average earning assets)

<TABLE>
<CAPTION>
                                    Earning Asset Mix                          
                       -------------------------------------------
                        Short-term
                       money market        Investment 
                       investments         securities        Loans
                       ------------        ----------        -----
        <S>            <C>                 <C>               <C>
        1995               8.2%                9.4%           82.4%
        1994               6.9                12.4            80.7
        1993               6.4                14.8            78.8
        1992               8.1                13.6            78.3
        1991               6.5                12.6            80.9
</TABLE>

     The accompanying table on Funding Mix illustrates that 59.2% of CoreStates'
funds were derived from consumer deposits in 1995, compared with 58.2% in 1994.
Funding to accommodate current business needs and future growth at non-bank
subsidiaries will continue to be supported by the previously discussed shelf
registration.

Funding Mix
-----------
Plotting Points for a Graph
---------------------------
(percentage of average earnings assets*)

<TABLE>
<CAPTION>
                                  Funding Mix
                     --------------------------------------
                                     Other           Non-
                      Retail        Interest       Interest
                     Deposits       Bearing        Bearing
                     --------       -------        -------
        <S>          <C>            <C>            <C>
        1995           59.2%          13.0%          27.8%
        1994           58.2           13.0           28.8
        1993           59.3           13.3           27.4
        1992           63.0           11.6           25.4
        1991           58.3           21.1           20.6
</TABLE>

* excluding short-term money market investments

                                       36
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

REVIEW AND ANALYSIS OF EARNINGS

OPERATING REVENUE

     Operating revenue has two primary sources, net interest income and non-
interest income. On the accompanying chart ("Operating Revenue"), net interest
income is presented excluding the earnings benefit of balances maintained by
commercial customers as compensation for transaction oriented non-credit
products. Non-interest income and the previously mentioned earnings benefit of
balances maintained are presented separately. Net interest income and non-
interest income are discussed in further detail on the following pages.

OPERATING REVENUE
-----------------
Plotting Points for a Graph
---------------------------
(tax equivalent net interest income plus non-interest income-in millions)

<TABLE>
<CAPTION>
                              Operating Revenue                     
                   --------------------------------------
                                    Derived               
                     Loan and         from          Non-  
                    Investment     Non-credit     Interest
                     Interest       Balances       Income       Total
                   -----------     ----------      ------       -----
        <S>        <C>             <C>            <C>          <C>
        1995         $1,346.4        $159.4        $605.7      $2,111.5
        1994          1,262.5         148.1         567.5       1,978.1
        1993          1,211.4         140.4         574.0       1,925.8
        1992          1,160.7         122.8         610.7       1,894.2
        1991          1,190.6         123.1         615.6       1,929.3
</TABLE>                                                      
                                                              
     Operating revenue for 1995, as adjusted for significant an d unusual items,
increased 6.0% over 1994, primarily due to a $95.2 million, or 6.7%, increase in
total net interest income. The growth in net interest income for 1995 was
primarily experienced in Consumer Financial Services, which experienced growth
of 9.4%. The items excluded from the 1995 to 1994 operating revenue comparison
were: a $19.0 million 1995 gain related to changes in CoreStates' investment in
the EPS affiliate joint venture, a $7.4 million 1995 gain on the sale of the
Corporate Trust business, a $1.9 million 1994 gain on the sale of two Virgin
Islands branches, and investment securities gains in both years.

     Operating revenue for 1994 adjusted for significant and unusual items,
experienced a 3.6% improvement over 1993, principally in the Wholesale Banking
business. The items excluded from the 1994 to 1993 comparison were: a $1.9
million gain from the sale of two Virgin Islands branches in 1994, a gain of
$9.1 million on the prepayment of long-term debt in 1993, an $11.0 million gain
on the sale of five Virgin Islands branches in 1993, and net securities gains in
both years.

                                       37
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

NET INTEREST INCOME

     The largest source of CoreStates' operating revenue is net interest income.
For analytical purposes, net interest income is adjusted to a taxable equivalent
basis to recognize the income from tax exempt assets as if the interest were
taxable. Net interest income on a taxable equivalent basis increased $95.2
million, or 6.7% in 1995, compared to an increase of $58.8 million, or 4.4% in
1994. The strength of CoreStates' net interest income and net interest margin
stems from the combination of wide spreads on both loans and deposits and a
balance sheet which has a relatively high portion of loans and a large base of
non-interest bearing funding. The following table compares taxable equivalent
net interest income for the years ended December 31, 1995, 1994 and 1993.

Taxable Equivalent Net Interest Income
--------------------------------------
For the Years Ended December 31,
(in millions)

<TABLE> 
<CAPTION> 
                                                                                                 Percentage
                                                                                              increase(decrease)
                                                                                              -----------------
                                                       1995           1994         1993       '95/'94   '94/'93
                                                     --------      --------      --------     -------   -------
<S>                                                  <C>           <C>           <C>          <C>       <C>
Total interest income.................               $2,262.4      $1,929.5      $1,841.9       17.3%      4.8%
Tax equivalent adjustment.............                   17.2          21.3          26.5      (19.2)    (19.6)
                                                     --------      --------      --------
Tax equivalent interest income........                2,279.6       1,950.8       1,868.4       16.9       4.4
Total interest expense................                  773.8         540.2         516.6       43.2       4.6
                                                     --------      --------      --------
Tax equivalent net interest income....               $1,505.8      $1,410.6      $1,351.8        6.7       4.4
                                                     ========      ========      ========

Interest rate spread..................                   4.92%         4.99%         4.85%
                                                         ====          ====          ====
Net interest margin...................                   5.97%         5.80%         5.59%
                                                         ====          ====          ====
</TABLE>

     The increase in net interest income for 1995 was driven by improved spreads
earned on both deposits and prime-based loans and by improved earnings on non-
interest bearing funding sources in 1995's comparatively higher interest rate
environment. Also contributing to the increase in 1995 net interest income was
the growth in relatively higher yielding loans, particularly commercial finance
lending at Congress Financial and credit card outstandings. Average commercial
finance loans at Congress Financial grew by $274 million, or 12.2%, in 1995 and
credit card outstandings grew by $195 million, or 15.3%, on average.

     The net interest margin is a key measure of net interest income
performance. It represents the difference between tax equivalent interest
income, including net loan fees earned, and interest expense, reflected as a
percentage of average earning assets. The net interest margin increased 17 basis
points in 1995 to 5.97%, following a 21 basis point increase in 1994. The 1995
increase was driven by improved product spreads, increased volumes in higher
spread loan categories and improved earnings on non-interest bearing funding
sources. The 1994 net interest margin increase was principally attributable to
higher yields on loans due to a change in asset mix and the increase in the
prime rate during that year, partially offset by a lower yield on the investment
portfolio during 1994 as compared to 1993. The cost of interest bearing deposits
decreased by 5 basis points in 1994 as changes in the pricing of consumer
deposits in the rising rate environment lagged changes in financial market
rates. The cost of borrowed funds, more sensitive to rising interest rates,
increased during 1994 by 89 basis points.

     The increase in net interest income in 1994 resulted primarily from an
improvement in interest rate spreads. While average total earning assets
experienced little growth in 1994, a change in asset mix resulted in the yield
on earning assets increasing to 8.03% in 1994 from 7.73%, partially offset by a
smaller increase in average cost of liabilities to 3.03% from 2.90% in 1993. The
loan portfolio experienced a $566 million increase in 1994 on average, mostly in
the higher yield credit card and asset-based lending portfolios, while the
comparatively lower yielding investment portfolio was reduced $569 million. An
increase in non-interest bearing funding sources of $287 million also
contributed to the 1994 increase in net interest income.

                                       38
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

NET INTEREST INCOME - continued

     For further detailed information regarding average balances, yields and
costs, see the consolidated average balance sheet on pages 82-85, and the
rate/volume analysis on page 88.

NON-INTEREST INCOME
For the Years Ended December 31,
(in millions)

<TABLE>
<CAPTION>
                                                                                       Percentage
                                                                                   increase(decrease)
                                                                                  -------------------
                                                    1995      1994      1993      '95/'94     '94/'93
                                                    ----      ----      ----      -------     -------
<S>                                                <C>       <C>       <C>        <C>         <C>
Basic banking transactional
  services(a)................................      $427.4    $422.3    $412.4         1.2%        2.4%
Income from investment in   
  EPS, Inc ..................................        30.1      31.8      13.1        (5.3)      142.7 
Third party processing fees(b)...............        47.7      23.5      17.5       103.0        34.3
Securities gains.............................         9.4      18.7      16.1
Other operating income.......................        64.7      69.3      93.4        (6.6)      (25.8)
                                                   ------    ------    ------
Non-interest income before
  significant and unusual items..............       579.3     565.6     552.5         2.4         2.4
Significant and unusual
  items......................................        26.4(c)    1.9(d)   21.5(e)
                                                   ------    ------    ------
Total non-interest income....................      $605.7    $567.5    $574.0         6.7        (1.1)
                                                   ======    ======    ======     
</TABLE>

_________________________
(a)  Comprised of debit and credit card fees, service charges on deposit
     accounts, trust income, and fees for international services.
(b)  Includes revenues for CashFlex lockbox processing, Transys check
     processing, and SynapQuest credit card and merchant processing.
(c)  Reflects the $19.0 million pre-tax gain related to changes in the
     investment in the EPS, Inc. affiliate joint venture and the $7.4 million
     pre-tax gain recorded on the sale of the Corporate Trust business.
(d)  Includes pre-tax gain of  $1.9 million recorded on the sale of two Virgin
     Islands branches.
(e)  Includes pre-tax gains of  $11.0 million recorded on the sale of five
     Virgin Islands branches, $9.1 million on prepayments of long-term debt and
     $1.4 million in excess recoveries from the settlement of a previously
     charged off loan at Independence.

     Non-interest income for 1995, excluding significant and unusual items,
increased 2.4% from 1994, primarily reflecting an increase in third-party
processing fees. Third-party processing fee income for 1995 increased $24.2
million, or 103.0%, principally as a result of the January 27, 1995 acquisition
of Nationwide Remittance Centers, Inc. ("NRC"). Revenues in CoreStates' basic
banking transactional businesses (discussed in detail below) experienced modest
growth in 1995, as a $12.4 million, or 15.6%, increase in fees for international
services was partially offset by declines of $4.7 million or 2.6%, in services
charges on deposits and $1.6 million, or 1.7% in trust income. The decline in
service charges on deposits reflects moderate growth in transaction volume and
the election by commercial customers to pay for deposit services by maintaining
deposit balances (the value of which is included in net interest income) in lieu
of cash fees.

     For 1994, reported total non-interest income decreased $6.5 million or
1.1%, but total non-interest income in 1994 before significant and unusual items
increased $13.1 million or 2.4% over 1993. The growth for 1994 reflects
increases in income from CoreStates' investment in EPS, Inc., international
service charges and third-party processing fees, partially offset by the
election by commercial customers to pay for deposit services by maintaining
deposit balances (the value of which is included in net interest income) in lieu
of cash fees, declines in income and fees derived from mortgage banking, and a
decline in trust income.

                                       39
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

NON-INTEREST INCOME - CONTINUED

     Income from basic banking transactional services increased modestly in
1995, 1.2%, following growth of 2.4% in 1994. The components of basic banking
transactional services are discussed in the following paragraphs:

     . Service charges on deposit accounts, paid in fees, decreased $4.7
       million, or 2.6%, in 1995, compared to an increase of $1.2 million, or
       0.7%, in 1994. After adding the value of service charges paid through the
       maintenance of deposit balances by commercial and correspondent
       customers, which is included in net interest income, total service charge
       compensation for 1995 was $335.4 million, up $6.6 million, or 2.0%, from
       1994 reflecting moderate growth in transaction volume. Total service
       charge compensation on this basis for 1994 was $328.8 million, an
       increase of $9.0 million or 2.8% over 1993.

     . Fees for international services increased $12.4 million, or 15.6%, in
       1995, following an increase of $10.3 million, or 14.8%, in 1994. The
       growth in revenues for 1995 and 1994 reflects a continuing emphasis on
       non-credit products and international transaction processing services and
       resulting volume increases at overseas branches which were opened in
       recent years. For 1995, foreign exchange fees increased $3.1 million, or
       16.5%, and fees on other international transaction processing services
       increased $9.3 million, or 15.3%.

     . Trust income decreased $1.6 million, or 1.7%, in 1995 and $4.4 million,
       or 4.4%, in 1994. The 1995 decline in trust income reflects the impact of
       CoreStates' October 1995 sale of its Corporate Trust business. Revenues
       recorded on Corporate Trust services were $6.5 million, $8.4 million and
       $8.1 million for 1995, 1994 and 1993, respectively. The pre-tax gain
       recorded in 1995 on the sale of Corporate Trust was $7.4 million. The
       Corporate Trust transaction provides for potential additional gains in
       1996, pending determination of customer retention by the buyers.
       Excluding Corporate Trust revenues in 1995 and 1994, trust income for
       1995 was level with 1994, reflecting the impact of past customer
       attrition. The 1994 decline in trust income was caused by declines in the
       financial markets which generated lower asset values and some customer
       attrition.

     . Debit and credit card fees decreased $1.0 million, or 1.5% in 1995,
       following an increase of $2.9 million, or 4.6%, in 1994. Credit card fees
       for 1995 were $25.5 million, level with 1994 fees. Competitive pricing
       pressures adversely impacted fee income for this product in 1995. At 
       year-end 1995, CoreStates' credit card portfolio included approximately
       614,000 active accounts, compared to 601,000 active accounts at year-end
       1994. Debit card fees were down $0.9 million or 2.2% from 1994 primarily
       due to price sensitivity.

     CoreStates recorded net securities gains of $9.4 million in 1995, compared
to $18.7 million in 1994 and $16.1 million in 1993. Investment securities gains
for 1995 included $7.8 million of gains recorded on sales of equity securities
acquired in connection with prior loan arrangements. Investment securities gains
in 1994 included $5.0 million recorded on sale of certain investments acquired
with Constellation and $10.7 million recorded on sales of certain bank stocks.
Investment securities gains for 1993 included $13.6 million on sales of domestic
equity securities and $8.6 million on sales of foreign equity securities,
partially offset by $6.1 million for partial writedowns of foreign equity
securities.

     Other operating income in 1995 decreased by $4.6 million, or 6.6%,
primarily as a result of gains on sales of loans (other than mortgages) in 1994.
Other operating income in 1994 decreased by $24.1 million, or 25.8% principally
as a result of mortgage banking activity which was adversely impacted in 1994 by
reduced refinance activity and higher mortgage rates. Gains on sales of
mortgages and mortgage servicing fees were down $11.6 million and $4.1 million
in 1994, respectively. Gains on trading account securities were $2.3 million in
1995, 1994 and 1993, respectively.

                                       40
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

<TABLE> 
<CAPTION> 
NON-FINANCIAL EXPENSES                                                                Percentage
For the Years Ended December 31,                                                  increase(decrease)
                                                                                  ------------------
(in millions)                                     1995        1994       1993     '95/'94    '94/'93
                                                  ----        ----       ----     -------   -------
<S>                                           <C>         <C>         <C>         <C>       <C>
Salaries, wages and benefits.............     $  600.9    $  631.1    $  623.0      (4.8)%     1.3%
Net occupancy expense....................        113.5       114.5       115.0      (0.9)     (0.4)
Equipment expense........................         78.5        77.1        74.8       1.8       3.1
Amortization of intangible assets........         28.1        14.1        19.5      99.3     (27.7)
FDIC premiums............................         23.1        43.7        46.2     (47.1)     (5.4)
Other operating expenses.................        332.1       322.4       318.6       3.0       1.2
                                              --------    --------    --------
Non-financial expenses before
   significant and unusual items.........      1,176.2     1,202.9     1,197.1      (2.2)      0.5
Significant and unusual
   items.................................         98.2(a)    114.7(b)     44.8(c)
                                              --------   ---------   ---------
Total non-financial expenses.............     $1,274.4    $1,317.6    $1,241.9      (3.3)      6.1
                                              ========    ========    ========
</TABLE>

_____________________________
(a)  Reflects a net restructuring charge of $98.2 million related to the
     corporate-wide process redesign. See "Process Redesign" on page 8 for more
     detail regarding the net restructuring charge. The impact of other real
     estate owned ("OREO") on non-financial expenses in 1995 was not
     significant.
(b)  Includes merger-related costs of $75.0 million and $33.7 million for the
     Constellation and Independence acquistions, respectively, OREO writedowns
     of $2.3 million and $3.7 million related to Germantown branch closings and
     signage.
(c)  Comprised of OREO writedowns totaling $26.6 million, writedowns of
     purchased mortgage servicing rights of $8.2 million and $10.0 million
     related to the establishment of Transys, a check processing business.

     Total non-financial expenses for 1995, excluding the significant and
unusual items as noted in the above table, were $1,176.2 million, a decrease of
$26.7 million, or 2.2% from 1994. This decline reflects the impacts of a hiring
freeze, the benefits of those aspects of the process redesign implemented to
date, merger-related synergies and the approximately $20.6 million impact of
reduced Federal Deposit Insurance Corporation ("FDIC") premiums. A further
reduction in FDIC premiums is effective January 1, 1996. If that reduced rate is
maintained by the FDIC throughout 1996, CoreStates would expect FDIC premium
expense for 1996 to be less than $0.5 million. Most of the reduction in FDIC
premiums will be used to fund investments in technology to support improved
products and services and increased volume. Affecting comparability of expenses
period-to-period are the acquisitions of GSB on December 2, 1994 and NRC on
January 27, 1995. Excluding the amortization of intangible assets created in the
acquisitions, in 1995 GSB added approximately $21.3 million to non-financial
expenses and NRC added approximately $19.9 million. Expense for amortization of
intangible assets created in the two acquisitions added $13.7 million to 1995
expenses. Excluding the significant and unusual items as noted in the above
table and the impact of GSB and NRC related expenses, non-financial expenses for
the 1995 declined 6.8% from the prior year.

      Salaries, wages and benefits decreased 4.8% in 1995 reflecting reduced
staff levels resulting from the hiring freeze, the process redesign and full-
year impact of merger consolidations, partially offset by increases of $11.4
million and $11.0 million for GSB and NRC, respectively. For 1995, salaries and
wages declined 4.1%, while benefits expense declined 7.1%. Contributing to the
higher decline in benefits expense for 1995 was reduced employee medical costs
arising from efficiencies associated with CoreStates transition to managed care
plans in the beginning of the year. The number of full-time equivalent employees
at December 31, 1995, 1994 and 1993 was: 13,598; 15,076; and 16,017,
respectively.

      In 1995, net occupancy expense declined $1.0 million or 0.9%, and
equipment expense increased $1.4 million, or 1.8%. The decline in net occupancy
expense was primarily due to the process redesign and merger-related synergies.
The increase in equipment expense reflects investments in technology and NRC
expenses.

                                       41
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

NON-FINANCIAL EXPENSES - CONTINUED

      COMPARISON OF 1994 TO 1993 - Reported total non-financial expenses in 1994
were 6.1% higher than 1993. However, excluding significant and unusual items,
non-financial expenses for 1994 were substantially level with 1993. Salaries,
wages and benefits increased 1.3% in 1994. The 1994 increase in salary and
benefit costs was largely the result of normal salary increases offset by
partial year staff reductions due to merger consolidations. At year-end 1994,
the number of full-time equivalent employees declined by over 900 as operations
and systems mergers were completed for acquired companies. Net occupancy expense
decreased 0.4% in 1994. Equipment expenses increased 3.1% in 1994, as
technological improvements were made in delivery systems and support areas.
Other operating expenses decreased 1.2% in 1994, largely due to reductions in
amortization of mortgage servicing rights intangibles which was $8.2 million
less than 1993.

PROVISION FOR INCOME TAXES

     The provision for income taxes was $262.6 million in 1995 compared to
$143.7 million in 1994 and $173.8 million in 1993. The $118.9 million increase
in 1995 tax expense was primarily due to higher pre-tax income. The provision
for income taxes for 1995, 1994 and 1993 were at effective rates of 36.7%, 36.6%
and 32.4%, respectively.

FOURTH QUARTER RESULTS

     In the fourth quarter of 1995, CoreStates recorded net income of $137.0
million or $0.99 per share. "Operating earnings" for the fourth quarter of 1995,
defined as net income excluding a fourth quarter restructuring credit, were
$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 operating earnings and net
income of $111.5 million, or $0.78 per share. The restructuring credit of $6.4
million, $4.1 million after-tax or $0.03 per share, relates to the process
redesign which is discussed on page 8.

     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 4.9% increase in non-interest income
reflecting the $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.

     Based on operating earnings, returns on average equity and assets were
22.52% and 1.84%, respectively, in the fourth quarter of 1995 compared to 19.50%
and 1.60%, respectively, in the fourth quarter of 1994.

ACCOUNTING STANDARDS EFFECTIVE IN 1996

      FAS 121 - Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("FAS 121") was issued in March 1995. FAS 121, which is effective beginning
with 1996, addresses the accounting for and the measurement of the impairment of
long-lived assets that either will be held and used in operations or that will
be disposed of. The impact that FAS 121 will have on CoreStates' future results
of operations cannot be estimated with certainty at the current time. However,
the adoption of FAS 121 is not expected to have a material impact on CoreStates'
financial condition.

                                       42
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CONTINUED

ACCOUNTING STANDARDS EFFECTIVE IN 1996 - continued

     FAS 122 - Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights - an amendment of FASB Statement No. 65" ("FAS
122") was issued in May 1995 to modify the treatment of capitalized mortgage
servicing rights by mortgage banking enterprises. FAS 122, which is effective
beginning with 1996, amends FASB Statement No. 65 to eliminate the separate
treatment of servicing rights acquired through loan originations versus those
acquired through purchase. The adoption of FAS 122 is not expected to have a
material impact on CoreStates' results of operations or financial condition.

      FAS 123 - Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123") was issued in October 1995 to
establish accounting and reporting standards for stock-based employee
compensation plans such as stock option and restricted stock plans ("stock-based
plans"). FAS 123 defines a fair value based method of accounting for measuring
compensation expense for stock-based plans and encourages all entities to adopt
that method of accounting. However, FAS 123 also permits entities to continue to
measure compensation expense for stock-based plans using the intrinsic value
based method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities electing to remain with the intrinsic value based method
must make pro forma disclosures of net income and earnings per share as if the
fair value based method defined by FAS 123 was applied.

     Under the fair value based method, compensation expense would be measured
as the value of an award under a stock-based plan on the date the award is
granted, and would be recognized over the vesting period of the award. Under the
intrinsic value based method, compensation expense is measured as the excess, if
any, of the market price of the stock underlying the award on the date the award
is granted, over the exercise price. Under CoreStates' stock-based long-term
incentive plan, awards have no intrinsic value on the date of grant as the
exercise price equals the market price on that date. Currently, CoreStates does
not expect to adopt the FAS 123 fair value based method of accounting for its
stock-based plans, but will provide the required pro forma disclosures in the
December 31, 1996 financial statements.

