Terrence A. Larsen, chairman and chief executive officer of CoreStates Financial Corp., said Wednesday the company had not ruled out the idea of merging with another banking company.

Speaking in a telephone conference call, he told Wall Street analysts that a second rejection Tuesday evening of an offer from in-state rival Mellon Bank Corp. did not foreclose "any strategic option."

"We constantly review potential merger partners and transactions," Mr. Larsen said. "We took this offer extremely seriously."

The statement appeared to represent a softening of CoreStates' stance on being acquired. On Oct. 9, in confirming that it had rejected an $18 billion offer from Mellon, CoreStates said its board believed the company "can create the greatest long-term value for shareholders by pursuing a course of independence."

On Wednesday, Mr. Larsen gave several reasons for rebuffing the Mellon bid, which, if accepted, would have been the largest price ever paid for a U.S. bank.

The $47.6 billion-asset CoreStates questioned the "true underlying" value of the deal and was concerned about return on equity dilution, "cultural issues," and the "merger-integration track record" of Mellon, Mr. Larsen said.

The firm rebuff of Mellon caused CoreStates stock to drop, as investors concluded that a sale was unlikely soon. (See story on back page). But some