                                       43
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER
FINANCIAL REPORTING


FINANCIAL STATEMENTS

CoreStates Financial Corp is responsible for the preparation, integrity, and
fair presentation of its published financial statements as of December 31, 1995,
and the year then ended. The consolidated financial statements of CoreStates
Financial Corp have been prepared in accordance with generally accepted
accounting principles and, as such, include some amounts that are based on
judgments and estimates of management.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an effective internal
control structure over financial reporting. The system contains monitoring
mechanisms and actions are taken to correct deficiencies identified.

There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, the effectiveness of an
internal control system may vary over time.

Management assessed CoreStates Financial Corp's internal control structure over
financial reporting as of December 31, 1995. This assessment was based on
criteria for effective internal control over financial reporting described in
"Internal Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management
believes that CoreStates Financial Corp maintained an effective internal control
structure over financial reporting as of December 31, 1995.



Principal Financial Officer
/s/ Albert W. Mandia



Chairman and Chief Executive Officer
/s/ Terrence A. Larsen

                                       44
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
INDEPENDENT ACCOUNTANTS' REPORT


The Board of Directors and Shareholders
CoreStates Financial Corp

We have examined management's assertion that CoreStates Financial Corp
maintained an effective internal control structure over financial reporting as
of December 31, 1995 included in the accompanying Management's Report on
Internal Controls over Financial Reporting, insofar as management's assertion
relates to the internal control structure over the annual financial reporting in
the 1995 consolidated financial statements of CoreStates Financial Corp.

Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the internal control structure over financial
reporting, testing, and evaluating the design and operating effectiveness of the
internal control structure, and such other procedures as we considered necessary
in the circumstances. We believe that our examination provides a reasonable
basis for our opinion.

Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure over financial reporting to future
periods are subject to the risk that the internal control structure may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assertion that CoreStates Financial Corp maintained
an effective internal control structure over financial reporting as of December
31, 1995, insofar as management's assertion relates to the internal control
structure over the annual financial reporting in the 1995 consolidated financial
statements of CoreStates Financial Corp, is fairly stated, in all material
respects, based upon the criteria established in "Internal Control - Integrated
Framework" issued by the Committee of Sponsoring Organizations of the Treadway
Commission.



                                                           /s/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania
January 17, 1996

                                       45
<PAGE>
 
     REPORT OF INDEPENDENT AUDITORS

     THE BOARD OF DIRECTORS AND SHAREHOLDERS
     CORESTATES FINANCIAL CORP

     We have audited the accompanying consolidated balance sheets of CoreStates
     Financial Corp as of December 31, 1995 and 1994, and the related
     consolidated statements of income, changes in shareholders' equity, and
     cash flows for each of the three years in the period ended December 31,
     1995.  These financial statements are the responsibility of the Company's
     management.  Our responsibility is to express an opinion on these financial
     statements based on our audits.  We did not audit the 1993 financial
     statements of Constellation Bancorp and Independence Bancorp, Inc., which
     statements reflect net interest income constituting 15.6% of the related
     consolidated total for the year ended December 31, 1993.  Those statements
     were audited by other auditors whose reports thereon have been furnished to
     us, and our opinion, insofar as it relates to data included for
     Constellation Bancorp and Independence Bancorp, Inc., is based solely on
     the reports of other auditors.

     We conducted our audits in accordance with generally accepted auditing
     standards.  Those standards require that we plan and perform the audit to
     obtain reasonable assurance about whether the financial statements are free
     of material misstatement.  An audit includes examining, on a test basis,
     evidence supporting the amounts and disclosures in the financial
     statements.  An audit also includes assessing the accounting principles
     used and significant estimates made by management, as well as evaluating
     the overall financial statement presentation.  We believe that our audits
     and the reports of other auditors provide a reasonable basis for our
     opinion.

     In our opinion, based on our audits and the reports of other auditors, the
     financial statements referred to above present fairly, in all material
     respects, the consolidated financial position of CoreStates Financial Corp
     at December 31, 1995 and 1994, and the consolidated results of its
     operations and its cash flows for each of the three years in the period
     ended December 31, 1995, in conformity with generally accepted accounting
     principles.

     As discussed in Note 1 to the financial statements, in 1994 the Company
     changed its method of accounting for certain investments in debt and equity
     securities, and in 1993 the Company changed its method of accounting for
     post-employment benefits.



                                                           /s/ Ernst & Young LLP


     Philadelphia, Pennsylvania
     January 17, 1996

                                       46
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                          --------------------------------------
INTEREST INCOME                                              1995         1994           1993
                                                          ----------   ----------     ----------
<S>                                                       <C>          <C>            <C>
Interest and fees on loans:
  Taxable income......................................    $1,973,085   $1,675,532     $1,553,865
  Tax exempt income...................................        19,851       22,818         31,150
Interest on investment securities:
  Taxable income......................................       125,941      140,379        185,866
  Tax exempt income...................................        12,169       16,552         19,304
Interest on time deposits in banks....................       116,689       66,389         44,340
Interest on Federal funds sold, securities
  purchased under agreements to resell and other......        14,570        7,857          7,339
                                                          ----------   ----------     ----------
  Total interest income...............................     2,262,305    1,929,527      1,841,864
                                                          ----------   ----------     ----------
INTEREST EXPENSE
Interest on deposits:
  Domestic savings....................................       189,942      139,703        149,094
  Domestic time.......................................       299,264      196,869        212,471
  Overseas branches and subsidiaries..................        43,497       28,286         18,248
                                                          ----------   ----------     ----------
  Total interest on deposits..........................       532,703      364,858        379,813
Interest on short-term funds borrowed.................       119,667       85,123         67,001
Interest on long-term debt............................       121,401       90,177         69,779
                                                          ----------   ----------     ----------
  Total interest expense..............................       773,771      540,158        516,593
                                                          ----------   ----------     ----------
  NET INTEREST INCOME.................................     1,488,534    1,389,369      1,325,271
Provision for losses on loans.........................       105,000      246,900        121,201
                                                          ----------   ----------     ----------
  NET INTEREST INCOME AFTER PROVISION FOR
     LOSSES ON LOANS..................................     1,383,534    1,142,469      1,204,070
                                                          ----------   ----------     ----------
NON-INTEREST INCOME
Service charges on deposit accounts...................       175,991      180,676        179,428
Trust income..........................................        95,747       97,362        101,793
Fees for international services.......................        92,075       79,682         69,432
Debit and credit card fees............................        63,619       64,585         61,717
Income from investment in EPS, Inc....................        30,114       31,800         13,159
Gains on trading account securities...................         2,339        2,347          2,254
Securities gains......................................         9,388       18,753         16,110
Other gains...........................................        26,400        1,900         11,000
Other operating income................................       109,993       90,435        119,137
                                                          ----------   ----------     ----------
  Total non-interest income...........................       605,666      567,540        574,030
                                                          ----------   ----------     ----------
NON-FINANCIAL EXPENSES
Salaries, wages and benefits..........................       600,925      631,134        622,969
Net occupancy.........................................       113,478      117,516        114,951
Equipment expenses....................................        78,482       77,098         74,844
Restructuring and merger-related charges..............        98,175      108,700              -
Other operating expenses..............................       383,338      383,113        429,098
                                                          ----------   ----------     ----------
  Total non-financial expenses........................     1,274,398    1,317,561      1,241,862
                                                          ----------   ----------     ----------
INCOME BEFORE INCOME TAXES............................       714,802      392,448        536,238
Provision for income taxes............................       262,565      143,656        173,809
                                                          ----------   ----------     ----------
INCOME BEFORE CUMULATIVE EFFECT OF A
  CHANGE IN ACCOUNTING PRINCIPLE......................       452,237      248,792        362,429
Cumulative effect of a change in accounting
  principle, net of income tax benefits of
  $1,846 in 1994, and $7,005 in 1993..................             -       (3,430)       (13,010)
                                                          ----------   ----------     ----------
NET INCOME............................................    $  452,237   $  245,362     $  349,419
                                                          ==========   ==========     ==========
PER COMMON SHARE DATA (Based on weighted average
  shares outstanding of 140.600 million in 1995,
  142.498 million in 1994 and 145.398 million
  in 1993)............................................
Income before cumulative effect of a
  change in accounting principle......................         $3.22        $1.75          $2.49
                                                               =====        =====          =====
Net Income............................................         $3.22        $1.73          $2.40
                                                               =====        =====          =====
Cash dividends declared...............................         $1.44        $1.24          $1.14
                                                               =====        =====          =====
</TABLE>
 
See accompanying notes to the financial statements.

                                      47
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                   --------------------------------------
                                                                                       1995                      1994
                                                                                   -----------               ------------
<S>                                                                                <C>                       <C>
ASSETS
Cash and due from banks...............................................             $ 2,755,636               $  2,262,512
Time deposits, principally Eurodollars................................               1,841,799                  1,750,458
Federal funds sold and securities purchased under
  agreements to resell................................................                 594,868                    731,820
Trading account securities............................................                   1,336                      1,206
Investment securities available-for-sale..............................                 974,711                    426,047
Investment securities held-to-maturity (market value:
  1995-$1,017,019; 1994-$2,423,830)...................................               1,015,621                  2,454,584
Total loans, net of unearned discounts of
  $123,672 in 1995 and $146,305 in 1994...............................              21,046,535                 20,526,216
  Less: Allowance for loan losses.....................................                (495,075)                  (500,631)
                                                                                   -----------               ------------
     Net loans........................................................              20,551,460                 20,025,585
Due from customers on acceptances.....................................                 549,557                    342,211
Premises and equipment................................................                 406,279                    423,832
Other assets..........................................................                 929,349                    906,881
                                                                                   -----------               ------------
     Total assets.....................................................             $29,620,616               $ 29,325,136
                                                                                   ===========               ============


LIABILITIES
Deposits:
  Domestic:
     Non-interest bearing.............................................             $ 6,700,599               $  6,362,470
     Interest bearing.................................................              13,661,766                 14,565,051
  Overseas branches and subsidiaries..................................               1,140,068                  1,113,365
                                                                                   -----------               ------------
     Total deposits...................................................              21,502,433                 22,040,886
Short-term funds borrowed.............................................               2,091,722                  1,546,201
Bank acceptances outstanding..........................................                 549,048                    336,103
Other liabilities.....................................................               1,399,660                  1,260,722
Long-term debt........................................................               1,698,334                  1,791,110
                                                                                   -----------               ------------
     Total liabilities................................................              27,241,197                 26,975,022
                                                                                   -----------               ------------


COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY
Preferred stock: authorized 10.0 million
  shares; no shares issued............................................                  -                          -
Common stock: $1 par value; authorized 200.0 million
  shares; issued 145.9 million shares in 1995 and 145.9
  million shares in 1994 (including treasury shares of
  7.8 million in 1995 and 1.0 million in 1994)........................                 145,875                    145,878
Other common shareholders' equity, net................................               2,233,544                  2,204,236
                                                                                   -----------               ------------
     Total shareholders' equity.......................................               2,379,419                  2,350,114
                                                                                   -----------               ------------
     Total liabilities and shareholders' equity.......................             $29,620,616               $ 29,325,136
                                                                                   ===========               ============
</TABLE> 
 
See accompanying notes to the financial statements.

                                      48
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          Common         Capital        Retained      Treasury
                                                          stock          surplus        earnings        stock          Total
                                                       ------------   -------------   ------------   ------------   ------------
<S>                                                     <C>            <C>            <C>            <C>            <C>
Balances at December 31, 1992.....................      $    86,387    $    817,391   $  1,194,662   $     (3,881)  $  2,094,559

Net income........................................                                         349,419                       349,419
Issuance of shares in connection with a
  100% common stock dividend......................           58,929         (58,929)
Net unrealized gain on investments
  available-for-sale, net of tax..................                                          64,305                        64,305
Acquisition of Inter Community Bancorp
  (640 treasury shares)...........................                                            (213)        17,459         17,246
Treasury shares acquired (1,060 shares)...........                                                        (29,449)       (29,449)
Repurchase and retirement of common stock.........             (382)         (2,255)        (5,808)                       (8,445)
Common stock issued under employee
  benefit plans (857 new shares; 175 treasury
  shares).........................................              586          13,701         (1,510)         4,871         17,648
Common stock issued under dividend
  reinvestment plan (358 new shares; 111 treasury
  shares).........................................              220           8,590           (101)         3,181         11,890
Foreign currency translation adjustments..........                                          (1,758)                       (1,758)
Common dividends declared.........................                                        (147,031)                     (147,031)
                                                        -----------    ------------   ------------     ----------   ------------
Balances at December 31, 1993.....................          145,740         778,498      1,451,965         (7,819)     2,368,384

Net income........................................                                         245,362                       245,362
Net change in unrealized gain on
  investments available-for-sale,
  net of tax......................................                                         (52,951)                      (52,951)
Acquisition of Germantown Savings Bank
  (5,880 treasury shares).........................                                          (8,605)       156,361        147,756
Treasury shares acquired (8,598 shares)...........                                                       (228,963)      (228,963)
Repurchase and retirement of common stock.........             (177)           (981)        (3,583)            (2)        (4,743)
Common stock issued under employee benefit
  plans (279 new shares; 688 treasury  shares)....              279           4,172         (7,803)        18,456         15,104
Common stock issued under dividend reinvestment 
  and stock purchase plans (450 treasury shares)..                               77           (483)        12,306         11,900
Conversion of subordinated debt (36 new  shares;
  909 treasury shares)............................               36                         (2,001)        25,364         23,399
Cash paid for fractional shares...................                                             (83)                          (83)
Foreign currency translation adjustments..........                                              52                            52
Common dividends declared.........................                                        (175,103)                     (175,103)
                                                        -----------    ------------   ------------   ------------   ------------
Balances at December 31, 1994.....................          145,878         781,766      1,446,767        (24,297)     2,350,114

Net income........................................                                         452,237                       452,237
Net change in unrealized gain on investments
  available-for-sale, net of tax..................                                          23,969                        23,969
Treasury shares acquired (10,307 shares)..........                                                       (335,528)      (335,528)
Common stock issued under employee
  benefit plans (3,089 treasury shares)...........               (3)         11,388        (30,728)        96,670         77,327
Common stock issued under dividend
  reinvestment plan (417 treasury shares).........                              560             (2)        12,690         13,248
Cash paid for fractional shares...................                                             (24)                          (24)
Foreign currency translation adjustments..........                                             (29)                          (29)
Common dividends declared.........................                                        (201,895)                     (201,895)
                                                        -----------    ------------   ------------   ------------   ------------   
Balances at December 31, 1995.....................      $   145,875    $    793,714   $  1,690,295   $   (250,465)  $  2,379,419
                                                        ===========    ============   ============   ============   ============
</TABLE> 
 
See accompanying notes to the financial statements.

                                      49
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES                           PAGE 1 OF 2
CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  Year Ended December 31
                                                                         --------------------------------------
OPERATING ACTIVITIES                                                        1995         1994           1993
                                                                         ----------   ----------     ----------
<S>                                                                      <C>           <C>            <C>
Net income.......................................................        $  452,237     $  245,362     $  349,419
Adjustments to reconcile net income to net
  cash provided by operating activities:
  Restructuring and merger-related charges.......................            98,175        108,700              -
  Cumulative effect of a change in
    accounting principle, net of tax.............................                 -          3,430         13,010
  Provision for losses on loans..................................           105,000        246,900        121,201
  Provision for losses and writedowns
    on other real estate owned...................................             7,097         12,538         26,614
  Depreciation and amortization..................................            65,735         76,277         84,998
  Deferred income tax expense (benefit)..........................            34,047         16,393        (10,656)
  Securities gains...............................................            (9,388)       (18,753)       (16,110)
  Other gains....................................................           (26,400)        (1,900)       (11,000)
  Increase (decrease) in due to factored clients.................           (86,921)        41,262        147,072
  (Increase) decrease in interest receivable.....................              (123)       (25,625)         3,646
  Increase (decrease) in interest payable........................            23,674         23,551         (7,738)
  Other, net.....................................................            26,892        (21,819)        43,789
                                                                       ------------   ------------   ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................           690,025        706,316        744,245
                                                                       ------------   ------------   ------------

INVESTING ACTIVITIES
Net increase in loans............................................        (1,205,051)      (633,013)    (1,483,539)
Proceeds from sales of loans.....................................           753,345        897,528        790,193
Loans originated or acquired--non-bank subsidiaries..............       (35,767,440)   (33,760,035)   (24,712,336)
Principal collected on loans--non-bank subsidiaries..............        35,622,742     33,399,764     24,411,312
Net (increase) decrease in time deposits,
  principally Eurodollars........................................           (89,322)      (431,001)       495,615
Purchases of investments held-to-maturity........................          (490,548)    (1,030,404)             -
Purchases of investments available-for-sale......................          (179,658)      (422,894)             -
Proceeds from maturities of investments
  held-to-maturity...............................................         1,318,571      1,655,885              -
Proceeds from maturities of investments
  available-for-sale.............................................            83,040        308,598              -
Proceeds from sales of investments available-for-sale............           207,655        690,343              -
Purchases of investment securities...............................                 -              -     (2,252,933)
Proceeds from sales of investment securities.....................                 -              -        581,101
Proceeds from maturities of investment securities................                 -              -      1,819,500
Net (increase) decrease in Federal funds sold and
  securities purchased under agreements to resell................           136,952       (549,293)       105,363
Purchases of premises and equipment..............................          (103,616)       (92,232)      (107,275)
Proceeds from sales and paydowns on other
  real estate owned..............................................            41,007         59,947         84,389
Purchase of Germantown Savings Bank, net of
  cash acquired..................................................                 -        (74,053)             -
Other, net.......................................................             1,675         19,617          6,689
                                                                       ------------   ------------   ------------
  NET CASH PROVIDED BY (USED IN) INVESTING
    ACTIVITIES...................................................           329,352         38,757       (261,921)
                                                                       ------------   ------------   ------------
</TABLE>


(continued)

                                      50
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES                          PAGE 2 OF 2
CONSOLIDATED STATEMENT OF CASH FLOWS: CONTINUED
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                              --------------------------------------
FINANCING ACTIVITIES                                             1995         1994           1993
                                                              ----------   ----------     ----------
<S>                                                           <C>          <C>            <C>
Net decrease in deposits..........................            (542,224)     (536,836)     (540,605)
Long-term debt issued.............................             430,140       478,048       916,519
Retirement of long-term debt......................            (520,646)     (242,432)     (683,399)
Net increase (decrease) in short-term
  funds borrowed..................................             545,521      (337,924)      (19,919)
Cash dividends paid...............................            (194,067)     (160,122)     (143,334)
Purchase of treasury stock........................            (335,528)     (228,963)      (29,449)
Common stock issued under employee
  benefit plans...................................              77,327        11,900        17,648
Other, net........................................              13,224        12,092        11,890
                                                            ----------   -----------    ----------
 NET CASH USED IN FINANCING ACTIVITIES............            (526,253)   (1,004,237)     (470,649)
                                                            ----------   -----------    ----------
INCREASE (DECREASE) IN CASH AND DUE
    FROM BANKS....................................             493,124      (259,164)       11,675
    Cash and due from banks at January 1,.........           2,262,512     2,521,676     2,510,001
                                                            ----------   -----------    ----------
CASH AND DUE FROM BANKS AT DECEMBER 31,...........          $2,755,636   $ 2,262,512    $2,521,676
                                                            ==========   ===========    ==========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
    Interest......................................          $  750,097   $   513,773    $  524,565
                                                            ==========   ===========    ==========
    Income taxes..................................          $  189,732   $   130,904    $  167,216
                                                            ==========   ===========    ==========
</TABLE> 

See accompanying notes to the financial statements.

                                      51
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
The consolidated financial statements include the accounts of CoreStates
Financial Corp ("the Corporation") and all of its subsidiaries, including:
CoreStates Bank, N.A. ("CBNA"); New Jersey National Bank ("NJNB"); CoreStates
Bank of Delaware, N.A. ("CBD"); Congress Financial Corporation; and CoreStates
Capital Corp ("CSCC").  All material intercompany transactions have been
eliminated.  Certain amounts in prior years have been reclassified for
comparative purposes.

The Corporation is a regional bank holding company incorporated under the laws
of the Commonwealth of Pennsylvania, primarily operating in the eastern
Pennsylvania, northern Delaware and central New Jersey markets.  Through its
subsidiaries, the Corporation is engaged in the business of providing wholesale
banking services (including international banking services), consumer financial
services, trust and investment management services and electronic payment
services to a diversified customer base.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
("FAS 114") and Statement No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures" ("FAS 118").  FAS 114 addresses
accounting for impairment of certain loans and requires that impaired loans
within the scope of FAS 114 be measured based on the present value of expected
cash flows discounted at the loan's effective interest rate, or be measured at
the loan's observable market price or the fair value of its collateral.  FAS 118
amended FAS 114's income recognition policies and clarifies FAS 114's disclosure
requirements.  The adoption of these standards did not have an impact on
CoreStates' provision for loan losses or allowance for loan losses, nor change
CoreStates' methodology for recognizing income on impaired loans.

During the first quarter of 1994, the Corporation  recognized a $3,430 
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 write-down to fair value of these securities, which were deemed to be
impaired. This resulted from a Financial Accounting Standards Board ("the FASB")
1994 interpretation of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115").
The interpretation, reached by 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.

Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("FAS 112").  FAS 112 established the accounting requirements for
benefits provided to former or inactive employees after employment but before
retirement.  FAS 112 requires that employers accrue the costs associated with
providing benefits, such as salary and benefit continuation under disability
plans, when payment of the benefits is probable and the amount of the obligation
can be reasonably estimated.  The Corporation recognized the January 1, 1993 FAS
112 transitional liability of $20,015, $13,010 after-tax or $0.09 per share, as
the cumulative effect of a change in accounting principle.

                                      52
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

INCOME TAXES
Under the asset and liability method used by the Corporation to provide for
income taxes, deferred tax assets and liabilities are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.

The Corporation and its subsidiaries file a consolidated Federal income tax
return.

INVESTMENT SECURITIES
Held-to-maturity securities, consisting primarily of debt securities, are
carried at cost adjusted for amortization of premiums and accretion of
discounts, both computed on the interest method.  The Corporation has both the
ability and positive intent to hold these securities until maturity.  Trading
account securities are carried at market value. Gains on trading account
securities include both realized and unrealized gains and losses on the
portfolio.  All other securities are classified as available-for-sale and are
carried at fair value, with unrealized gains and losses, net of tax, reported as
a component of shareholders' equity.  The accumulated net unrealized gain on
available-for-sale securities included in retained earnings was $35,075 at
December 31, 1995 and $11,354 at December 31, 1994.

The adjusted cost of a specific certificate sold is the basis for determining
realized securities gains and losses as included in the consolidated statement
of income in "non-interest income".

Interest and dividends on investment securities are recognized as income when
earned.

LOANS
Interest on commercial loans is recognized on the daily principal amounts
outstanding. Loan fees are generally considered adjustments of interest rate
yields and are amortized into interest income on loans over the terms of the
related loans. Interest on installment loans is principally recognized on the
interest method.

Commercial loans are placed on a non-accrual status, generally recognizing
interest as income when received, when, in the opinion of management, the
collectability of principal or interest payments becomes doubtful or when such
payments are 90 days or more past due unless the loan is well secured and in the
process of collection. The deferral or non-recognition of interest does not
constitute forgiveness of the borrower's obligation. In those cases where
collection of principal is in doubt, additions are made to the allowance for
loan losses.

Consumer loans, including residential mortgage loans, are not automatically
placed on non-accrual status when principal or interest payments are 90 days
past due, but are charged off when deemed uncollectible or after reaching 120
days past due.

OTHER REAL ESTATE OWNED
When a property is acquired through foreclosure of a loan secured by real
estate, that property is recorded at the lower of the cost basis in the loan or
the estimated fair value of the property less estimated disposal costs.
Writedowns at the time of foreclosure are charged against the allowance for loan
losses.  Subsequent writedowns for changes in the fair value of the property are
charged to other non-financial expense.

ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable credit losses. Factors included in
management's determination of an adequate level of allowance for loan losses are
a statistical analysis of historical loss levels throughout an economic cycle
and one year of projected charge-offs, establishing a minimum level below which
the allowance for loan losses is considered inadequate and a maximum level above
which is considered inappropriate.  A quarterly evaluation of loss potential on
specific credits, products, industries, portfolios and markets, as well as
indicators for loan growth, the economic environment and concentrations assist
in validating the position of the allowance for loan losses within those
boundaries.  This evaluation is inherently subjective as it requires material
estimates that may be susceptible to significant change.

                                      53
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

The Corporation adopted FAS 114 effective January 1, 1995.  Under FAS 114 the
allowance for loan losses related to "impaired loans" is based on discounted
cash flows using the impaired loan's initial effective interest rate as the
discount rate, or the fair value of the collateral for collateral dependent
loans.  A loan is impaired when it meets the criteria to be placed on non-
accrual status or is a renegotiated loan.  Loans which are evaluated for
impairment pursuant to FAS 114 are assessed on a loan-by-loan basis, and include
only commercial non-accrual and renegotiated loans.   Large groups of smaller
balance homogeneous loans, such as credit cards, lease financing receivables,
loans secured by first and second liens on residential properties, and other
consumer loans are evaluated collectively for impairment.

Additions to the allowance arise from the provision for loan losses charged to
operations or from the recovery of amounts previously charged off.  Loan charge-
offs reduce the allowance.  Loans are charged off when there has been permanent
impairment of the related carrying values.

PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization is computed,
generally, on the straight-line method at rates based on the following range of
lives:  buildings - 10 to 45 years; equipment - 3 to 12 years; and leasehold
improvements - 3 to 15 years.

RETIREMENT PLANS
The Corporation maintains a non-contributory defined benefit pension plan for
substantially all employees. Benefits are primarily based on the employee's
years of credited service, average annual salary and primary social security
benefit, as defined in the plan.  It is the Corporation's policy to fund the
plan on a current basis to the extent deductible under existing tax regulations.

The Corporation provides certain postretirement health care and life insurance
benefits for retired employees.  In order to participate in the health care
plan, an employee must retire with at least 10 years of service.  The
postretirement health care plan is contributory, with retiree contributions
based on years of service.  It is the Corporation's policy to fund the health
care plan on a current basis to the extent deductible under existing tax
regulations.

FOREIGN EXCHANGE/CURRENCY
Forward exchange contracts are valued at current rates of exchange. Gains or
losses on forward exchange contracts intended to hedge an identifiable foreign
currency commitment, if any, are deferred and included in the measurement of the
related foreign currency transaction.  All other gains or losses on forward
exchange contracts are included in the consolidated statement of income.

Currency gains and losses in connection with non-dollar denominated loans and
deposits, which are included in interest income and expenses, are recognized pro
rata over the contract terms.  Foreign currency translation adjustments are
recorded directly to retained earnings.  The cumulative foreign currency
translation loss was $1,600, $1,571 and $1,623 at December 31, 1995, 1994 and
1993, respectively.

DERIVATIVE INTEREST RATE CONTRACTS
The Corporation uses various interest rate contracts such as, interest rate
swaps, futures, forward rate agreements, caps and floors, primarily to manage
the interest rate risk of specific assets, liabilities or anticipated
transactions and to provide for the needs of its customers.  For contracts held
for purposes other than trading, gains or losses are deferred and recognized as
adjustments to interest income or expense of the underlying assets or
liabilities and the interest differentials are recognized as adjustments of the
related interest income or expense.  Gains or losses resulting from early
terminations of these contracts are deferred and amortized over the remaining
term of the underlying assets or liabilities. Any fees received or disbursed
which represent adjustments to the yield on interest rate contracts are
capitalized and amortized over the term of the interest rate contracts.  If the
underlying assets or liabilities related to a derivative matures, is sold,
extinguished, or terminates, the amount of the previously unrecognized gain or
loss is recognized at that time in the consolidated income statement.  Contracts
held or issued for customers are valued at market with gains or losses included
in the consolidated income statement.

EARNINGS PER COMMON SHARE
Earnings per common share for all periods presented were based on weighted
average common shares outstanding as dilution from potentially dilutive common
stock equivalents (primarily stock options) did not have a materially dilutive
effect on earnings per share.

                                      54
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

CASH DIVIDENDS DECLARED PER SHARE
Cash dividends declared per share for the periods prior to the acquisitions of
Independence on June 27, 1994 and Constellation on March 16, 1994 assume that
the Corporation would have declared cash dividends equal to the cash dividends
per share actually declared by the Corporation.


2.  ACQUISITIONS

On December 2, 1994, the Corporation purchased Germantown Savings Bank
("Germantown") a Pennsylvania chartered stock savings bank with $1.6 billion in
assets and $1.4 billion in deposits at the time of the acquisition.  Under the
terms of the transaction, each of Germantown's 4.15 million shares of common
stock was exchanged for a combination of the Corporation's common stock, equal
to approximately 55% of the $62 per Germantown share purchase price, and cash,
equal to approximately 45% of the purchase price.  As a result of this
acquisition, 5.9 million shares of the Corporation's common stock were issued
out of treasury stock.  The transaction had a total value of approximately $260
million and was accounted for under the purchase method of accounting.
Accordingly, the results of operations of Germantown have been included since
the date of acquisition.  Under this method of accounting, the purchase price is
allocated to the respective assets acquired and liabilities assumed based on
their estimated fair values, net of applicable income tax effects.  Intangible
assets of $183 million, including $140 million of goodwill, were created in this
transaction.  Goodwill is being amortized to other operating expense on a
straight-line basis over 15 years.

A summary of unaudited pro forma combined financial information for the
Corporation and Germantown as if the transaction had occurred on January 1, 1993
is as follows:

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                               ------------------------
                                                   1994         1993
                                               -----------  -----------
<S>                                            <C>          <C>
Net interest income....................         $1,457,323   $1,395,883
Non-interest income....................            571,738      580,445
Income before cumulative effect
  of a change in accounting
  principle............................            263,219      374,178
Per common share.......................         $     1.77   $     2.47
Average common shares
  outstanding..........................            148,444      151,261
</TABLE>

On March 16, 1994, the Corporation acquired Constellation Bancorp
("Constellation"), a New Jersey bank holding company with $2.3 billion in assets
and $2.1 billion in deposits.  The Corporation issued approximately 11.3 million
shares of common stock to shareholders of Constellation based on an exchange
ratio of .4137 of a share of the Corporation's common stock for each share of
Constellation common stock.

On June 27, 1994, the Corporation acquired Independence Bancorp, Inc.
("Independence"), a Pennsylvania bank holding company with $2.6 billion in
assets and $2.1 billion in deposits.  The Corporation issued approximately 16.6
million shares of common stock to shareholders of Independence based on an
exchange ratio of 1.5 shares of the Corporation's common stock for each share of
Independence common stock.

                                      55
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

2.  ACQUISITIONS - continued

The Constellation and Independence acquisitions were both accounted for under
the pooling of interests method of accounting; accordingly, the consolidated
financial statements have been restated to include the consolidated accounts of
Constellation and Independence for all periods presented.  Previously reported
information on a separate company basis for the year ended December 31, 1993 
was as follows:

<TABLE>
<CAPTION>
1993                                                                  Corporation   Constellation   Independence
----                                                                  ------------  --------------  -------------
                                                                                     (Unaudited)     (Unaudited)
<S>                                                                   <C>           <C>             <C>
Net interest income........................................            $1,117,901        $100,753       $106,617
Provision for losses on loans..............................               100,000          10,000         11,201
Non-interest income........................................               503,055          41,599         29,376
Non-financial expenses.....................................             1,033,375         115,186         93,601
Provision for income taxes.................................               159,654             662 (a)      8,312
Income before cumulative effect of a change
   in accounting principle.................................               327,927          16,504         22,879
Cumulative effect of a change in accounting
   principle, net of tax...................................               (13,010)              -              -
Net income.................................................               314,917          16,504         22,879
Income per share before cumulative effect
   of a change in accounting principle.....................                 $2.80           $0.61          $1.98
Net income per share.......................................                  2.69            0.61           1.98
Cash dividends declared....................................                  1.14               -           1.16
</TABLE>

_____________________
(a)  In 1993, Constellation prospectively adopted FAS 109.  However, restated
     financial information is prepared as if Constellation retroactively adopted
     FAS 109 as of January 1, 1987.  The impact of applying pooling of interests
     accounting rules and retroactively applying FAS 109 to Constellation had
     the effect of reducing 1993 restated net income by $5,076, or $0.03 per
     share, and December 31, 1993 common shareholders' equity by $39,924.

Subsequent to the March 16, 1994 consummation of the Constellation acquisition,
Constellation recorded merger-related charges in the first quarter of 1994 in
connection with a change in strategic direction related to problem assets and to
conform its consumer lending charge-off policies to those of the Corporation,
and charges for expenses attributable to the acquisition.  These merger-related
charges totaled $127.8 million after-tax, or $0.89 per share. 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 acquisition including
severance costs of $8.0 million related to approximately 370 employees.

Subsequent to the June 27, 1994 consummation of the Independence acquisition,
Independence recorded merger-related charges in the second quarter of 1994 in
connection with a change in strategic direction related to problem assets and to
conform its consumer lending charge-off policies to those of the Corporation,
and charges for expenses attributable to the acquisition. These merger-related
charges totaled $39.6 million after-tax, or $0.28 per share. On a pre-tax basis,
the merger-related charges consisted of a $25.0 million provision for loan
losses, a $4.0 million addition to the OREO reserve, and $29.7 million for
expenses directly attributable to the acquisition including severance costs of
$5.0 million related to approximately 345 employees.

On October 10, 1995, the Corporation announced a definitive agreement to acquire
Meridian Bancorp, Inc. ("Meridian") in a transaction expected to be accounted
for under the  pooling of interests method of accounting.  For each Meridian
common share outstanding, 1.225 shares of the Corporation's common stock will be
issued.  As a result of this transaction, approximately 71.2 million new shares
will be issued.  This agreement has been approved by the shareholders of both
the Corporation and Meridian and, pending receipt of approval by certain
regulatory authorities, is expected to close during the first half of 1996.
Also at the February 6, 1996 shareholders' meeting, the Corporation's
shareholders approved an increase in the number of authorized shares from 200
million to 350 million.

                                      56
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

2.  ACQUISITIONS - continued

In May 1995, Meridian announced a definitive agreement to acquire United
Counties Bancorporation ("United Counties"), a $1.6 billion asset New Jersey
bank holding company in a transaction to be accounted for as a pooling of
interests. For each United Counties common share outstanding, 5.0 shares of
Meridian's common stock will be issued. As a result of Meridian's acquisition of
United Counties, approximately 13.2 million additional shares of the
Corporation's common stock will be issued. This transaction closed on February
23, 1996.

A summary of selected unaudited historical financial information for Meridian
and United Counties on a combined basis reflecting pooling of interests
accounting follows:

<TABLE>
<CAPTION>

                                                        Meridian and United Counties Combined
                                                        -------------------------------------
YEAR ENDED DECEMBER 31,                                  1995 (a) (b)      1994        1993  
                                                        --------------  ----------  --------- 
Operating results:                                      
                                                        
<S>                                                     <C>             <C>         <C>
   Net interest income..........................           $678,394       $678,646   $685,865
   Non-interest income..........................            275,717        234,127    281,641
   Income before cumulative effect of a                               
      change in accounting principle............            202,003        185,880    174,733
Per common share data:                                                
   Income before cumulative effect of a                               
      change in accounting principle............           $   3.03       $   2.72   $   2.57
   Average common shares outstanding............             66,682         68,356     67,904
                                                                      
AT DECEMBER 31, 1995                                                  
(in millions, except per share amount)                                
Assets..........................................           $ 16,391   
Loans...........................................             10,675   
Deposits........................................             12,461   
Common shareholders' equity.....................              1,511   
Book value per common share.....................              22.57   
</TABLE>
_____________                                                          
(a)  In June 1995, Meridian completed an internal review of its operations and
     businesses and announced a company-wide plan designed to improve its
     operating performance and competitive position. As a result of this review,
     Meridian recorded a restructuring charge in the second quarter of 1995 of
     $32.0 million ($20.8 million after-tax or $0.31 per Meridian share).
(b)  Includes a gain of $13.8 million ($8.6 million after-tax or $0.13 per
     Meridian share) on the exchange of investment securities.


A summary of unaudited pro forma financial information for the Corporation,
Meridian and United Counties as if both transactions had occurred on January 1,
1993 is as follows:

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,                               1995      1994      1993
                                                    --------  --------  --------
(in millions, except per share amounts)
<S>                                                 <C>       <C>       <C>
Net interest income...........................      $  2,167  $  2,068  $  2,011
Non-interest income...........................           881       801       856
Income before cumulative effect of a
   change in accounting principle.............           655       436       538
Per common share..............................      $   2.95  $   1.93  $   2.35
Average common shares outstanding.............       222.285   226.234   228.580
</TABLE>

                                      57
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

3.  FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("FAS 107"), requires disclosure of fair value
information about financial instruments, whether or not required to be
recognized in the balance sheet, for which it is practicable to estimate that
value.  FAS 107 defines a financial instrument as cash, evidence of ownership
interest in an entity, or a contractual obligation or right that will be settled
with another financial instrument.

In cases where quoted market prices are not available, fair values are based on
estimates using discounted cash flow or other valuation techniques.  Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows.  Fair value estimates derived
through those techniques cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument.  FAS 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements.  Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Corporation.
 
The following table summarizes the carrying amount and fair value estimates of
financial instruments at December 31, 1995 and 1994.

<TABLE>
<CAPTION>
                                                        1995                               1994
                                          ---------------------------------  ---------------------------------
                                             CARRYING                           Carrying
                                            OR NOTIONAL          FAIR          or Notional          Fair
                                              AMOUNT            VALUE            Amount            Value
                                          ---------------  ----------------  ---------------  ----------------
<S>                                       <C>              <C>               <C>              <C>
ASSETS:
Cash and short-term assets..............      $ 5,192,303      $ 5,192,303       $ 4,744,790      $ 4,744,790
Investment securities...................        1,990,332        1,991,730         2,880,631        2,849,877
Trading account securities..............            1,336            1,336             1,206            1,206
Net loans, excluding leases.............       19,813,829       19,978,986        19,315,247       19,856,330
LIABILITIES:
Demand and savings deposits.............       14,741,389       14,741,389        15,213,517       15,213,517
Time deposits, including overseas.......        6,761,044        6,910,864         6,827,369        6,898,093
 branches and subsidiaries
Short-term borrowings...................        2,091,722        2,091,722         1,546,201        1,546,201
Long-term debt..........................        1,698,334        1,740,311         1,791,110        1,741,345
OFF-BALANCE SHEET ASSET  (LIABILITY):
Letters of credit.......................        2,271,585          (22,716)        2,369,426           (5,923)
Commitments to extend credit............       14,092,523          (15,177)       11,802,714          (13,310)
Derivative financial instruments........       11,781,073          200,610        13,289,463         (204,183)
</TABLE>

Fair value estimates, methods, and assumptions for the Corporation's financial
instruments are set forth below:

CASH AND DUE FROM BANKS AND SHORT-TERM INSTRUMENTS The carrying amounts reported
in the balance sheet for cash and due from banks and short-term instruments
approximate their fair values.  Short-term instruments include: time deposits;
Federal funds sold; and securities purchased under agreements to resell, all of
which generally have original maturities of less than 90 days.

INVESTMENT SECURITIES Fair values for investment securities are based on quoted
market prices, where available.  If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.

TRADING ACCOUNT SECURITIES Fair values for the Corporation's trading account
securities, which also are the amounts recognized in the balance sheet, are
based on quoted market prices where available.  If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.

                                      58
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

3.  FAIR VALUES OF FINANCIAL INSTRUMENTS - continued

LOANS Fair values are estimated for loans in groups with similar financial and
risk characteristics.  Loans are segregated by type including: commercial and
industrial; commercial real estate; residential real estate; credit card and
other consumer; financial institutions; factoring receivables; and foreign.
Each loan type is further segmented into fixed and variable rate interest terms
and by performing and non-performing categories in order to estimate fair
values.

The fair value of fixed-rate performing loans is calculated by discounting
scheduled principal and interest cash flows through the estimated maturity using
estimated market discount rates that reflect the credit and interest rate risk
inherent in the loan type at December 31, 1995 and 1994.  The estimate of
maturity is based on the Corporation's historical experience with repayments for
each loan type, modified by an estimate of the effect of current economic and
lending conditions.  For performing residential mortgage loans, fair value is
estimated by referring to secondary market source pricing.

For credit card loans, cash flows and maturities are estimated based on
contractual interest rates and historical experience and are discounted using
secondary market rates adjusted for differences in servicing and credit costs.
This estimate does not include the benefit that relates to cash flows which
could generate from new loans to existing cardholders over the remaining life of
the portfolio.

For variable rate loans that reprice frequently and which have experienced no
significant change in credit risk, fair values are based on carrying amounts.

Fair value for non-performing loans is based on discounting estimated cash flows
using a rate commensurate with the risk associated with the estimated cash
flows.  Assumptions regarding cash flows, and discount rates are determined
using available market information and specific borrower information.

DEPOSIT LIABILITIES The fair values disclosed for demand deposits (non-interest
bearing checking accounts, NOW accounts, savings accounts, and money market
accounts) are, by FAS 107 definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts).  The carrying amounts for
variable-rate, fixed-term certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates offered on
certificates at December 31, 1995 and 1994, respectively, to an estimate of
aggregate expected maturities for those certificates of deposit.

The estimated fair values do not include the benefit that results from funding
provided by core deposit liabilities as compared to the cost of borrowing funds
in the financial markets.

SHORT-TERM FUNDS BORROWED The carrying amounts of Federal funds purchased,
securities sold under agreements to repurchase, commercial paper and other
short-term borrowings approximate their fair values.

LONG-TERM DEBT The fair values for long-term debt are based on quoted market
prices where available.  If quoted market prices are not available, fair values
are estimated using discounted cash flow analyses based on the Corporation's
borrowing rates at December 31, 1995 and 1994 for comparable types of borrowing
arrangements.

                                      59
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

3.  FAIR VALUES OF FINANCIAL INSTRUMENTS - continued

OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS AND COMMITMENTS Fair values
for the Corporation's futures, forwards, interest rate swaps, options, interest
rate caps and floors, and foreign exchange contracts are based on quoted market
prices (futures); current settlement values (forwards); quoted market prices of
comparable instruments (foreign currency exchange contracts); or, if there are
no relevant comparable instruments, on pricing models or formulas using current
assumptions (interest rate swaps, interest rate caps and floors, and options).
The fair value of commitments to extend credit, other than credit card lines, is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present credit
worthiness of the counterparties.  For fixed-rate loan commitments, fair value
also considers the difference between current levels of interest rates and the
committed rates.  The value of commitments to extend credit under credit card
lines is embodied in the benefit that relates to estimated cash flows from new
loans expected to be generated from existing cardholders over the remaining life
of the portfolio.

The fair value of standby and commercial letters of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
the agreements or otherwise settle the obligations with the counterparties.


4.  CASH AND DUE FROM BANKS

The Corporation's banking subsidiaries are required to maintain reserve balances
with the Federal Reserve Bank. The average amount of those reserve balances for
the years ended December 31, 1995 and 1994 were approximately $366,000 and
$326,000, respectively.

                                      60
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)


5.  INVESTMENT SECURITIES

The carrying and fair values of investment securities at December 31, 1995 and
1994 were as follows:

<TABLE>
<CAPTION>
                                                            GROSS       GROSS
                                              AMORTIZED   UNREALIZED  UNREALIZED     FAIR
                                                COST        GAINS       LOSSES       VALUE
                                              ---------   ----------  ----------  -----------
<S>                                          <C>          <C>         <C>         <C>
1995
----
Held-to-Maturity
----------------
U.S. Treasury............................     $    7,947     $   229               $    8,176
U.S. Government agencies.................        578,802       4,652     $   969      582,485
State and municipal......................        180,378       7,766         375      187,769
Other:
   Domestic..............................        217,111       2,254      12,175      207,190
   Foreign...............................         31,383          16           -       31,399
                                              ----------     -------     -------   ----------
      Total held-to-maturity.............     $1,015,621     $14,917     $13,519   $1,017,019
                                              ==========     =======     =======   ==========
Available-for-Sale
------------------
U.S. Treasury............................     $  553,268     $ 3,563     $   349   $  556,482
U.S. Government agencies.................        170,406       1,346         190      171,562
State and municipal......................         55,345         683          84       55,944
Other:
   Domestic..............................        111,164      32,687       1,434      142,417
   Foreign...............................         26,989      21,317           -       48,306
                                              ----------     -------     -------   ----------
      Total available-for-sale...........     $  917,172     $59,596     $ 2,057   $  974,711
                                              ==========     =======     =======   ==========
1994
----
Held-to-Maturity
----------------
U.S. Treasury............................     $  736,613     $   202     $13,545   $  723,270
U.S. Government agencies.................      1,107,550         923      16,572    1,091,901
State and municipal......................        297,890       6,602       5,562      298,930
Other:
   Domestic..............................        284,466         331       3,133      281,664
   Foreign...............................         28,065           -           -       28,065
                                              ----------     -------     -------   ----------
      Total held-to-maturity.............     $2,454,584     $ 8,058     $38,812   $2,423,830
                                              ==========     =======     =======   ==========
Available-for-Sale
------------------
U.S. Treasury............................     $  185,411                 $ 8,015   $  177,396
U.S. Government agencies.................        147,996     $    89       8,855      139,230
State and municipal......................          8,218          99          90        8,227
Other:
   Domestic..............................         35,914      17,041       2,067       50,888
   Foreign...............................         23,229      27,109          32       50,306
                                              ----------     -------     -------   ----------
      Total available-for-sale...........     $  400,768     $44,338     $19,059   $  426,047
                                              ==========     =======     =======   ==========
</TABLE>

On November 15, 1995, the FASB issued a Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities", which permitted an enterprise to reassess the
appropriateness of the classification of all investment securities held between
November 15, 1995 and December 31, 1995. Based on its reassessment, the
Corporation reclassified $606,552 in investment securities previously classified
as held-to-maturity to the available-for-sale category. Unrealized gains on
transferred investments were $2,001, unrealized losses were $1,659, and the fair
value was $606,894.

                                       61
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

5.  INVESTMENT SECURITIES - continued

Marketable equity securities are carried in the available-for-sale portfolio and
have been written up by $53,385 at December 31, 1995 and $43,989 at December 31,
1994, the aggregate of their excess fair values over cost, through after-tax
credits to retained earnings. The Corporation recorded pre-tax gains of $7,654
in 1995, $11,926 in 1994 and $13,594 in 1993 on sales of certain domestic equity
securities. During 1995, 1994 and 1993, the Corporation recorded pre-tax gains
of $939, $2,567 and $8,617 on sales of foreign equity securities.

Included in other domestic securities available-for-sale at December 31, 1995
were mortgage residual securities with an amortized cost and fair value of
$3,072 and $3,513, respectively. Pre-tax write-downs of $3,961 were recognized
in 1993 on these investments and were included in securities gains and losses.
During the first quarter of 1994, a $5,276 pre-tax, $3,430 after-tax, impairment
loss was recognized on these mortgage residual securities as the cumulative
effect of a change in accounting principle. The loss was the result of a write-
down to fair value of these securities which were deemed to be impaired. This
write-down resulted from a FASB interpretation of FAS 115 reached by a consensus
of the FASB Emerging Issues Task Force in March 1995, which provided more
definitive criteria for recognition of impairment losses on these types of
securities.

At December 31, 1995 and 1994, there were no investments in securities of any
single, non-Federal issuer in excess of 10% of shareholders' equity.

Securities with a carrying value of $1,018,170 were pledged at December 31, 1995
to secure public deposits, trust deposits, and for certain other purposes as
required by law.

The amortized cost and estimated fair value of debt securities at December 31,
1995, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to prepay
obligations without prepayment penalties.

<TABLE>
<CAPTION>
                                                       AMORTIZED    FAIR
                                                         COST       VALUE
                                                       ---------  ---------
<S>                                                    <C>        <C>
Held-to-Maturity
----------------
Due in one year or less............................     $184,790   $185,794
Due after one year through five years..............      173,584    176,388
Due after five years through ten years.............       98,500     89,191
Due after ten years................................       48,050     51,280
Mortgage-backed securities.........................      382,671    385,525
                                                        --------   --------
                                                        $887,595   $888,178
                                                        ========   ========
Available-for-Sale
------------------
Due in one year or less............................     $292,738   $293,726
Due after one year through five years..............      397,708    400,159
Due after five years through ten years.............       12,974     13,064
Due after ten years................................       40,225     40,169
Mortgage-backed securities.........................      130,405    131,086
                                                        --------   --------
                                                        $874,050   $878,204
                                                        ========   ========
</TABLE>

Proceeds from sales of investments in debt securities available-for-sale during
1995, 1994, and 1993 were $194,525, $657,361 and $535,267, respectively. Gross
gains of $1,948 in 1995, $9,625 in 1994, and $6,069 in 1993, and gross losses of
$1,153 in 1995, $4,739 in 1994, and $200 in 1993 were realized on those sales.

                                       62
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

6.  LOAN PORTFOLIO

For a breakdown of the loan portfolio by type of loan and for information on 
non-performing loans, refer to Supplemental Financial Data under the captions 
Loan Portfolio and Non-Performing Assets (pages 89 and 91).

The Corporation has traditionally maintained limits on industry, market and
borrower concentrations as a way to diversify and manage credit risk. The
Corporation's current policy is to limit industry concentrations to 50% of total
equity and to limit market segment concentrations to 10% of total assets. The
Corporation manages industry concentrations by applying these dollar limits to
industries that have common risk characteristics.

Derivative financial instruments of $4,251,000 notional value at December 31,
1995 were used to manage interest rate risk associated with loans.  At December
31, 1995, unrealized gains on these derivative financial instruments were
$104,000 and unrealized losses were $5,000.  The effect of these derivative
financial instruments on the yield of the loan portfolio for the year ended
December 31, 1995 was to increase the yield from 9.56% to 9.65%.

The book value of real estate loans transferred to other real estate owned
during 1995, 1994 and 1993 was $5,388, $32,215 and $48,124, respectively.

At December 31, 1995 and 1994, the Corporation had loans totaling $162,070 and
$147,465, respectively, to its directors, officers and companies in which the
directors had a 10% or more voting interest. These loans were made on
substantially the same terms, including interest rates and collateral as those
prevailing at the time for comparable transactions with unrelated persons and do
not involve more than normal risk of collectibility. The 1995 additions and
reductions were $1,461,953 and $1,447,348, respectively.

In September 1993, the Corporation sold five of its seven branches from the
Virgin Islands operations. The five branches had loans of $131,200 and deposits
of $228,800 at the time of sale. The Corporation recorded a pre-tax gain of
$11,000 on the sale. In December 1994, the remaining two branches were sold at a
pre-tax gain of $1,900.

Included in loans at December 31, 1995 and 1994 were $389,000 and $530,000,
respectively, of loans accounted for as held for sale and carried at lower of
cost or market.

                                       63
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)


7.  ALLOWANCE FOR LOAN LOSSES

The following represents an analysis of changes in the allowance for loan losses
for the years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
                                                          1995        1994        1993
                                                       ---------   ---------   ---------
<S>                                                    <C>         <C>         <C>
Balance at beginning of period....................     $ 500,631   $ 450,823   $ 442,267
Allowance for loans sold at date of sale..........          -           -           (353)
Allowance for loans purchased at date                           
   of purchase....................................          -             24        -   
Allowance for loans of bank acquired under                      
   purchase method of accounting..................          -         23,739       2,703
Provision charged to operating expense............       105,000     246,900     121,201
Recoveries of loans previously charged off........        68,641      63,059      86,738

Loan charge-offs..................................      (179,197)   (283,914)   (201,733)
                                                       ---------   ---------   ---------
Balance at end of period..........................     $ 495,075   $ 500,631   $ 450,823
                                                       =========   =========   =========
</TABLE>

At December 31, 1995, the recorded investment in loans that are considered to be
impaired under FAS 114 was $121,960. Included in total impaired loans is $47,834
against which $14,145 of the allowance for loan losses is allocated. During
1995, impaired loans averaged approximately $170,107. For the year ended
December 31, 1995, the Corporation recognized interest income of approximately
$13,509 on impaired loans.

                                       64
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

8. PREMISES AND EQUIPMENT

Premises and equipment on the consolidated balance sheet is net of accumulated
depreciation and amortization of $523,226 and $535,126 at December 31, 1995 and
1994, respectively. Depreciation and amortization of premises and equipment for
the years ended December 31, 1995, 1994, and 1993, was $67,413, $64,549 and
$67,557, respectively.

9. DEPOSITS

The following presents a breakdown of deposits at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
                                                           1995                  1994
                                                       ------------          ------------
<S>                                                    <C>                    <C>
Domestic:
  Non-interest bearing checking.....................    $ 6,700,599           $ 6,362,470
  NOW accounts......................................      1,715,831             1,875,391
  Savings accounts..................................      3,924,841             4,354,829
  Money market accounts.............................      2,400,119             2,620,827
  Time deposits.....................................      5,620,977             5,714,004
                                                        -----------           -----------
      Total domestic deposits.......................     20,362,365            20,927,521
Overseas branches and subsidiaries..................      1,140,068             1,113,365
                                                        -----------           -----------
      Total deposits................................    $21,502,433           $22,040,886
                                                        ===========           ===========
</TABLE>

Domestic time deposits in denominations  of $100 or more at December 31, 1995,
1994, and 1993 were:

<TABLE>
<CAPTION>
                                                          1995            1994           1993
                                                       -----------      --------       --------
<S>                                                    <C>              <C>           <C>
Commercial certificates of deposit..................    $  220,032      $268,402       $295,835
Other domestic time deposits,
    principally savings certificates................       366,487       371,771        145,195
                                                        ----------      --------       --------
           Total...................................     $  586,519      $640,173       $441,030
                                                        ==========      ========       ========
</TABLE>
 
Interest expense on domestic time deposits in denominations of $100 or more for
the years ended December 31, 1995, 1994, and 1993 was:

<TABLE>
<CAPTION>
                                                          1995           1994         1993
                                                       -----------     --------     --------
Interest expense:
<S>                                                    <C>             <C>          <C>
    Commercial certificates of deposit.............     $   12,554     $  9,547     $ 13,908
    Other domestic time deposits, principally
        savings certificates.......................         20,910       13,231        9,434
                                                        ----------     --------     --------
           Total...................................     $   33,464     $ 22,778     $ 23,342
                                                        ==========     ========     ========
</TABLE>

Substantially all of the deposits of overseas branches and subsidiaries were
time deposits in denominations of $100 or more for each of the three years
presented.

Derivative financial instruments of $3,862,000 notional value at December 31,
1995 were used to manage interest rate risk associated with deposits. At
December 31, 1995, unrealized gains on these derivative financial instruments
were $73,000 and unrealized losses were $5,000. The effect of derivative
financial instruments on the cost of deposits for the year ended December 31,
1995 was to decrease the cost from 3.74% to 3.61%.

                                       65
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

10. SHORT-TERM FUNDS BORROWED

Short-term funds borrowed at December 31, 1995 and 1994 include the following:

<TABLE>
<CAPTION>
                                                           1995           1994
                                                       -----------     -----------
<S>                                                    <C>             <C>
Federal funds purchased (a)........................     $  482,932     $  252,340
Securities sold under agreements to                                                
 repurchase (b)....................................        129,145        139,923 
Commercial paper (c)...............................      1,255,656        853,947
Other short-term funds borrowed (d)................        223,989        299,991
                                                        ----------     ----------
   Total short-term funds borrowed (e).............     $2,091,722     $1,546,201
                                                        ==========     ==========
</TABLE>

______________________     
(a)  Federal funds purchased generally represent the overnight Federal funds
     transactions of banking subsidiaries with correspondent banks. The weighted
     average interest rate paid was 6.11% in 1995, 4.58% in 1994 and 3.15% in
     1993. The maximum amount outstanding at any month-end was $1,141,271
     during 1995, $961,634 during 1994, and $1,160,951 during 1993.
                           
(b)  Securities sold under agreements to repurchase usually mature within one to
     thirty days or are due on demand. The weighted average interest rate paid
     was 4.82% in 1995, 2.61% in 1994 and 2.73% in 1993. The maximum amount
     outstanding at any month-end was $190,492 during 1995, $281,327 during
     1994, and $386,368 during 1993.

(c)  Commercial paper issued by CSCC is used to finance the short-term borrowing
     requirements of certain banking-related activities. Commercial paper is
     issued with maturities of not more than nine months and there are no
     provisions for extension, renewal or automatic rollover. The weighted
     average interest rate on commercial paper borrowings was 5.94% in 1995,
     4.24% in 1994, and 3.14% in 1993. The maximum amount outstanding at any
     month-end was $1,388,927 during 1995, $919,292 during 1994, and $714,439
     during 1993.

     At December 31, 1995, the Corporation had a $650,000 revolving credit
     facility from unaffiliated banks. The facility was established in support
     of commercial paper borrowings, Medium Term Note (see Note 11) issuance and
     general corporate purposes. Unless extended by the Corporation in
     accordance with the terms of the facility agreement, the facility expires
     January 1999. There were no borrowings under this facility at December 31,
     1995. The interest rate charged for usage of these lines varies with money
     market conditions.

(d)  Other short-term funds borrowed include term Federal funds purchased and
     demand notes payable to the U.S. Treasury.

(e)  The aggregate average short-term funds borrowed were $2,073,000 in 1995,
     $1,928,000 in 1994, and $1,962,000 in 1993. The weighted average interest
     rate was 5.77% in 1995, 4.42% in 1994 and 3.42% in 1993. The average
     interest rate is calculated primarily on a daily average of short-term
     funds borrowed.

                                       66
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

11.  LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 includes the following:

<TABLE>
<CAPTION>
CoreStates Financial Corp:                                 1995          1994
                                                       ------------  ------------
<S>                                                    <C>             <C>
8 5/8% Mortgages due 2001...........................    $    8,823     $    9,997
                                                        ----------     ----------

CSCC:
5 7/8% Guaranteed Subordinated
  Notes due 2003 (a)................................       200,000        200,000
6 5/8% Guaranteed Subordinated
  Notes due 2005 (a)................................       175,000        175,000
9 5/8% Guaranteed Subordinated
  Notes due 2001 (a)................................       150,000        150,000
9 3/8% Guaranteed Subordinated
  Notes due 2003 (a)................................       100,000        100,000
Medium Term Notes (b)...............................     1,036,035      1,099,585
Unamortized Discounts...............................        (3,631)        (3,785)
                                                        ----------     ----------
                                                         1,657,404      1,720,800
                                                        ----------     ----------
Other subsidiaries:
Federal Home Loan Bank
  Borrowings (c)....................................        30,000         55,000
Various other.......................................         2,107          5,313
                                                        ----------     ----------
                                                            32,107         60,313
                                                        ----------     ----------
Total long-term debt (d)............................    $1,698,334     $1,791,110
                                                        ==========     ==========
</TABLE> 

____________________
(a)  The Notes are not subject to redemption prior to maturity and are
     unconditionally guaranteed, on a subordinated basis, as to payment of
     principal and interest by the Corporation. The Notes are subordinated to
     all existing and future senior CSCC indebtedness and the guarantee is
     subordinated to all outstanding senior Corporation indebtedness.

(b)  CSCC can issue Medium Term Notes (Senior and Subordinated) ranging in
     maturity of more than nine months from date of issue. The interest rate or
     interest rate formula on each Note is established by CSCC at the time of
     issuance. The Senior Notes are unconditionally guaranteed as to payment of
     principal and interest by the Corporation. The Subordinated Notes are
     unconditionally guaranteed, on a subordinated basis, as to payment of
     principal and interest by the Corporation. The Subordinated Notes are
     subordinated to all existing and future senior CSCC indebtedness and the
     guarantee is subordinated to all existing and future senior Corporation
     indebtedness. At December 31, 1995, $1,036,035 of debt was outstanding with
     terms up to five years. Interest rates are predominately variable, but
     include several issues at fixed interest rates ranging from 5.30% to 5.50%.

     Under an existing shelf registration statement filed with the Securities
     and Exchange Commission, the Corporation had debt and capital securities
     that were registered but unissued of approximately $294,000 at December 31,
     1995. A new shelf registration statement will be filed in the first half of
     1996 increasing registered but unissued debt and capital securities to
     $1,750,000.

(c)  The borrowings range in maturity from February 1996 to June 1996 at fixed
     interest rates from 4.58% to 4.82%.

(d)  The consolidated aggregate maturities and sinking fund requirements for
     long-term debt for the years ending December 31, 1996 through 2000 are:
     $305,469; $275,497; $326,653; $137,356; and $26,322, respectively.

                                       67
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)


11.  LONG-TERM DEBT - continued

Derivative financial instruments of $614,000 notional value at December 31, 1995
were used to manage interest rate risk associated with long-term debt. At
December 31, 1995, unrealized gains on these derivative financial instruments
were $24,000 and unrealized losses were $8,000. The effect of these derivative
financial instruments on the cost of long-term debt for the year ended December
31, 1995 was to decrease the interest rate from 6.71% to 6.69%.

12.  RETIREMENT AND BENEFIT PLANS

The projected benefit obligation under the Corporation's defined benefit pension
plans exceeded plan assets at fair value by $23,696 at December 31, 1995, based
on current and estimated future salary levels. The excess of the projected
benefit obligation is reconciled to the accrued pension cost included in other
liabilities as follows:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                           ----------------------
                                                                              1995        1994
                                                                           ----------  ----------
<S>                                                                        <C>         <C>
Plan assets at fair value(a)...........................................     $588,640    $456,293
                                                                            --------    --------
   Present value of benefit obligation:
   Accumulated benefits based on salaries to date, including
    vested benefits of $464,912 in 1995 and $371,570
    in 1994............................................................      492,394     402,772
   Additional benefits based on estimated future salary levels.........      119,942      97,867
                                                                            --------    --------
Projected benefit obligation...........................................      612,336     500,639
                                                                            --------    --------
Amount projected benefit obligation exceeds
    plan assets at fair value at December 31,..........................      (23,696)    (44,346)
Reconciliation:
    Unrecognized prior service cost....................................       11,806       5,879
    Unrecognized net asset from date of initial application............      (22,336)    (27,538)
    Net deferred actuarial loss........................................       29,006      19,299
                                                                            --------    --------
Accrued pension expense included in other liabilities..................     $ (5,220)   $(46,706)
                                                                            ========    ========
</TABLE>
______________________
(a)  Primarily U.S. Government securities, U.S. agency securities, fixed income
     securities and commingled funds managed by subsidiary banks.

 
Net pension cost for the years ended December 31, 1995, 1994 and 1993 included
the following expense (income) components:

<TABLE>
<CAPTION>
                                                                            1995                 1994                  1993
                                                                        ------------          ------------         -------------
<S>                                                                     <C>                   <C>                  <C>
Service cost benefits earned during the period......................       $  16,615              $ 21,260              $ 16,117
Interest cost on projected benefit obligation.......................          40,997                38,773                35,186
Actual (return) loss on plan assets.................................        (112,879)               17,746               (49,401)
Net amortization and deferral.......................................          69,591               (57,389)               10,105
                                                                           ---------              --------              --------
    Net pension cost................................................       $  14,324              $ 20,390              $ 12,007
                                                                           =========              ========              ========
</TABLE>

The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation for the Corporation was 7.0% and 8.0%,
respectively, at December 31, 1995 and 1994. The rate of increase on future
compensation levels was 5.0%. The expected long-term rate of return on plan
assets was 8.5% to 9.5%.

The Corporation sponsors a savings plan for its employees. Contributions to the
savings plan for the employers' match were $13,192 in 1995, $13,133 in 1994, and
$13,576 in 1993.

Prior to its acquisition by the Corporation, Independence maintained a defined
contribution plan which covered all employees who met age and service
requirements. Expense related to this plan was $2,407 in 1994 and $2,636 in
1993. Vested contributions were rolled into the Corporation's savings plan.

                                       68
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

12.  RETIREMENT AND BENEFIT PLANS - continued

The Corporation and its subsidiaries provide certain postretirement health care
and life insurance benefits for retired employees. Postretirement benefits are
provided through an insurance company whose premiums are based on the benefits
paid during the year. The postretirement health care plan is contributory, with
retiree contributions based on years of service.

The liability for postretirement benefits included in other liabilities at
December 31, 1995 and 1994 was as follows:

<TABLE>
<CAPTION>
                                                                                        1995           1994  
                                                                                     ----------     ---------- 
<S>                                                                                  <C>            <C>       
Accumulated postretirement benefit obligation:                                                                
 Retirees......................................................................       $(110,642)     $ (93,547)
 Fully eligible active plan participants.......................................          (1,818)        (2,979)
 Other active plan participants................................................         (28,445)       (32,420)
                                                                                      ---------      ---------
Accumulated postretirement benefit obligation..................................        (140,905)      (128,946)
Plan assets at fair value (a)..................................................          46,974         24,467
                                                                                      ---------      ---------
Unfunded obligation at December 31,............................................         (93,931)      (104,479)
Unrecognized prior service cost................................................             115              -
Unrecognized net (gain) loss...................................................         (18,722)       (27,247)
                                                                                      ---------      ---------
Accrued postretirement benefit obligation included in other liabilities........       $(112,538)     $(131,726)
                                                                                      =========      ========= 
</TABLE>
    
_____________________
(a)  Primarily municipal bonds and short-term investments.

Net periodic postretirement benefit cost for the years ended December 31, 1995,
1994 and 1993 included the following expense (income) components:

<TABLE>
<CAPTION>
                                                              1995      1994       1993
                                                            -------   --------   -------- 
<S>                                                         <C>       <C>        <C>
Service cost benefits earned during the period..........    $ 2,173    $ 2,323    $ 2,160
Interest cost on accumulated postretirement benefit 
   obligation...........................................      9,638      9,261     10,108
Actual return on plan assets............................     (1,107)      (461)        (6)
Net amortization and deferral...........................     (1,436)      (736)         6
                                                            -------    -------    -------
Net periodic postretirement benefit cost................    $ 9,268    $10,387    $12,268
                                                            =======    =======    =======
</TABLE>

For measurement purposes, a 10.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995; the rate was assumed
to decrease gradually to 9.5% for 1997 and remains at that level thereafter. For
measurement purposes, a fixed dollar amount was determined as the Corporation's
maximum cost per employee. This fixed dollar amount was established at the
projected cost level for medical expenses in 1997. The health care cost trend
rate assumption has a significant effect on the amounts reported. To illustrate,
increasing the assumed health care cost trend rates by 1 percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1995 by $9,662 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year then ended
by $663.

The expected long-term rate of return on plan assets was 6.0%. The weighted-
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% and 8.0%, respectively, at December 31, 1995 and 1994.

                                       69
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

13.  LONG-TERM INCENTIVE PLAN

The Corporation has outstanding options granted under the Corporation's long-
term incentive plan (the "Plan"). As provided in the Plan, a variety of
incentives can be issued to eligible participants including restricted stock
awards, incentive stock options, non-qualified stock options, stock appreciation
rights, performance units and cash awards. Constellation, Independence and
Germantown had maintained similar plans. Options granted under those plans were
assumed by the Corporation upon consummation of their respective acquisitions.
The Plan provides for a maximum number of options available to be granted each
year equal to 2% of outstanding common shares as of January 1 of that year.
Information on options for 1995 follows:

<TABLE>
<CAPTION>
                                        SHARES UNDER     OPTION PRICE
                                           OPTION          PER SHARE
                                        -------------    ------------
<S>                                     <C>            <C>
Balance at January 1, 1995...........      7,235,699    $ 3.99  - $54.70
Options granted......................      1,754,977     28.75  -  28.75
Options exercised....................     (3,069,893)     3.99  -  28.16
Options canceled.....................       (118,737)     7.64  -  54.70
                                          ----------
Balance at December 31, 1995.........      5,802,046      3.99  -  28.75
                                          ----------
</TABLE>

Options under the Plan are granted to purchase the Corporation's common shares
at market value on the date of grant and are exercisable one year from the date
of grant for a period not exceeding ten years. Stock appreciation rights may be
granted in conjunction with the granting of an option. Upon the exercise of
stock appreciation rights and the surrender of the related option, an employee
may receive in cash or common stock of the Corporation a value equal to the
difference between the market price at the date of exercise and the option price
of shares.

The preceding option table does not reflect 122,800 performance unit awards
outstanding at December 31, 1995, 214,062 at December 31, 1994 and 280,190 at
December 31, 1993. Performance unit awards are earned subject to specific
performance of the Corporation over specified performance periods as defined in
the Plan. The payment value of each performance unit earned for the applicable
performance period is the fair market value of one share of common stock of the
Corporation based on the formula contained in the Plan. During 1995, 1994 and
1993, respectively, $1,258, $867 and $1,051 was expensed in connection with
performance unit awards.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123") was issued in October 1995 to establish accounting and
reporting standards for stock-based employee compensation plans such as stock
option and restricted stock plans ("stock-based plans"). FAS 123 defines a fair
value based method of accounting for measuring compensation expense for stock-
based plans and encourages all entities to adopt that method of accounting.
However, FAS 123 also permits entities to continue to measure compensation
expense for stock-based plans using the intrinsic value based method prescribed
by APB Opinion No. 25, "Accounting for Stock Issued to Employees." Entities
electing to remain with the intrinsic value based method must begin to make pro
forma disclosures of net income and earnings per share in fiscal years beginning
after December 31, 1995 as if the fair based method defined by FAS 123 was
applied.

Under the fair value based method, compensation expense would be measured as the
value of an award under a stock-based plan on the date the award is granted, and
would be recognized over the vesting period of the award. Under the current
intrinsic value based method, compensation expense is measured as the excess, if
any, of the market price of the stock underlying the award on the date the award
is granted, over the exercise price. Under CoreStates' stock-based long-term
incentive plan, awards have no intrinsic value on the date of grant as the
exercise price equals the market price on that date. Currently, CoreStates does
not expect to adopt the FAS 123 fair value based method of accounting for stock-
based plans but will provide the required pro forma disclosures in the December
31, 1996 financial statements.

                                       70
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)


14.  OPERATING LEASES

Rental expense, reduced by sublease rental income, charged to operations was
$64,995, $63,901 and $63,055 for 1995, 1994 and 1993, respectively.


15.  OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS AND COMMITMENTS

In the normal course of business, there are outstanding commitments and
contingent liabilities which are not reflected in the financial statements.
These include various financial instruments with off-balance sheet risk used in
connection with the Corporation's asset and liability management and to provide
for the needs of customers. These involve varying degrees of credit, interest
rate and liquidity risk, but do not represent unusual risks for the Corporation
and management does not anticipate any significant losses as a result of these
transactions.

DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING

The Corporation uses off-balance sheet derivative financial instruments, such as
interest rate swaps, futures and caps, to manage interest rate risk. The
Corporation's exposure to interest rate risk stems from the mismatch between the
sensitivity to movements in interest rates of the Corporation's assets and
liabilities and from the spread risk between the rates on those assets and
liabilities and financial market rates. The use of derivatives to manage
interest rate risk falls into three categories: interest sensitivity
adjustments, interest rate spread protection and hedging anticipated asset
sales.

Interest rate swaps and futures are generally used to lengthen the interest rate
sensitivity of short-term assets and to shorten the repricing characteristics of
longer term liabilities. Interest rate caps are used to manage spread risk.
Interest rate caps are also used to offset the risk of upward interest rate
movement on adjustable rate mortgages and other products with imbedded caps as
well as to reduce the risk that interest rate spreads narrow on prime based
products. Gains or losses are used to adjust the basis of the related asset or
liability and interest differentials are adjustments of the related interest
income or expense.

In connection with anticipated sales of longer term assets acquired through
merger or generated in the loan origination process, the Corporation uses
interest rate swaps and option agreements to reduce interest rate sensitivity as
the assets are readied for sale. Hedge gains or losses are used to adjust the
basis of the assets held for sale.

Derivative financial instruments used in the management of interest rate risk at
December 31, 1995 are summarized by category in the table on page 29. A summary
of interest rate swap contracts categorized by whether the Corporation receives
or pays fixed rates and stratified by repricing or maturity date is on page 32.
Foreign currency derivatives used for hedging activities have not had a material
impact on income or liquidity of the Corporation for any of the years presented.

DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES

In its business of providing risk management services for its customers, the
Corporation engages in derivative activities including interest rate swaps, caps
and floors. In addition, as part of its international business, the Corporation
enters into foreign exchange contracts on behalf of customers. These contracts
are matched against forward sale or purchase contracts. All customer related
derivative financial instrument transactions are marked to market and any gains
or losses are recorded in the income statement.

The Corporation does not maintain a regular trading business where unbalanced
positions are taken in any financial derivative instrument.

Customer related derivative financial instruments accounted for as trading at
December 31, 1995 and 1994 are summarized by type of instrument in the table on
page 33.

                                       71
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

15.  OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS AND COMMITMENTS -
continued

The following is a summary of off-balance sheet commitments and derivative
financial instruments as of December 31, 1995 and 1994, including fair values:

<TABLE>
<CAPTION>

                                                                                 1995                         1994
                                                                      ---------------------------  ---------------------------
                                                                       NOTIONAL         FAIR        Notional         Fair
                                                                          OR           VALUE           or           Value
                                                                      CONTRACTUAL     OF ASSET     Contractual     of Asset1
                                                                        AMOUNT     (LIABILITY)(1)    Amount     (Liability)(1)
                                                                      -----------  --------------  -----------  --------------
<S>                                                                   <C>          <C>             <C>          <C>
Standby letters of credit, net of participations (a).............     $ 1,005,261    $(10,053)      $1,125,262   $  (2,813)
Commercial letters of credit.....................................       1,266,324     (12,663)       1,244,164      (3,110)
Commitments to extend credit (b).................................      10,219,882     (15,177)       8,223,261     (13,310)
Unused commitments under credit card lines.......................       3,872,641           -        3,579,453           -
Interest rate futures contracts (c):
   Commitments to purchase.......................................         619,000         538        1,043,000      (1,185)
Commitments to purchase foreign and
   U.S. currencies (d)...........................................       1,659,925       1,545        1,816,549       1,702
Interest rate swaps, notional principal
   amounts (e)...................................................       7,770,802     198,531        8,234,400    (210,300)
Interest rate caps and floors (f):
   Written.......................................................         647,323      (2,592)         749,857     (15,000)
   Purchased.....................................................         948,023       4,235        1,150,657      20,200
Other derivatives................................................         136,000      (1,647)         295,000         400
</TABLE>

_________________________
(1)  See Note 3 for discussion of fair value.

                                       72
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

15.  OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS AND COMMITMENTS -
continued

(a)  Standby letters of credit ("SBLC") are used in various transactions to
     enhance the credit standing of the Corporation's customers and are
     subjected to the same risk, credit review and approval process as loans.
     SBLC's are irrevocable assurances that the Corporation will make payment in
     the event that a customer cannot perform its contractual obligations to
     third parties.

(b)  Commitments to extend credit represent the Corporation's obligation to fund
     commercial and real estate loans, including home equity lines, lines of
     credit, revolving lines of credit and other types of commitments.

(c)  Exchange traded futures contracts represent agreements to exchange dollar
     amounts at a specified future date for interest rate differentials between
     an agreed interest rate and a reference rate, computed on a notional
     amount. Credit and market risk exist with respect to these instruments.
     Exchange traded futures contracts entail daily cash settlement; therefore,
     the credit risk amount represents a one-day receivable.

(d)  Commitments to purchase foreign and U.S. currencies are primarily executed
     for the needs of customers. These foreign exchange contracts are structured
     similar to interest rate futures and forward contracts. The risk associated
     with a foreign exchange contract arises from the counterparty's ability to
     make payment at settlement and that the value of a foreign currency might
     change in relation to the U.S. dollar. The Corporation's exposure, if any,
     to counterparty failure equals the current market value of the contract,
     which at December 31, 1995 and 1994 was $16,394 and $2,275, respectively.
     Included in fees for international services are net foreign exchange gains
     of $21,884, $18,863 and $15,979 for the years ended December 31, 1995, 1994
     and 1993, respectively.

(e)  Interest rate swaps generally represent the contractual exchange of fixed
     and variable rate interest payments based on a notional principal amount
     and an interest reference rate. Credit risk exists with respect to these
     instruments arising from the possible failure of the counterparty to make
     required payments on those contracts which are favorable to the
     Corporation. The Corporation's exposure to counterparty failure equals the
     current replacement cost of the contract. At December 31, 1995 and 1994,
     the replacement cost of the Corporation's interest rate swap contracts was
     $214,943 and $17,093, respectively. The risk of counterparty failure is
     controlled by limiting transactions to an approved list of counterparties
     and requiring collateral in certain instances. Net cash received on
     interest rate swaps during 1995 and 1994 totaled $32,080 and $99,928,
     respectively.

(f)  Interest rate caps and floors are written by the Corporation to enable
     customers to transfer, modify or reduce their interest rate risk. Interest
     rate caps and floors are similar to interest rate swaps except that
     payments are made only if current interest rates move above or below a
     predetermined rate. The risk associated with interest rate caps and floors
     is an unfavorable change in interest rates. As a writer of interest rate
     caps and floors, the Corporation receives a premium in exchange for bearing
     the risk of an unfavorable change in interest rates. The Corporation
     generally minimizes this risk by entering into offsetting cap and floor
     positions that essentially counterbalance each other. The Corporation also
     enters interest rate caps to offset the risk of upward interest rate
     movement on assets with embedded caps as well as to limit spread risk. As a
     purchaser of interest rate caps, the Corporation pays a premium in exchange
     for the right to receive payments if interest rates rise above
     predetermined levels. Similar to interest rate swaps, credit risk exists
     with respect to the possible failure of the counterparty to make required
     payments on those contracts which are favorable to the Corporation.
     Exposure to counterparty failure equals the current replacement cost of the
     contract which totaled $4,235 and $20,200, respectively, at December 31,
     1995 and 1994.

In the normal course of business, the Corporation and its subsidiaries are
subject to numerous pending and threatened legal actions and proceedings, some
for which the relief or damages sought are substantial. Management does not
believe the outcome of these actions and proceedings will have a materially
adverse effect on the consolidated financial position of the Corporation.

                                       73
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

16.  PROVISION FOR INCOME TAXES

The provision for income taxes in the consolidated statement of income consists
of the following:

<TABLE>
<CAPTION>

                                                          1995       1994       1993
                                                       ---------  ---------  ---------
<S>                                                    <C>        <C>        <C>
Current:
  Federal..........................................     $200,567   $106,053   $155,972
  State............................................       19,928     15,652     18,209
                                                        --------   --------   --------
       Total domestic..............................      220,495    121,705    174,181
  Foreign..........................................        8,023      5,558     10,284
                                                        --------   --------   --------
       Total current...............................      228,518    127,263    184,465
Deferred Federal and state expense                      
 (benefit).........................................       34,047     16,393    (10,656)
                                                        --------   --------   -------- 
       Total provision for income taxes............     $262,565   $143,656   $173,809 
                                                        ========   ========   ========  
</TABLE>

The significant components of the Corporation's deferred tax assets and
liabilities at December 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
                                                         1995        1994
                                                       ---------  ----------
<S>                                                    <C>        <C> 
Deferred tax assets:
   Allowance for loan losses.......................     $171,756   $171,176
   Postretirement and postemployment benefits......       47,612     65,743
   Reserves........................................       43,523     26,616
   Other...........................................       53,667     61,108
                                                        --------   --------
   Gross deferred tax asset........................      316,558    324,643
   Valuation allowance.............................            -     (9,102)
                                                        --------   --------
       Total deferred tax assets...................      316,558    315,541
                                                        --------   --------

Deferred tax liabilities:
   Auto leasing portfolio..........................      103,258     88,570
   FAS 115 fair value accounting...................       18,888      5,981
   Partnership investments.........................        3,282        744
   Tax over book depreciation......................       16,985     18,040
   Affiliate income................................       30,404     17,716
   Other...........................................       10,064      9,984
                                                        --------   --------
       Total deferred tax liabilities..............      182,881    141,035
                                                        --------   --------
Net deferred tax assets............................     $133,677   $174,506
                                                        ========   ========
</TABLE>

At December 31, 1995 cumulative deductible temporary differences are
approximately $904,000 and the related deferred tax asset is $316,558. The major
components of the temporary differences include $491,000 related to the
allowance for loan losses and $136,000 related to pension, and other post
retirement and post employment benefits. Cumulative taxable temporary
differences related to deferred tax credits at December 31, 1995 are estimated
at $522,000 and are primarily related to leasing, FAS 115 fair value accounting,
affiliate income and depreciation. The related deferred tax liability is
$182,881.

                                       74
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

16.  PROVISION FOR INCOME TAXES - continued

At December 31, 1995, the Corporation has determined that it is not required to
establish a valuation allowance for the deferred tax asset since it is more
likely than not that the deferred tax asset of $316,558 will be realized
principally through carryback to taxable income in prior years, and future
reversals of existing taxable temporary differences, and to a lesser extent,
future taxable income and tax planning strategies. The Corporation's conclusion
that it is "more likely than not" that the deferred tax asset will be realized
is based on a history of growth in earnings and the prospects for continued
growth including an analysis of potential uncertainties that may affect future
operating results. The Corporation will continue to review the tax criteria of
"more likely than not", for the recognition of deferred tax assets on a
quarterly basis.

The Corporation has reversed the $9,102 valuation allowance for the deferred tax
asset related to pre-affiliation state income taxes. An estimated $4,000 state
benefit for tax purposes will be obtained in future periods. No further benefit
will be obtained on the remaining $5,102.

The consolidated effective tax rates are reconciled to the statutory rate as
follows:

<TABLE>
<CAPTION>
                                                       1995   1994   1993
                                                       ----   ----   ---- 
<S>                                                    <C>    <C>    <C>
Statutory rate......................................   35.0%  35.0%  35.0%
Difference resulting from:
  Tax-exempt income.................................   (1.5)  (3.4)  (3.1)
  State, local and foreign income tax...............    1.8    2.6    2.4
  Other, net........................................    1.4    2.4   (1.9)
                                                       ----   ----   ----
Effective tax rate..................................   36.7%  36.6%  32.4%
                                                       ====   ====   ====
</TABLE>

Foreign earnings of certain subsidiaries would be taxed only upon their transfer
to the United States. No transfers or dividends are contemplated at this time.
Taxes payable upon remittance of such accumulated earnings of $21,323 at
December 31, 1995 would approximate $7,065.

Taxes, other than income taxes, included in other operating expenses for the
years ended December 31, 1995, 1994 and 1993 are $72,013, $70,505 and $76,608,
respectively.

                                       75
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS:  Continued
(DOLLAR AMOUNTS IN THOUSANDS)

17.  QUARTERLY FINANCIAL DATA (UNAUDITED)

The following represents summarized quarterly financial data of the Corporation,
which, in the opinion of management, reflects all adjustments (comprising only
normal recurring accruals) necessary for a fair presentation:

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                 --------------------------------------------------------
                                                                    DEC. 31          SEPT. 30       JUNE 30      MARCH 31
                                                                    -------          --------       -------      --------   

<S>                                                               <C>              <C>             <C>          <C>
1995
----
Interest income................................................   $    568,358     $  566,368      $576,592     $550,987
                                                                  ============     ==========      ========     ========
Interest expense...............................................   $    193,708     $  195,980      $197,964     $186,119
                                                                  ============     ==========      ========     ========
Net interest income............................................   $    374,650     $  370,388      $378,628     $364,868
                                                                  ============     ==========      ========     ========
Provision for losses on loans..................................   $     27,500     $   27,500      $ 25,000     $ 25,000
                                                                  ============     ==========      ========     ========
Securities gains...............................................   $        931     $      470      $  1,592     $  6,395
                                                                  ============     ==========      ========     ========
Net income.....................................................   $    136,954(b)  $  133,946(b)   $125,970(b)  $ 55,367(a) 
                                                                  ============     ==========      ========     ========  
Net income per common share....................................          $0.99(b)       $0.96(b)      $0.89(b)     $0.38(a)
                                                                         =====          =====         =====        =====
Average common shares outstanding..............................        138,468        139,176       140,914      144,246
                                                                       =======        =======       =======      =======
Common Stock Market Bid Information:
  High.........................................................       $ 40 1/8     $   38 7/8      $ 36         $ 33
  Low..........................................................         34 5/8         34 1/4        30 1/2       25 5/8
  Quarter-end..................................................         37 7/8         36 5/8        34 5/8       32

1994
----
Interest income................................................       $517,956       $488,406      $473,956     $449,209
                                                                      ========       ========      ========     ========
Interest expense...............................................       $158,709       $136,287      $124,291     $120,871
                                                                      ========       ========      ========     ========
Net interest income............................................       $359,247       $352,119      $349,665     $328,338
                                                                      ========       ========      ========     ========
Provision for losses on loans..................................       $ 25,000       $ 25,000      $ 49,995     $146,905
                                                                      ========       ========      ========     ========
Securities gains...............................................       $  4,610       $  4,223      $  3,023     $  6,897
                                                                      ========       ========      ========     ========
Income (loss) before cumulative effect of a
  change in accounting principle...............................       $111,475       $104,221      $ 63,091     $(29,995)
                                                                      ========       ========      ========     ========
Cumulative effect of a change
  in accounting principle......................................                                                 $ (3,430)
                                                                                                                ========
Net income (loss)..............................................       $111,475       $104,221      $ 63,091     $(33,425)
                                                                      ========       ========      ========     ========
Net income (loss) per common share.............................          $0.78          $0.74         $0.44(d)    $(0.21)(c)(d)
                                                                         =====          =====         =====       ======
Average common shares outstanding..............................        142,252        141,033       142,139      144,612
                                                                       =======        =======       =======      =======
Common Stock Market Bid Information:
  High.........................................................       $ 27 5/8       $ 29 1/8      $ 28         $ 27 1/8
  Low..........................................................         22 7/8         25 7/8        25           24 1/2
  Quarter-end..................................................         26             26 5/8        25 3/4       26
</TABLE>

______________________
(a)  Includes the impact of an after-tax restructuring charge of $70.0 million,
     or $0.49 per share related to a process redesign and an after-tax gain of
     $11.8 million, or $0.08 per share related to a change in ownership
     interests in a joint venture.
(b)  Includes the impact of after-tax restructuring credits of $1.9 million or
     $0.01 per share, $1.5 million or $0.01 per share, and $4.1 million or $0.03
     per share recorded in the second, third and fourth quarters of 1995,
     respectively.
(c)  Based on income before cumulative effect of a change in accounting
     principle.
(d)  Reflects after-tax merger-related charges of $0.89 per share recorded in
     the first quarter of 1994 for the Constellation acquisition and $0.28 per
     share recorded in the second quarter of 1994 for the Independence
     acquisition.

                                       76
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS:  CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)

18.  INTERNATIONAL OPERATIONS

International operations include the international activities of CBNA and its
five overseas branches and two Edge Act subsidiaries. The International Banking
group engages in foreign banking and international financing activities
including loans, acceptances, time deposits, letter of credit financing and
related financial services.

Due to the complex nature of the Corporation's businesses and because its
revenue from customers domiciled outside the U.S. is recorded in both domestic
and foreign offices, it is impossible to segregate with precision the respective
contributions to income from the domestic and international operations. As these
operations are highly integrated, estimates and subjective assumptions have been
made to apportion revenue and expenses between domestic and international
operations. Charges for funds used by one segment provided by another segment
are based on a pooled cost of purchased funds. Geographic distributions of
earnings are based upon average interest earning assets. Expenses are charged to
international operations as directly incurred by such activities plus allocated
charges consistent with internal allocation policies. Subject to the above
limitations, estimates and assumptions, the following tables present information
attributable to international operations:

<TABLE>
<CAPTION>
                                                         Domestic     International
                                                        Operations     Operations      Total
                                                       ------------   ------------- ------------
<S>                                                    <C>            <C>           <C>
DECEMBER 31, 1995
Assets(a).........................................      $27,222,121    $2,398,495    $29,620,616
                                                        ===========    ==========    ===========
Total operating income............................      $ 2,657,357    $  210,614    $ 2,867,971
                                                        ===========    ==========    ===========
Income before income taxes........................      $   670,728    $   44,074    $   714,802
                                                        ===========    ==========    ===========
Net income........................................      $   423,589    $   28,648    $   452,237
                                                        ===========    ==========    ===========

DECEMBER 31, 1994
Assets(a).........................................      $27,581,360    $1,743,776    $29,325,136
                                                        ===========    ==========    ===========
Total operating income............................      $ 2,302,798    $  194,269    $ 2,497,067
                                                        ===========    ==========    ===========
Income before income taxes........................      $   349,473    $   42,975    $   392,448
                                                        ===========    ==========    ===========
Income before cumulative effect of a
   change in accounting principle.................      $   220,859    $   27,933    $   248,792
                                                        ===========    ==========    ===========

DECEMBER 31, 1993
Assets(a).........................................      $26,784,458    $1,650,159    $28,434,617
                                                        ===========    ==========    ===========
Total operating income............................      $ 2,258,689    $  157,205    $ 2,415,894
                                                        ===========    ==========    ===========
Income before  income taxes.......................      $   492,450    $   43,788    $   536,238
                                                        ===========    ==========    ===========
Income before cumulative effect of a
   change in accounting principle.................      $   333,967    $   28,462    $   362,429
                                                        ===========    ==========    ===========
</TABLE>
____________________
(a)  The Corporation had no material foreign currency positions at December 31,
     1995, 1994 and 1993.  Assets primarily consist of Eurodollar time deposit
     placements, loans and acceptances with maturities of one year or less.

                                       77
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

19.  JOINT VENTURE
In December 1992, the Corporation entered into a joint venture with three other
banking companies creating Electronic Payment Services, Inc. ("EPS"). The joint
venture combines the partners' separate consumer electronic transaction
processing businesses and provides automated teller machine ("ATM") and
electronic point-of-sale ("POS") processing services.

The Corporation contributed to EPS its wholly-owned subsidiaries Money Access
Service Inc. ("MAC"), a regional ATM network, and BUYPASS Corporation, a third-
party processor of electronic POS transactions.

At the formation of EPS, the Corporation had equal ownership with two partners
in the joint venture, each with 31%. The fourth partner owned 7%. As part of the
1992 transaction, the Corporation received a cash payment of $79,350 and
$245,400 of EPS 5% cumulative redeemable preferred stock. The exchange of assets
involved in the transaction resulted in a 1992 pre-tax gain to the Corporation
of $41,072, $25,670 after-tax. The exchange also generated a deferred gain of
approximately $138,000.

In December 1993, the Corporation and EPS mutually agreed to enter into a
recapitalization of EPS involving the EPS preferred stock held by the
Corporation. In exchange for substantially all of the preferred stock, the
Corporation received from EPS a ten-year 6.45% note providing for equal
principal payments over the life of the note. The recapitalization did not
affect the amount of deferred gain, but changed the timing of deferred gain
income recognition from a five-year period beginning in 1996 to a ten-year
period which began in 1994.

On March 27, 1995, EPS added a new partner and increased the ownership interests
of an existing partner to that of a full partner, resulting in a decrease in the
Corporation's share of ownership from 31% to 20%. As a direct result of this
change in ownership interests, the Corporation recognized a pre-tax gain of
$19,000, $11,800 after-tax or $0.08 per share, in 1995. Included in the pre-tax
gain amount was $4,000 related to the acceleration of deferred gain recognition.

The Corporation's investment in EPS at December 31, 1995, net of $117,000
deferred gain, is $72,632 and is included in other assets. "Income from
investment in EPS, Inc.", which is included in non-interest income, reflects the
Corporation's share in EPS net income for all periods presented, interest income
on the 6.45% note in 1995 and 1994, dividends on the preferred stock in 1993 and
amortization of the deferred gain in 1995 and 1994.

20.  RESTRUCTURING CHARGE
The Corporation recorded a restructuring charge of $110,000, $70,000 after-tax
or $0.49 per share, in the first quarter of 1995 in connection with a process
redesign which commenced March 1995 and will continue into 1996. The objectives
of the process redesign are : (i) to enhance the Corporation's customer focus;
(ii) to accelerate "cultural changes" which were already in progress; and (iii)
to improve productivity. The charge included direct and incremental costs
associated with the process redesign. The components of the restructuring charge
were as follows:

<TABLE>
<CAPTION>
                                                             REQUIRING    1995
                                                               CASH       CASH
                                                    TOTAL     OUTFLOW   OUTFLOW
                                                  ---------  ---------  --------
<S>                                               <C>        <C>        <C>
Severance costs................................    $ 72,000    $72,000   $28,306
Office reconfiguration costs...................      16,000      7,000         -
Branch closing costs...........................      15,000      7,000     1,669
Outplacement costs.............................       2,500      2,500     1,821
Miscellaneous..................................       4,500      2,500     1,474
                                                   --------    -------   -------
     Total.....................................    $110,000    $91,000   $33,270
                                                   ========    =======   =======
</TABLE>

Subsequent to recording the March 1995 restructuring charge, the Corporation
recorded restructuring credits of $11,825, $7,525 after-tax or $0.05 per share,
related to gains on the curtailment of pension benefits associated with
employees displaced during 1995 and gains on the sale of branches which were
sold as a result of the process redesign.

The following table summarizes the activity in the restructuring accrual for the
year ended December 31, 1995:

<TABLE>
<S>                                           <C>
Balance at beginning of year..............    $      -
Provision charged against income..........     110,000
Cash outflow..............................     (33,270)
Writedowns of assets......................      (7,442)
                                              --------
Balance at December 31, 1995..............    $ 69,288
                                              ========
</TABLE>

                                       78
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS: Continued
(DOLLAR AMOUNTS IN THOUSANDS)
 
21.   FINANCIAL STATEMENTS OF THE PARENT COMPANY

<TABLE>
<CAPTION>
STATEMENT OF INCOME                                                               Year Ended December 31,
                                                                           -------------------------------------
                                                                              1995          1994         1993
                                                                           ----------    ----------    ---------
<S>                                                                        <C>           <C>           <C> 
REVENUES
--------
Dividends from subsidiaries:
  Banks..............................................................      $  248,131    $  240,370    $ 204,393
  Other subsidiaries.................................................          90,267        20,375       14,648
                                                                           ----------    ----------    ---------
     Total dividends from subsidiaries...............................         338,398       260,745      219,041
Management fees and other income from subsidiaries...................         146,011       144,583      143,776
Securities (losses)..................................................               -            (2)        (380)
Other income.........................................................             784           119          721
                                                                           ----------    ----------    ---------
     Total revenues..................................................         485,193       405,445      363,158
                                                                           ----------    ----------    ---------

EXPENSES
--------
Interest on:
  Funds borrowed.....................................................          19,685         9,709        5,525
  Long-term debt.....................................................             927         1,020        8,405
                                                                           ----------    ----------    ---------
     Total interest expense..........................................          20,612        10,729       13,930
Other operating expenses.............................................         151,000       173,157      137,468
                                                                           ----------    ----------    ---------
     Total expenses..................................................         171,612       183,886      151,398
                                                                           ----------    ----------    ---------
Income before income tax benefit and equity in
   undistributed income of subsidiaries..............................         313,581       221,559      211,760
Income tax benefit...................................................          (8,272)      (13,715)      (2,882)
                                                                           ----------    ----------    ---------
Income before equity in undistributed income of subsidiaries.........         321,853       235,274      214,642
Equity in undistributed income (loss) of subsidiaries:
  Banks..............................................................         111,996       (52,590)      89,743
  Other subsidiaries.................................................          18,388        62,678       45,034
                                                                           ----------    ----------    ---------
     Total equity in undistributed income of subsidiaries............         130,384        10,088      134,777
                                                                           ----------    ----------    ---------
NET INCOME...........................................................      $  452,237    $  245,362    $ 349,419
                                                                           ==========    ==========    =========
<CAPTION>
BALANCE SHEET                                                                    December 31,
                                                                           ------------------------
                                                                              1995          1994
                                                                           ----------    ----------
<S>                                                                        <C>           <C>  
ASSETS
------
Cash.................................................................      $    1,254    $    3,893
Time deposit.........................................................               -           300
Investments: securities available-for-sale...........................           9,982        69,566
Investments and receivables-subsidiaries:
 Investments in subsidiaries at equity in underlying net assets:
  Banks..............................................................       2,255,495     2,279,541
  Other subsidiaries.................................................         337,048       308,130
                                                                           ----------    ----------
     Total investments in subsidiaries...............................       2,592,543     2,587,671
Other................................................................           3,995         9,165
                                                                           ----------    ----------
     Total investments and receivables-subsidiaries..................       2,596,538     2,596,836
Other assets.........................................................          34,066        31,579
                                                                           ----------    ----------
     Total assets....................................................      $2,641,840    $2,702,174
                                                                           ==========    ==========
LIABILITIES
-----------
Funds borrowed - subsidiaries........................................      $  176,551    $  246,609
Dividends payable and other liabilities..............................          76,012        94,200
Long-term debt.......................................................           9,858        11,251
                                                                           ----------    ----------
     Total liabilities...............................................         262,421       352,060
                                                                           ----------    ----------
SHAREHOLDERS' EQUITY
--------------------
     Total shareholders' equity......................................       2,379,419     2,350,114
                                                                           ----------    ----------
     Total liabilities and shareholders' equity......................      $2,641,840    $2,702,174
                                                                           ==========    ==========
</TABLE>

                                       79
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS: Continued
(DOLLAR AMOUNTS IN THOUSANDS)
 
21.   FINANCIAL  STATEMENTS OF THE PARENT COMPANY - CONTINUED
 
The approval of the Comptroller of the Currency is required for a nationally
chartered bank to pay dividends if the total of all dividends declared in any
calendar year exceeds the bank's net profits (as defined by national banking
regulations) for that year combined with its retained net profits for the
preceding two calendar years. Under this formula, CBD can declare dividends
without approval of the Comptroller of the Currency of approximately $37
million, plus an additional amount equal to CBD's retained net profits for 1996
up to the date of any such dividend declaration. CBNA and NJNB will be able to
declare dividends without the approval of the Comptroller of the Currency to the
extent that and when 1996 retained net profits exceed $2 million and $7 million,
respectively.

The Federal Reserve Act requires that extensions of credit by CBNA and NJNB to
certain affiliates, including the Corporation, be secured by specified amounts
and types of collateral, that extensions of credit to any such affiliate
generally be limited to 10% of capital and surplus (as defined in that Act) and
that extensions of credit to all such affiliates be limited to 20% of capital
and surplus.

The Corporation has guaranteed certain borrowings of its subsidiaries at
December 31, 1995 in the amount of $2,916,691, which includes $1,255,656 for
commercial paper.

The maturities for parent company long-term debt for the years ending December
31, 1996 through 2000 are: $1,234; $1,345; $1,466; $1,596; and $1,741,
respectively.

<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
                                                                                       Year Ended December 31,               
                                                                           -------------------------------------------
                                                                             1995              1994            1993         
                                                                           ---------        ----------       ---------      
OPERATING ACTIVITIES                                                                                                        
<S>                                                                        <C>              <C>              <C>            
  Net income..........................................................      $ 452,237       $ 245,362        $ 349,419       
  Adjustments to reconcile net income to net cash                                                                            
   provided by operating activities:                                                                                         
     Undistributed income of subsidiaries.............................       (130,384)        (10,088)        (143,393)      
     Securities losses................................................              -               2              380       
     Deferred income tax expense (benefit)............................           (953)         (5,428)           1,692       
     Net (increase) decrease in other assets..........................         (1,895)              -               96       
     Net increase (decrease) in other liabilities.....................         (2,020)           (419)           1,082       
     Other, net.......................................................            661          (8,142)          (3,147)      
                                                                            ---------       ----------        ---------      
   NET CASH PROVIDED BY OPERATING ACTIVITIES                                  317,646         221,287          206,129       
                                                                            ---------       ----------        ---------      
INVESTING ACTIVITIES                                                                                                         
  Net capital returned from (contributed to) subsidiaries.............        149,000         (15,860)          37,119       
  (Increase) decrease in receivables from subsidiaries................          5,170          53,862          (16,962)      
  Purchases of investment securities..................................        (58,001)       (202,309)        (483,551)      
  Proceeds from maturities and sales of investment securities.........        117,585         188,028          453,002       
  Purchase of Germantown Savings Bank.................................              -        (108,061)               -       
  Other, net..........................................................            417               -             (188)      
                                                                            ---------       ---------        ---------       
    NET CASH PROVIDED BY (USED IN) INVESTING                                                                                 
     ACTIVITIES.......................................................        214,171         (84,340)         (10,580)      
                                                                            ---------       ---------        ---------        
FINANCING ACTIVITIES                                                                                                         
  Retirement of long-term debt........................................         (1,393)        (45,488)         (20,940)      
  Net increase (decrease) in financing from and due to subsidiaries...        (94,054)        270,587          (75,967)      
  Cash dividends paid.................................................       (194,067)       (160,122)        (143,334)      
  Purchase of treasury stock..........................................       (335,528)       (228,963)         (29,449)      
  Other, net..........................................................         90,586          22,178           29,538       
                                                                            ---------       ---------        ---------        
    NET CASH USED IN FINANCING ACTIVITIES.............................       (534,456)       (141,808)        (240,152)      
                                                                            ---------       ---------        ---------        
      DECREASE IN CASH AND DUE FROM BANKS.............................         (2,639)         (4,861)         (44,603)      
    Cash and due from banks at January 1,.............................          3,893           8,754           53,357       
                                                                            ---------       ---------        ---------        
    CASH AND DUE FROM BANKS AT DECEMBER 31,...........................      $   1,254       $   3,893        $   8,754       
                                                                            =========       =========        =========       
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                             
  Cash paid during the year for:                                                                                             
   Interest...........................................................      $  20,810       $  10,884        $  10,712       
                                                                            =========       =========        =========       
    Income taxes......................................................              -              -                 -       
                                                                            =========       =========        =========   
</TABLE> 

                                       80
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES 
SUPPLEMENTAL FINANCIAL DATA
CONSOLIDATED AVERAGE BALANCE SHEET AND TAXABLE EQUIVALENT INCOME/EXPENSE AND 
RATES  

<TABLE>
<CAPTION> 
                                                                      1995                                1994                 
                                                       ---------------------------------    --------------------------------  
                                                       AVERAGE                INCOME/       Average               Income/     
                                                       BALANCE     RATE       EXPENSE       balance     Rate      expense     
                                                       ---------   -----   -------------    ---------   -----   ------------  
                                                       (000,000)               (000)        (000,000)                (000)    
INTEREST EARNING ASSETS                                                                                                       
<S>                                                    <C>          <C>       <C>           <C>          <C>      <C>         
Time deposits, principally Eurodollars (a).........    $   1,843    6.33%     $  116,689    $   1,520    4.37%    $   66,389  
Investment securities (b):                                                                                                    
 U.S. Government...................................        1,661    5.72          94,994        2,235    5.06        112,990  
 State and municipal...............................          278    8.43          23,428          365    7.65         27,921  
 Other.............................................          428    6.13          26,235          414    6.02         24,925  
                                                       ---------              ----------    ---------             ----------  
     Total investment securities...................        2,367    6.11         144,657        3,014    5.50        165,836  
Federal funds sold.................................          229    6.34          14,527          165    4.70          7,754  
Trading account securities.........................            2    2.45              49            3    5.63            169  
Loans (b)(c)(d):                                                                                                              
 Domestic:                                                                                                                    
  Commercial, industrial and other.................        9,338    9.83         917,635        8,222    8.56        703,985  
  Real estate......................................        5,894    8.93         526,163        6,265    8.01        502,048  
  Consumer.........................................        2,764   12.26         338,839        2,572   11.78        302,951  
  Financial institutions...........................          708    7.00          49,594          618    8.02         49,571  
  Factoring receivables............................          543   10.63          57,747          587    9.95         58,389  
  Lease financing..................................          734    7.90          57,988          750    8.27         61,999  
 Foreign...........................................          789    7.05          55,650          587    5.40         31,683  
                                                       ---------              ----------    ---------             ----------  
      Total loans, net of discounts................       20,770    9.65       2,003,616       19,601    8.73      1,710,626  
                                                       ---------              ----------    ---------             ----------  
      Total interest earning assets (d)(e).........    $  25,211    9.04       2,279,538    $  24,303    8.02      1,950,774  
                                                       =========   -----      ----------    =========  ------     ----------  
FUNDING SOURCES                                                                                                               
Interest bearing liabilities (b):                                                                                             
 Deposits in domestic offices (f):                                                                                            
  Commercial.......................................    $     247    5.42          13,382    $     269    3.76         10,125  
  NOW accounts.....................................        1,715    1.09          17,199        1,829     .68         11,470  
  Money Market Accounts............................        3,649    3.25         118,010        3,935    2.12         83,167  
  Consumer savings.................................        2,807    1.95          54,733        3,029    1.49         45,066  
  Consumer certificates............................        5,529    5.17         285,882        4,361    4.28        186,744  
 Time deposits of overseas branches 
  and subsidiaries.................................          944    4.61          43,497          804    3.52         28,286  
                                                       ---------              ----------    ---------             ----------  
      Total interest bearing deposits..............       14,891    3.61         532,703       14,227    2.59        364,858  
                                                       ---------              ----------    ---------             ----------  
 Short-term funds borrowed:                                                                                                   
  Federal funds purchased..........................          758    5.88          44,546          861    4.08         35,162  
  Commercial paper.................................        1,051    5.94          62,459          753    4.24         31,948  
  Other............................................          264    4.80          12,662          314    5.74         18,013  
                                                       ---------              ----------    ---------             ----------  
      Total short-term funds borrowed..............        2,073    5.77         119,667        1,928    4.42         85,123  
                                                       ---------              ----------    ---------             ----------  
 Long-term debt (g)................................        1,814    6.69         121,401        1,657    5.44         90,177  
                                                       ---------              ----------    ---------             ----------  
      Total interest bearing liabilities...........       18,778    4.12         773,771       17,812    3.03        540,158  
Portion of non-interest bearing funding sources....        6,433                                6,491                         
                                                       ---------              ----------    ---------             ----------  
      Total funding sources (e)....................    $  25,211    3.07         773,771    $  24,303    2.22        540,158  
                                                       =========   -----      ----------    =========  ------     ----------  
Net interest income and net interest margin........                 5.97%     $1,505,767                 5.80%    $1,410,616  
                                                                   =====      ==========               ======     ==========  

                                                                      1993                    
                                                       --------------------------------
                                                       Average               Income/    
                                                       balance     Rate      expense    
                                                       ---------   -----   ------------ 
                                                        (000,000)              (000) 
INTEREST EARNING ASSETS                                                              
<S>                                                    <C>          <C>      <C>                                                
Time deposits, principally Eurodollars (a).........    $   1,312    3.38%    $   44,340 
Investment securities (b):                                                              
 U.S. Government...................................        2,759    5.80        159,950                                   
 State and municipal...............................          414    8.28         34,261  
 Other.............................................          410    5.21         21,347  
                                                       ---------             ----------  
     Total investment securities...................        3,583    6.02        215,558  
Federal funds sold.................................          235    3.10          7,282                                     
Trading account securities.........................            2    4.15             83   
Loans (b)(c)(d):                                                                          
 Domestic:                                                                                
  Commercial, industrial and other.................        7,378    8.07        595,114   
  Real estate......................................        6,795    7.89        536,234                                       
  Consumer.........................................        2,399   11.93        286,134    
  Financial institutions...........................          707    6.15         43,475    
  Factoring receivables............................          554    9.62         53,312    
  Lease financing..................................          658    9.06         59,609    
 Foreign...........................................          544    5.01         27,258    
                                                       ---------             ----------    
      Total loans, net of discounts................       19,035    8.41      1,601,136    
                                                       ---------             ----------    
      Total interest earning assets (d)(e).........    $  24,167    7.73      1,868,399    
                                                       =========   -----     ----------    
FUNDING SOURCES                                             
Interest bearing liabilities (b):                          
 Deposits in domestic offices (f):          
  Commercial.......................................    $     419    3.74         15,656      
  NOW accounts.....................................        1,793     .94         15,442       
  Money Market Accounts............................        4,142    2.13         88,061       
  Consumer savings.................................        2,982    1.54         45,792       
  Consumer certificates............................        4,499    4.37        196,614       
 Time deposits of overseas branches                                                           
  and subsidiaries.................................          711    2.57         18,248       
                                                       ---------             ----------       
      Total interest bearing deposits..............       14,546    2.64        379,813       
                                                       ---------             ----------       
 Short-term funds borrowed:                                                                   
  Federal funds purchased..........................        1,129    3.05         34,444       
  Commercial paper.................................          604    3.14         18,982       
  Other............................................          229    5.93         13,575       
                                                       ---------             ----------       
      Total short-term funds borrowed..............        1,962    3.42         67,001       
                                                       ---------             ----------       
 Long-term debt (g)................................        1,455    4.80         69,779       
                                                       ---------             ----------       
      Total interest bearing liabilities...........       17,963    2.88        516,593       
Portion of non-interest bearing funding sources....        6,204                         
                                                       ---------                              
      Total funding sources (e)....................    $  24,167    2.14        516,593      
                                                       =========   -----     ----------      
Net interest income and net interest margin........                 5.59%    $1,351,806
                                                                   =====     ========== 
</TABLE> 

______________________
(a)  Yields and income on time deposits include net Eurodollar trading profits.
(b)  The net impact of interest rate swaps is recognized as an adjustment to 
     interest income or expense of the related hedged asset or liability.
(c)  Yields and income on loans include fees on loans.
(d)  Non-performing loans are included in interest earning assets.
(e)  For the years 1995-1991, 7%, 7%, 7%, 10%, and 9% respectively, of total
     average assets and liabilities are attributed to foreign operations.
(f)  Average balances on time deposits in domestic offices are reduced by
     specified reserve amounts for purposes of rate calculations.
(g)  Rates on long-term debt are based on average balances excluding capital 
     lease obligations 
                                 

                                       81
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES                                  
SUPPLEMENTAL FINANCIAL DATA                                 
CONSOLIDATED AVERAGE BALANCE SHEET AND TAXABLE EQUIVALENT INCOME/EXPENSE AND 
RATES                                    
                                 
<TABLE> 
<CAPTION> 
                                                                       1995                              1994                   
                                                      ------------------------------------  ----------------------------------  
                                                        AVERAGE                INCOME/        Average               Income/     
                                                        BALANCE     RATE       EXPENSE        balance     Rate      expense     
                                                        -------     ----       -------        -------     ----      -------     
                                                       (000,000)                (000)        (000,000)               (000)  
<S>                                                    <C>          <C>        <C>          <C>           <C>       <C> 
NON-INTEREST EARNING ASSETS                                                                                                     
Cash............................................       $  2,118                             $   2,256                          
Allowance for loan losses.......................           (501)                                 (506)                         
Other assets....................................          1,618                                 1,614                          
                                                       --------                             ---------                          
  Total non-interest earning assets.............       $  3,235                             $   3,364                          
                                                       ========                             =========                          
TOTAL AVERAGE ASSETS............................       $ 28,446                             $  27,667                          
                                                       ========                             =========                          
                                                                                                                                
NON-INTEREST BEARING FUNDING SOURCES                                                                                            
Demand deposits:                                                                                                                
  Domestic......................................       $  5,404                             $   5,708                          
  Foreign.......................................            420                                   417                          
Other liabilities...............................          1,535                                 1,460                          
Shareholders' equity............................          2,309                                 2,270                          
Non-interest bearing funding sources used                                                                                       
 to fund earning assets.........................         (6,433)                               (6,491)                         
                                                       --------                             ---------                          
     Total net non-interest bearing                                                                                             
       funding sources..........................       $   3,235                            $   3,364                          
                                                       =========                            =========                          
                                                                                                                                
SUPPLEMENTARY AVERAGES                                                                                                          
Net demand deposits.............................       $   4,569                            $   4,525                          
Net Federal funds purchased.....................             529    5.68%    $ 30,019             696     3.94%    $27,408   
Commercial certificates of deposit in domestic                                                                                  
 offices over $100,000..........................             247    5.08       12,554             261     3.66       9,547    
Average prime rate..............................                    8.84                                  6.60                   
                                                                                                                                
<CAPTION> 
                                                                    1993                                                        
                                                       ----------------------------                                             
                                                        Average             Income/                                               
                                                        balance    Rate     expense                                               
                                                        -------    ----     -------                                               
                                                       (000,000)             (000)                                               
<S>                                                    <C>         <C>      <C> 
NON-INTEREST EARNING ASSETS 
Cash............................................       $  2,263                                                                 
Allowance for loan losses.......................           (457)                                                                
Other assets....................................          1,727                                                                 
                                                       --------                                                                
  Total non-interest earning assets.............       $  3,533                                                                 
                                                       ========                                                                
                                                                                                                                
TOTAL AVERAGE ASSETS............................       $ 27,700                                                                
                                                       ========                                                                
                                                                                                                                
NON-INTEREST BEARING                                                                                                            
 FUNDING SOURCES                                                                                                                
Demand deposits:                                                                                                                
  Domestic......................................       $  5,714                                                                 
  Foreign.......................................            369                                                                 
Other liabilities...............................          1,456                                                                 
Shareholders' equity............................          2,198                                                                 
Non-interest bearing funding sources used                                                                                       
 to fund earning assets.........................                                                                                
                                                         (6,204)                                                                
     Total net non-interest bearing                    --------                                                                
       funding sources..........................       $  3,533                                                                 
                                                       ========                                                                
                                                                                                                                
SUPPLEMENTARY AVERAGES                                                                                                          
Net demand deposits.............................       $  4,579                                                                 
Net Federal funds purchased.....................            894    3.04%    $27,162                                              
Commercial certificates of deposit in domestic                                                                                  
 offices over $100,000..........................            373    3.73      13,908                                              
Average prime rate..............................                   6.00                                                          
</TABLE> 

                                       82
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES                                  
SUPPLEMENTAL FINANCIAL DATA                                 
CONSOLIDATED AVERAGE BALANCE SHEET AND TAXABLE EQUIVALENT INCOME/EXPENSE AND 
RATES: CONTINUED

<TABLE>
<CAPTION> 
                                                                           1992                                 1991              
                                                            ----------------------------------    -------------------------------- 
                                                             Average                 Income/       Average                Income/   
                                                             balance      Rate       expense       balance     Rate       expense   
                                                            ---------     ----       -------      ---------    -----   -----------
                                                            (000,000)                 (000)       (000,000)                (000)
<S>                                                         <C>           <C>     <C>             <C>          <C>     <C>  
INTEREST EARNING ASSETS                                                                                                           
Time deposits, principally Eurodollars (a).............     $  1,435      4.08%   $   58,613      $  1,213     6.52%   $    79,125
Investment securities (b):                                                                                                        
 U.S. Government.......................................        2,321      6.97       161,760         2,061     8.04        165,700
 State and municipal...................................          423      9.40        39,766           466    10.44         48,664
Other..................................................          550      7.82        43,024           671     9.23         61,945
                                                            --------              ----------      --------             ----------- 
      Total investment securities......................        3,294      7.42       244,550         3,198     8.64        276,309
                                                                                                                 
Federal funds sold.....................................          510      4.43        22,611           450     6.40         28,813
Trading account securities.............................            1      7.20            72             1     5.10             51
Loans (b)(c)(d):                                                                                                                  
  Domestic:                                                                                                                       
   Commercial, industrial and other....................        7,234      8.31       601,294         7,993     9.71        776,261
   Real estate.........................................        6,854      8.51       583,562         6,571     9.47        622,340
   Consumer............................................        2,471     12.35       305,193         3,653    14.35        524,058
   Financial institutions..............................          832      6.24        51,903           900     8.71         78,420
   Factoring receivable................................          486      9.70        47,154           480    10.69         51,327
   Lease financing.....................................          562      8.87        49,848           546     9.50         51,876
Foreign................................................          429      6.53        28,018           431     8.68         37,429
                                                            --------              ----------      --------             -----------  
      Total loans, net of discounts....................       18,868      8.83     1,666,972        20,574    10.41      2,141,711
                                                            --------              ----------      --------             ----------- 
      Total interest earning assets (d)(e).............     $ 24,108      8.26     1,992,818      $ 25,436     9.93      2,526,009
                                                            ========     -----    ----------      ========     ----    -----------
FUNDING SOURCES                                                                                                                   
Interest bearing liabilities (b):                                                                                                 
 Deposits in domestic offices (f):                                                                                                
  Commercial...........................................     $    796      4.40        34,996      $  1,466     6.42         94,181
  NOW accounts.........................................        1,671      2.44        36,858         1,444     4.54         58,450
  Money Market Accounts................................        4,225      2.89       122,086         3,947     4.91        193,621
  Consumer savings.....................................        2,612      2.74        71,495         2,024     4.62         93,408
  Consumer certificates................................        5,446      5.08       276,701         6,449     6.73        433,790
 Time deposits of overseas branches                                                                                               
   and subsidiaries....................................          756      3.75        28,319         1,227     6.27         76,929
                                                            --------              ----------      --------             -----------
      Total interest bearing deposits..................       15,506      3.72       570,455        16,557     5.79        950,379
                                                            --------              ----------      --------             -----------
 Short-term funds borrowed:                                                                                                       
   Federal funds purchased.............................          990      3.41        33,735         1,321     5.58         73,742
   Commercial paper....................................          539      3.72        20,030           791     6.28         49,657
   Other...............................................          128      5.25         6,715           700     6.89         48,206
                                                            --------              ----------      --------             -----------
      Total short-term funds borrowed..................        1,657      3.65        60,480         2,812     6.10        171,605
                                                            --------              ----------      --------             -----------
 Long-term debt (g)....................................        1,312      6.06        78,425         1,168     7.86         90,363
                                                            --------              ----------      --------             -----------
      Total interest bearing liabilities...............       18,475      3.84       709,360        20,537     5.90      1,212,347
Portion of non-interest bearing funding sources........        5,633                                 4,899                       
                                                            --------                              --------                        
      Total funding sources (e)........................     $ 24,108      2.94       709,360      $ 25,436     4.77      1,212,347
                                                            ========      ----    ----------      ========     ----    -----------
Net interest income and net interest margin............                   5.32%   $1,283,458                   5.16%   $ 1,313,662
                                                                          ====    ==========                   ====    =========== 
</TABLE> 

(a)  Yields and income on time deposits include net Eurodollar trading profits.
(b)  The net impact of interest rate swaps is recognized as an adjustment to 
     interest income or expense of the related hedged asset or liability.
(c)  Yields and income on loans include fees on loans.
(d)  Non-performing loans are include in interest earning assets.
(e)  For the years 1995-1991, 7%, 7%, 7%, 10%, and 9%, respectively, of total 
     average assets and liabilities are attributed to foreign operations.
(f)  Average balances on time deposits in domestic offices are reduced by 
     specified reserve amounts for purposes of rate calculations.
(g)  Rates on long-term debt are based on average balances excluding capital 
     lease obligations.

                                       83
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA
CONSOLIDATED AVERAGE BALANCE SHEET AND TAXABLE EQUIVALENT INCOME/EXPENSE AND
 RATES: CONTINUED
 
<TABLE>
<CAPTION> 
                                                      1992                             1991
                                          ---------------------------   --------------------------------
                                           Average           Income/      Average               Income/
                                           balance    Rate   expense      balance      Rate     expense
                                           -------    ----   -------      -------      ----     -------
<S>                                       <C>         <C>    <C>        <C>           <C>      <C>
                                          (000,000)            (000)     (000,000)                (000)
NON-INTEREST EARNING ASSETS
Cash....................................  $  2,114                       $  1,973
Allowance for loan losses...............      (463)                          (512)
Other assets............................     1,795                          1,746
                                          ---------                       --------
      Total non-interest earning assets.  $  3,446                        $ 3,207
                                          =========                       ========
 
TOTAL AVERAGE ASSETS....................  $ 27,554                        $28,643
                                          =========                       ========
 
NON-INTEREST BEARING FUNDING SOURCES
Demand deposits:
  Domestic..............................  $  5,437                        $ 4,752
  Foreign...............................       324                            308
Other liabilities.......................     1,368                          1,184
Shareholders' equity....................     1,950                          1,862
Non-interest bearing funding sources
 used to fund earning assets............    (5,633)                        (4,899)
                                          ---------                       --------
     Total net non-interest bearing
         funding sources................  $  3,446                       $  3,207
                                          =========                       ========
 
SUPPLEMENTARY AVERAGES
Net demand deposits.....................  $  3,998                        $ 3,306
Net Federal funds purchased.............       480    2.32%  $11,124          871      5.16%    $44,929
Commercial certificates of deposit in
 domestic offices over $100,000.........       702    4.38    30,739        1,310      6.47      84,812
Average prime rate......................              6.25                             8.46
</TABLE>

                                       84
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED
CONDENSED CONSOLIDATED STATEMENT OF INCOME
 AND SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                   --------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF INCOME            1995             1994             1993           1992           1991
                                                   ----------       ----------       ----------     ----------     ----------
<S>                                                <C>              <C>              <C>            <C>            <C>
Interest income and fees........................   $2,262,305       $1,929,527       $1,841,864     $1,961,838     $2,485,277
Interest expense................................      773,771          540,158          516,593        709,360      1,212,367
                                                   ----------       ----------       ----------     ----------     ----------
   Net interest income..........................    1,488,534        1,389,369        1,325,271      1,252,478      1,272,910
Provision for losses on loans...................      105,000          246,900          121,201        160,250        291,261
                                                   ----------       ----------       ----------     ----------     ----------
   Net interest income after
     provision for losses on loans..............    1,383,534        1,142,469        1,204,070      1,092,228        981,649
Non-interest income.............................      605,666          567,540          574,030        610,664        615,565
Non-financial expenses..........................    1,274,398        1,317,561        1,241,862      1,306,593      1,319,465
                                                   ----------       ----------       ----------     ----------     ----------
Income before income taxes......................      714,802          392,448          536,238        396,299        277,749
Provision for income taxes......................      262,565          143,656          173,809        128,165         97,432
                                                   ----------       ----------       ----------     ----------     ----------
Income before cumulative
 effect of a change in accounting
  principle.....................................      452,237          248,792          362,429        268,134        180,317
Cumulative effect of a change in
  accounting principle, net of tax..............          -             (3,430)         (13,010)       (84,946)           -
                                                   ----------       ----------       ----------     ----------     ----------
Net income......................................   $  452,237       $  245,362       $  349,419     $  183,188     $  180,317
                                                   ==========       ==========       ==========     ==========     ==========

PER COMMON SHARE DATA:
 Income before cumulative effect of a
  change in accounting principle................        $3.22(a)         $1.75(b)         $2.49          $1.97          $1.35
 Net income.....................................         3.22(a)          1.73(b)          2.40           1.35           1.35
 Dividends paid.................................         1.36             1.20             1.11           1.00           0.96
 Dividends declared.............................         1.44             1.24             1.14           1.02           0.97
Average common shares outstanding...............      140,600          142,498          145,398        135,813        133,237


OPERATING RATIOS:
 Income before cumulative effect of a change in
  accounting principle as a percent of:
    Average common shareholders equity..........        19.59(a) %       10.96(b)%        16.49%          13.7%          9.68%
    Average total assets........................         1.59(a)          0.90(b)          1.31           0.97           0.63
Average total shareholders equity as a percent of
  average total assets..........................         8.12             8.20             7.94           7.08           6.50
Dividends declared as a percent of income from
  continuing operations.........................        44.72(a)         70.86(b)         45.78          51.78          71.85

FULL TIME EQUIVALENT STAFF......................       13,598           15,076           16,017         16,271         16,571
</TABLE>

______________________
(a)  Includes the impact of an after-tax net restructuring charge of $62.5
     million, or $0.44 per share and an after-tax gain of $0.08 per share
     related to a change in ownership interests in a joint venture. Excluding
     the impact of these items, net income per common share was $3.58, return on
     average common shareholders' equity was 21.78%, and return on average total
     assets was 1.77%.

(b)  Includes the impact of after-tax merger-related charges of $0.89 per share
     recorded for the acquisition of Constellation Bancorp and $0.28 per share
     recorded for the acquisition of Independence Bancorp, Inc. Excluding the
     impact of these merger-related charges, per share income before the
     cumulative effect of a change in accounting principle was $2.92, return on
     average common shareholders' equity was 18.34%, and return on average total
     assets was 1.50% (see Note 2 to the Financial Statements).

                                       85
<PAGE>
 
CORESTATES FINANCIAL CORP AND
SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA: CONTINUED
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                     -----------------------------------------------------------------------
                                                         1995           1994           1993          1992            1991
                                                     -----------    -----------    -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>            <C>            <C>  
ASSETS
Cash and due from banks.........................     $ 2,755,636    $ 2,262,512    $ 2,521,676    $ 2,510,001    $ 2,210,383
Time deposits, principally Eurodollars..........       1,841,799      1,750,458      1,319,457      1,815,394      1,673,553
Federal funds sold..............................         594,868        731,820        161,527        266,890        376,300
Trading account securities......................           1,336          1,206          6,393          2,796          1,255
Investment securities...........................       1,990,332      2,880,631      3,599,166      3,588,348      3,298,107
Loans...........................................      21,046,535     20,526,216     19,776,258     18,940,402     19,418,084
Allowance for loan losses.......................        (495,075)      (500,631)      (450,823)      (442,267)      (473,301)
Due from customers on acceptances...............         549,557        342,211        332,234        632,976        212,024
Premises, equipment and other assets............       1,335,628      1,330,713      1,168,729      1,418,177      1,467,492
                                                     -----------    -----------    -----------    -----------    -----------
     Total assets...............................     $29,620,616    $29,325,136    $28,434,617    $28,732,717    $28,183,897
                                                     ===========    ===========    ===========    ===========    ===========

LIABILITIES
Deposits:
  Domestic:
   Non-interest bearing.........................     $ 6,700,599    $ 6,362,470    $ 6,649,367    $ 6,460,415    $ 5,930,296
   Interest bearing.............................      13,661,766     14,565,051     13,686,027     14,446,043     15,147,941
  Overseas branches and subsidiaries............       1,140,068      1,113,365        796,902        766,119        839,327
                                                     -----------    -----------    -----------    -----------    -----------
     Total deposits.............................      21,502,433     22,040,886     21,132,296     21,672,577     21,917,564
Short-term funds borrowed.......................       2,091,722      1,546,201      1,884,125      1,904,044      2,069,451
Bank acceptances outstanding....................         549,048        336,103        337,180        635,544        213,613
Other liabilities...............................       1,399,660      1,260,722      1,123,342      1,068,395        814,888
Long-term debt..................................       1,698,334      1,791,110      1,589,290      1,357,598      1,240,970
                                                     -----------    -----------    -----------    -----------    -----------
     Total liabilities..........................      27,241,197     26,975,022     26,066,233     26,638,158     26,256,486
                                                     -----------    -----------    -----------    -----------    -----------

SHAREHOLDERS' EQUITY
Preferred.......................................          -              -              -              -              -
Common..........................................       2,379,419      2,350,114      2,368,384      2,094,559      1,927,411
                                                     -----------    -----------    -----------    -----------    -----------
     Total shareholders' equity.................       2,379,419      2,350,114      2,368,384      2,094,559      1,927,411
                                                     -----------    -----------    -----------    -----------    -----------
     Total liabilities and
         shareholders equity....................     $29,620,616    $29,325,136    $28,434,617    $28,732,717    $28,183,897
                                                     ===========    ===========    ===========    ===========    ===========
Book value per common share.....................          $17.24         $16.22         $16.29         $14.48         $14.40
                                                          ======         ======         ======         ======         ======
</TABLE>

                                       86
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED


RATE/VOLUME ANALYSIS TAXABLE EQUIVALENT BASIS
(in thousands)

<TABLE> 
<CAPTION> 
                                                           1995 VS. 1994                         1994 vs. 1993
                                               -------------------------------------  -----------------------------------
                                                 INCREASE (DECREASE) IN INTEREST        Increase (decrease) in interest
                                               -------------------------------------  -----------------------------------
                                                 INCOME/     CHANGE ATTRIBUTABLE TO    Income/     Change attributable to
                                                             -----------------------              -----------------------
                                                 EXPENSE       VOLUME        RATE      expense      Volume        Rate
                                               -----------   ----------   ----------  ---------   ----------   ----------
<S>                                            <C>           <C>          <C>         <C>         <C>          <C> 
INTEREST EARNING ASSETS
-----------------------
Time deposits, principally
  Eurodollars................................   $ 50,300     $ 14,115      $ 36,185    $ 22,049     $  7,030     $ 15,019
Investment securities........................    (21,179)     (34,857)       13,678     (49,722)     (34,241)     (15,481)
Federal funds sold...........................      6,773        3,008         3,765         472       (2,170)       2,642
Trading account securities...................       (120)         (56)          (64)         86           42           44
Loans:
   Domestic..................................    269,023       99,464       169,559     105,065       52,969       52,096
   Foreign...................................     23,967       10,908        13,059       4,425        2,154        2,271
                                                --------     --------      --------    --------     --------     --------
      Total interest income..................    328,764       92,582       236,182      82,375       25,784       56,591
                                                --------     --------      --------    --------     --------     --------

INTEREST BEARING FUNDS
----------------------
Deposits:
  Domestic...................................    152,634       38,958       113,676     (24,993)     (14,796)     (10,197)
  Overseas...................................     15,211        4,928        10,283      10,038        2,390        7,648
Short-term funds borrowed:                       
  Federal funds purchased....................      9,384       (4,202)       13,586         718       (8,174)       8,892
  Other......................................     25,160        9,765        15,395      17,404        9,720        7,684
Long-term debt...............................     31,224        8,541        22,683      20,398        9,696       10,702
                                                --------     --------      --------    --------     --------     --------
      Total interest expense.................    233,613       57,990       175,623      23,565       (1,164)      24,729
                                                --------     --------      --------    --------     --------     --------

NET INTEREST INCOME..........................   $ 95,151     $ 34,592      $ 60,559    $ 58,810     $ 26,948     $ 31,862
-------------------                             ========     ========      ========    ========     ========     ========
</TABLE>

NOTES TO RATE/VOLUME ANALYSIS

Changes in interest income or expense not arising solely as a result of volume
or rate variances are allocated to rate variances due to the interest
sensitivity of consolidated assets and liabilities.

Included in interest income is $58.7 million, $66.2 million, $62.1 million of
loan fees for the years ended 1995, 1994 and 1993, respectively.

Non-performing loans are included in interest earning assets.

The changes in interest expense on domestic deposits attributable to volume and
rate are adjusted by specific reserves as average balances are reduced by such
reserve amounts for purposes of rate calculations.

                                       87
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED


LOAN PORTFOLIO

The following are summaries of certain loan categories, net of unearned
discounts, for the five years ended December 31, 1995 (in thousands):

<TABLE>
<CAPTION>
                                                 1995            1994             1993             1992             1991
                                             ------------    ------------     ------------     ------------     ------------
<S>                                          <C>             <C>              <C>              <C>              <C>
Domestic loans:                                                                                            
  Commercial, industrial and other......      $ 9,440,727     $ 8,688,733      $ 7,879,451      $ 7,354,666      $ 7,503,223
                                              -----------     -----------      -----------      -----------      -----------
  Real estate loans:                                                                                       
    Construction and development........          366,576         331,369          367,364          501,404          754,089
    Residential.........................        2,571,788       3,180,227        3,121,008        3,314,111        3,106,984
    Other, primarily commercial                                                                            
     mortgages and commercial loans 
      secured by owner-occupied                                                                      
      real estate.......................        2,577,755       2,979,053        3,175,284        3,212,582        2,984,798
                                              -----------     -----------      -----------      -----------      -----------
        Total real estate loans.........        5,516,119       6,490,649        6,663,656        7,028,097        6,845,871
                                              -----------     -----------      -----------      -----------      -----------
  Consumer loans:                                                                                          
    Installment.........................        1,331,442       1,386,776        1,356,633        1,379,760        1,762,210
    Credit card.........................        1,546,900       1,374,598        1,178,972          957,168          979,327
                                              -----------     -----------      -----------      -----------      -----------
        Total consumer loans............        2,878,342       2,761,374        2,535,605        2,336,928        2,741,537
                                              -----------     -----------      -----------      -----------      -----------
  Financial institutions................          950,943         668,119          870,489          783,125          996,500
  Factoring receivables.................          557,272         622,380          555,211          454,244          402,752
  Lease financing.......................          737,631         710,338          728,764          583,187          536,836
                                              -----------     -----------      -----------      -----------      -----------
         Total domestic loans...........       20,081,034      19,941,593       19,233,176       18,540,247       19,026,719
                                              -----------     -----------      -----------      -----------      -----------
Foreign loans:                                                                                             
  Loans to or guaranteed by foreign                                                                        
    banks:                                                                                                 
      Government owned and central                                                                         
        banks...........................             -               -                -                 257            1,506
      Other foreign banks...............          614,901         300,590          332,149          203,103          130,308
                                              -----------     -----------      -----------      -----------      -----------
                                                  614,901         300,590          332,149          203,360          131,814
  Commercial and industrial.............          350,600         274,720          210,573          196,795          242,098
  Loans to other financial institutions.             -              9,313              360             -              17,453
                                              -----------     -----------      -----------      -----------      -----------
        Total foreign loans.............          965,501         584,623          543,082          400,155          391,365
                                              -----------     -----------      -----------      -----------      -----------
                Total loans.............      $21,046,535     $20,526,216      $19,776,258      $18,940,402      $19,418,084
                                              ===========     ===========      ===========      ===========      ===========
</TABLE>

                                       88
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED

RISK ELEMENT DATA:

FOREIGN OUTSTANDINGS - (IN THOUSANDS)

While the associated risks are clearly recognized, international lending is a
part of the Corporation's wide range of international services. It is the
Corporation's intent to remain involved in providing the international financial
services needed for the increasingly global competition faced by customers.  At
December 31, 1995, 1994 and 1993, there were no aggregate foreign outstandings
(defined as loans, investments, acceptances and time deposits) to borrowers in a
foreign country that exceeded 1% of total assets. Outstandings below 1%, but
over .75% of total assets were $239,000 in France and $232,000 in Germany at
December 31, 1995, and $223,000 in the United Kingdom at December 31, 1994.
There were no outstandings below 1%, but over .75% at December 31, 1995.

                                       89
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED

NON-PERFORMING ASSETS

The following represents the Corporation's non-accrual loans, renegotiated loans
and other real estate owned for the five years ended December 31, 1995 (in
thousands):

<TABLE>
<CAPTION>
                                       1995         1994         1993         1992         1991    
                                    ----------   ----------   ----------   ----------   ---------- 
<S>                                 <C>          <C>          <C>          <C>          <C>        
NON-ACCRUAL LOANS                                                                                  
Domestic.........................    $ 143,240    $ 244,406    $ 246,512    $ 411,120    $ 565,644  
Foreign..........................         -             158          171        3,047        8,797  
                                     ---------    ---------    ---------    ---------    ---------  
     Total non-accrual loans.....      143,240      244,564      246,683      414,167      574,441  
                                     ---------    ---------    ---------    ---------    ---------  
RENEGOTIATED LOANS (a)...........        1,615        1,657       56,457       63,074       46,611  
                                     ---------    ---------    ---------    ---------    ---------  
     Total non-performing loans..      144,855      246,221      303,140      477,241      621,052  
                                     ---------    ---------    ---------    ---------    ---------  
OTHER REAL ESTATE OWNED (OREO)...       26,647       64,663      135,528      194,312      181,546  
                                     ---------    ---------    ---------    ---------    ---------  
Total non-performing assets......    $ 171,502    $ 310,884    $ 438,668    $ 671,553    $ 802,598  
                                     =========    =========    =========    =========    =========  
                                                                                                   
Non-performing assets as a                                                                         
  percentage of loans plus OREO..        0.81%        1.51%        2.20%        3.51%        4.09% 
                                         ====         ====         ====         ====         ====
                                                                                                   
Non-performing assets as a                                                                         
  percentage of total assets.....        0.58%        1.06%        1.54%        2.34%        2.85% 
                                         ====         ====         ====         ====         ====
</TABLE> 

_______________________
(a)  There were no foreign renegotiated loans in any periods presented.

The following reflects the effect of non-accrual and renegotiated loans on both
interest income and net interest income for the three years ended December 31,
1995 (in thousands):

<TABLE>
<CAPTION>
                                               1995        1994        1993      
                                             --------    --------    -------- 
<S>                                          <C>         <C>         <C>      
Interest income which would have been                                        
 recorded in accordance with original                                                                    
 terms:                                           
 Domestic...............................     $ 19,022    $ 25,347    $ 30,838 
 Foreign................................            8           9          38 
                                             --------    --------    -------- 
  Total.................................       19,030      25,356      30,876 
                                             --------    --------    -------- 
Interest income reflected in total                                           
 operating income:        
 Domestic...............................       13,509      12,003      17,300 
 Foreign................................            -           -           - 
                                             --------    --------    -------- 
  Total.................................       13,509      12,003      17,300 
                                             --------    --------    -------- 
                                                                             
Net reduction in interest income and                                         
 net interest income....................     $  5,521    $ 13,353    $ 13,576 
                                             ========    ========    ======== 
</TABLE>


ACCRUING LOANS PAST DUE 90 DAYS OR MORE

Accruing loans 90 days or more past due as to payment of interest or principal
for the five years ended December 31, 1995 were as follows (in thousands):

<TABLE>
<CAPTION>
                                              1995        1994        1993        1992         1991
                                            --------    --------    --------    --------    ---------
<S>                                         <C>         <C>         <C>         <C>         <C>
Total (a)...............................    $58,942     $53,104     $53,524     $95,866     $110,143
                                            =======     =======     =======     =======     ========
</TABLE> 
 
______________________
(a)  There were no foreign loans past due 90 days or more in any periods
     presented.

                                       90
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED


CONSOLIDATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the distribution of loan charge-offs and
recoveries by type of loan for the five years ended December 31, 1995 (in
thousands):

<TABLE>
<CAPTION>
                                                           1995       1994         1993         1992          1991
                                                        ---------   --------    ---------    ---------     ---------
<S>                                                     <C>         <C>         <C>          <C>            <C>
Balance at beginning of year:                                                               
Domestic............................................    $480,631    $440,823    $432,267     $463,301       $495,775
Foreign.............................................      20,000      10,000      10,000       10,000         16,513
                                                        --------    --------    --------     --------       --------
                                                         500,631     450,823     442,267      473,301        512,288
                                                        --------    --------    --------     --------       --------
                                                                                            
Allowance for loans purchased  at date of purchase:                                         
    Domestic........................................           -      23,763       2,703        1,028              -
                                                        --------    --------    --------     --------       --------
                                                                                            
Allowance for loans sold at date of sale:                                                   
    Domestic........................................           -           -           -      (14,700)       (27,486)
    Foreign.........................................           -           -        (353)           -              -
                                                        --------    --------    --------     --------       --------
                                                               -           -        (353)     (14,700)       (27,486)
                                                        --------    --------    --------     --------       --------
Recoveries, by type of loan:                                                                
    Domestic:                                                                               
      Commercial, industrial and other..............      31,637      25,893      45,207       25,865         26,636
      Real estate...................................      19,087      13,596       8,470        6,438          5,874
      Consumer......................................      17,393      20,300      18,170       21,852         20,729
      Financial institutions........................         231         654       2,246        2,776          1,966
      Foreign.......................................         293       2,616      12,645       13,138         26,586
                                                        --------    --------    --------     --------       --------
        Total recoveries............................      68,641      63,059      86,738       70,069         81,791
                                                        --------    --------    --------     --------       --------
                                                                                            
Charge-offs, by type of loan:                                                               
    Domestic:                                                                               
      Commercial, industrial and other..............      45,555     101,313      91,785      103,000        136,363
      Real estate...................................      47,934     126,189      59,191       69,896         99,650
      Consumer......................................      83,656      56,371      49,941       71,585        130,981
      Financial institutions........................       2,052          41         816        3,195         14,669
    Foreign.........................................           -           -           -            5          2,890
                                                        --------    --------    --------     --------       --------
        Total loans charged off.....................     179,197     283,914     201,733      247,681        384,553
                                                        --------    --------    --------     --------       --------
                                                                                            
Total net charge-offs...............................     110,556     220,855     114,995      177,612        302,762
                                                        --------    --------    --------     --------       --------
                                                                                            
Provision charged to operating expense:                                                     
    Domestic........................................     100,293     239,516     133,493      173,383        321,470
    Foreign.........................................       4,707       7,384     (12,292)(a)  (13,133)(a)    (30,209)(a)
                                                        --------    --------   ---------    ---------      ---------
                                                         105,000     246,900     121,201      160,250        291,261
                                                        --------    --------    --------     --------       --------
Balance at end of year:                                                                     
    Domestic........................................     470,075     480,631     440,823      432,267        463,301
    Foreign.........................................      25,000      20,000      10,000       10,000         10,000
                                                        --------    --------    --------     --------       --------
                                                        $495,075    $500,631    $450,823     $442,267       $473,301
                                                        ========    ========    ========     ========       ========
RATIOS
Net charge-offs as a percentage
  of average loans outstanding......................        0.53%       1.13%       0.60%        0.94%          1.47%
                                                            ====        ====        ====         ====           ====
Allowance for loan losses as a
  percentage of year-end loans......................        2.35%       2.44%       2.28%        2.34%          2.44%
                                                            ====        ====        ====         ====           ====
</TABLE> 

________________________
(a) Reflects reallocation of the foreign allowance for loan losses to the
    domestic allowance for loan losses.

                                      91

<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA:  CONTINUED

DISTRIBUTION OF ALLOWANCE FOR LOAN LOSSES (a)

The distribution of the allowance for loan losses and the percentage of each
loan type to total loans for the five years ended December 31, 1995 is
illustrated in the table below (in millions):

December 31,

<TABLE> 
<CAPTION> 
                                                1995                           1994                           1993  
                                     ---------------------------   ----------------------------    --------------------------
                                                           %                              %                             %     
                                                        OF LOAN                        OF LOAN                       OF LOAN  
                                                        CATEGORY                       CATEGORY                      CATEGORY 
                                                           TO                             TO                            TO    
                                                          TOTAL                          TOTAL                         TOTAL   
                                     ALLOWANCE            LOANS       ALLOWANCE          LOANS        ALLOWANCE        LOANS   
                                     ---------          --------      ---------        --------       ---------      -------- 
<S>                                  <C>                <C>           <C>              <C>            <C>            <C> 
Loan type                 
---------
Domestic:                 
  Commercial and industrial            $230.0              47%          $212.9             45%         $208.3           42% 
  Real estate:                                                                                                              
     Construction..........              30.0               2             55.9              2            69.0            2  
     Other.................              70.0              24             79.9             30            63.4           32  
  Consumer.................             120.5              14            101.9             13            83.1           13  
  Other domestic loans.....              19.6               8             30.0              7            17.0            8  
Foreign....................              25.0               5             20.0              3            10.0            3  
                                       ------             ---           ------            ---          ------          ---  
     Total.................            $495.1             100%          $500.6            100%         $450.8          100% 
                                       ======             ===           ======            ===          ======          ===  

<CAPTION> 
                                                 1992                           1991
                                     ---------------------------    ---------------------------
                                                           %                              %                 
                                                        OF LOAN                        OF LOAN     
                                                        CATEGORY                       CATEGORY    
                                                           TO                             TO       
                                                          TOTAL                          TOTAL      
                                     ALLOWANCE            LOANS       ALLOWANCE          LOANS      
                                     ---------          --------      ---------        --------    
<S>                                  <C>                <C>           <C>              <C>       
Loan type                 
---------
Domestic:                 
  Commercial and industrial            $206.7              42%          $238.1             41%
  Real estate:                                                                               
     Construction..........              94.7               3             88.0              4
     Other.................              36.9              34             45.5             31
  Consumer.................              73.8              12             79.6             14
  Other domestic loans.....              20.2               7             12.1              8
Foreign....................              10.0               2             10.0              2
                                       ------             ---           ------            ---
     Total.................            $442.3             100%          $473.3            100%
                                       ======             ===           ======            === 
</TABLE> 

________________
(a) This portfolio. distribution is made for analytical purposes. It does not
    represent specific allocations of the allowance. The total allowance is
    available to absorb losses from any segment of the portfolio.
 
COMMERCIAL CERTIFICATES OF DEPOSIT OVER $100,000 ISSUED BY DOMESTIC OFFICES
(in thousands)

<TABLE> 
<CAPTION> 
                                               DECEMBER 31,
                              ----------------------------------------------
                                        1995                     1994    
                              ---------------------     --------------------
                                AMOUNT      PERCENT       AMOUNT     PERCENT
                                ------      -------       ------     -------
<S>                           <C>           <C>         <C>        <C> 
MATURITY DISTRIBUTION
3 months or less...........   $177,411         80.6%    $225,348        84.0%
3 through 6 months.........     17,531          8.0       24,016         8.9
6 through 12 months........     15,808          7.2       16,432         6.1
Over 12 months.............      9,282          4.2        2,606         1.0
                              --------        -----     --------       -----
   Total...................   $220,032        100.0%    $268,402       100.0%
                              ========        =====     ========       =====
</TABLE> 
 

                                       92
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED
 
INTEREST SENSITIVITY ANALYSIS AT DECEMBER 31, 1995
(in millions)

<TABLE> 
<CAPTION> 
                                                                       Rate Maturity Period                               
                                             --------------------------------------------------------------------
                                                1-90       91-181     182-365      1-2        2-5   greater than 5
                                                Days        Days       Days       Years      Years       Years       Total
                                              --------    -------    --------   -------      -----       -----     -------
<S>                                           <C>         <C>        <C>        <C>          <C>         <C>       <C>  
EARNING ASSETS
Federal funds sold, resale agreements and
   trading account securities...............  $   596                                                              $    596
Time deposits...............................      996     $    408   $    438                                         1,842
Investment securities.......................      452          155        381      $  430    $   439     $   133      1,990
Interest rate swaps.........................      862          812      1,279       1,125      2,788         906      7,771
Asset financial futures.....................        -           15        383          21          -           -        419
                                              -------     --------   --------      ------    -------     -------   --------
     Total discretionary assets.............    2,906        1,390      2,481       1,576      3,227       1,039     12,619
Total loans(a)..............................   15,030        1,240      1,076       1,432      1,871         396     21,046
                                              -------     --------   --------      ------    -------     -------   --------
Total earning assets........................   17,936        2,630      3,558       3,009      5,097       1,435     33,665
                                              -------     --------   --------      ------    -------     -------   --------

FUNDING SOURCES
Federal funds purchased, repurchase
   agreements and other short-term funds
   borrowed.................................    1,990          102          -           -          -           -      2,092
Domestic and foreign time deposits(b).......    1,312           18         12           1          5           -      1,348
Long-term debt..............................    1,023           20         21           2          7         625      1,698
Interest rate swaps.........................    7,246           25        200          71        224           4      7,771
Liability financial futures.................      167          237         15           -          -           -        419
                                              -------     --------   --------      ------    -------     -------   --------
     Total discretionary liabilities........   11,738          402        248          74        236         630     13,327
                                              -------     --------   --------      ------    -------     -------   --------
Savings certificates........................    1,382          933      1,724         599        453         255      5,347
Money market, savings and NOW accounts(c)...    2,347          584      1,008       1,672      2,497           -      8,108
Net non-interest bearing funds(d)(e)........    3,070            -          -           -          -       3,813      6,883
                                              -------     --------   --------      ------    -------     -------   --------
  Total savings certificates and
   indefinite
     maturity liabilities...................    6,800        1,516      2,732       2,271      2,950       4,068     20,337
                                              -------     --------   --------      ------    -------     -------   --------
Total net funding sources...................   18,538        1,919      2,980       2,345      3,185       4,698     33,665
                                              -------     --------   --------      ------    -------     -------   --------

Period gap..................................     (602)         711        577         664      1,912      (3,263)        -0-
Cumulative gap..............................     (602)         110        687       1,351      3,263           -         -0-
Adjustments(f)..............................      727         (726)      (586)       (656)    (1,977)      3,217         -0-
                                              -------     --------   --------      ------    -------     -------   --------
Adjusted period gap.........................  $   125     $    (14)  $     (9)     $    8    $   (64)    $   (46)  $     -0-
                                              =======     ========   ========      ======    =======     =======   ========
Cumulative gap..............................  $   125     $    111   $    102      $  110    $    46     $    -0-  $     -0-
                                              =======     ========   ========      ======    =======     =======   ========
</TABLE>

Notes to interest sensitivity analysis:

(a) Non-performing loans are included in 1-90 days.
(b) Deposit volumes exclude time deposits not at interest.
(c) Adjustments to the interest sensitivity of savings and NOW account balances
    reflect managerial assumptions based on historical experience, simulation
    results as to the behavior of both the balances and rates on these products
    in potential future rate environments and CoreStates' intent for positioning
    these products.
(d) Net non-interest bearing funds is the sum of non-interest bearing
    liabilities and shareholders' equity minus non-interest earning assets.
(e) The estimated volume of stable net non-interest bearing funds is allocated
    to the over 1 year interest sensitivity period. Allocations to the under 1
    year periods include: estimated volumes that are expected to vary inversely
    with interest rates; and the temporary difference between the actual volume
    of total net non-interest bearing funds on December 31, 1995 and the trend
    volume at the current level of interest rates.
(f) Adjustments reflect managerial assumptions as to the appropriate investment
    maturities for non-interest bearing funding sources, along with the funding
    of current investment and loan commitments.

                                       93
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA:  CONTINUED

LOAN MATURITY AND INTEREST SENSITIVITY, NET OF UNEARNED DISCOUNTS


The contractual maturity of loans outstanding at December 31, 1995 was as
follows (in thousands):

<TABLE>
<CAPTION>
                                                               Due after one
                                                 Due in one    year through    Due after
                                                year or less    five years     five years      Total
                                                ------------   -------------   ----------    ----------
<S>                                             <C>            <C>             <C>          <C>
Commercial, industrial and other loans........   $ 8,941,922    $1,652,337      $354,683    $10,948,942
                                                 -----------    ----------      --------    -----------
Real estate loans:
Construction and development..................       209,826       117,896        38,854        366,576
Other, primarily permanent commercial
                      mortgages...............       965,932     1,247,158       446,908      2,659,998
                                                 -----------    ----------      --------    -----------
      Total real estate loans.................     1,175,758     1,365,054       485,762      3,026,574
                                                 -----------    ----------      --------    -----------
Foreign loans.................................       913,874        43,646         7,981        965,501
                                                 -----------    ----------      --------    -----------
 Total loans (excluding loans to
  individuals)(a).............................   $11,031,554    $3,061,037      $848,426    $14,941,017
                                                 ===========    ==========      ========    ===========
</TABLE>

_________________________
(a) Loans due after one-year totaling $2,187,140 have fixed interest rates. The
    remaining 43% of such loans or $1,647,254 have floating or adjustable rates.

                                       94
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA: CONTINUED

INVESTMENT SECURITIES
(in thousands)
 
CARRYING VALUE AT DECEMBER 31,

<TABLE> 
<CAPTION> 
                                               1995(a)          1994(a)        1993(a)  
                                            -----------      -----------    -----------
<S>                                         <C>              <C>            <C>        
U.S. Treasury...........................     $  564,429       $  914,009     $  972,076
U.S. Government agencies and                                                           
     corporations.......................        750,364        1,246,780      1,767,212
State and municipal.....................        236,322          306,117        356,438
Other...................................        439,217          413,725        503,440
                                             ----------       ----------     ----------
    Total...............................     $1,990,332       $2,880,631     $3,599,166
                                             ==========       ==========     ========== 
</TABLE> 

_____________________
(a) Held-to-maturity and available-for-sale portfolios combined.
 

MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD AT DECEMBER 31, 1995(a)

<TABLE> 
<CAPTION> 
                                                            
                                                            U.S. Government                                   Total          
                                                             Agencies and    State and               -----------------------
                                           U.S. Treasury     Corporations    Municipal     Other         Amount     Yield(b)
                                           -------------   ---------------   ---------    -------    -------------  --------
<S>                                        <C>             <C>              <C>          <C>          <C>           <C> 
1 year or less..........................     $  262,139       $  244,245    $  90,957     $  22,884     $  620,225    6.21%
1 year through 5 years..................        301,933          335,616      106,975        69,490        814,014    6.15%
5 years through 10 years................            357           75,522       16,767        76,849        169,495    6.53%
After 10 years..........................              -           94,981       21,623       269,994        386,598    6.39%
                                             ----------       ----------   ----------    ----------     ----------
     Total..............................     $  564,429       $  750,364   $  236,322    $  439,217     $1,990,332    6.25%
                                             ==========       ==========   ==========    ==========     ==========
</TABLE>

_______________________
(a) Held-to-maturity and available-for-sale portfolios combined.
(b) The weighted average yield has been computed on a tax equivalent basis using
    an effective tax rate of 35%. The amount of the tax equivalent adjustment by
    range of maturity is as follows: 1 year or less - $2,371; 1 year to 5 
    years-$2,888; 5 years to 10 years - $482 and after 10 years - $3,188.

                                       95
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
GRAPHICS APPENDIX LIST TO EXHIBIT 13


Narrative description of graphs from the Management's Discussion and Analysis of
Financial Condition and Results of Operations:

<TABLE>
<CAPTION>
               EDGAR VERSION                                   TYPESET VERSION                          
               -------------                                   ---------------                          
<S>                                               <C>                                                     
Page 14 contains the plotting points for the      Page 16                                                 
AVERAGE COMMON EQUITY TO ASSETS GRAPH             The Average Common Equity to Assets graph is a          
                                                  five year, vertical bar graph with the years 1991,      
                                                  1992, 1993, 1994 and 1995 listed along the x axis.      
                                                  Lines numbering 0 to 9 are drawn along the y axis       
                                                  and represent, in percent, the average common           
                                                  equity to assets ratio.  There are 2 bars for each      
                                                  year: the first representing the CoreStates ratio      
                                                  and the second representing the Salomon Brothers        
                                                  Superregional Bank Composite Index ratio.               
                                                                                                          
Page 17 contains the plotting points for the      Page 17                                                 
WHOLESALE LOANS BY INDUSTRY GRAPH                 The Wholesale Loans by Industry graph is a              
                                                  horizontal bar graph with 12 wholesale loan             
                                                  industries listed down the y axis.  One bar             
                                                  extends out from each industry, parallel to the x       
                                                  axis and represents the industry's December 31,         
                                                  1995 loan outstandings as a percentage of December      
                                                  31, 1995 equity.  A second bar is overlayed on top      
                                                  of the first bar and represents the percentage of       
                                                  the industry's loan outstandings that are               
                                                  non-performing.                                         
                                                                                                          
Page 25 contains the plotting points for the      Page 23                                                 
NET INTEREST MARGIN GRAPH                         The Net Interest Margin graph is a five year,           
                                                  vertical bar graph with the years 1991, 1992,           
                                                  1993, 1994 and 1995 listed along the x axis.            
                                                  Lines numbering 0 to 6 are drawn along the y axis       
                                                  and represent, in percent, the net interest             
                                                  margin.  There are 2 bars for each year:  the           
                                                  first representing the CoreStates margin and the        
                                                  second representing the Salomon Brothers                
                                                  Superregional Bank Composite Index margin.              
</TABLE> 
<PAGE>
 
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
GRAPHICS APPENDIX LIST TO EXHIBIT 13 - (CONTINUED)


Narrative description of graphs from the Management's Discussion and Analysis of
Financial Condition and Results of Operations:

<TABLE>
<CAPTION>
               EDGAR VERSION                                   TYPESET VERSION
               -------------                                   ---------------
 <S>                                               <C>
Page 36 contains the plotting points for the      Page 30
EARNING ASSET MIX GRAPH                           The Earning Asset Mix graph is a five year,
                                                  vertical bar graph with the years 1991, 1992,
                                                  1993, 1994 and 1995 listed along the x axis.  One
                                                  bar is drawn in each year to represent 100% of
                                                  average earning assets.  Each bar is divided into
                                                  three sections along the y axis, representing the
                                                  percentage of average earning assets comprised of:
                                                  1) loans; 2) investment securities; and 3)
                                                  short-term money market investments.
 
Page 36 contains the plotting points for the      Page 30
FUNDING MIX GRAPH                                 The Funding Mix graph is a five year, vertical bar graph 
                                                  with the years 1991, 1992, 1993, 1994 and 1995 listed 
                                                  along the x axis. One bar is drawn in each year to represent 
                                                  100% of average earning assets, excluding short-term money market 
                                                  investments. Each bar is divided into three sections along the y axis, 
                                                  representing the percentage of: 1) retail deposits; 2) other 
                                                  interest bearing sources; and 3) non-interest bearing sources 
                                                  to average earning assets, excluding short-term money market investments.
                                                  
Page 37 contains the plotting points for the      Page 31
OPERATING REVENUE GRAPH                           The Operating Revenue graph is a five year,                         
                                                  vertical bar graph with the years 1991, 1992,                       
                                                  1993, 1994 and 1995 listed along the x axis.  One                   
                                                  bar is drawn in each year to represent the total                    
                                                  dollar amount of operating revenue (tax equivalent                  
                                                  net interest income plus non-interest income)                       
                                                  recorded, in millions.  Each bar is divided into                    
                                                  three sections along the y axis, representing the                   
                                                  dollar amount of operating revenue derived from:                    
                                                  1) loan and investment related net interest                         
                                                  income; 2) net interest income derived from                         
                                                  non-credit balances; and 3) non-interest income.                     
                                                  
</TABLE>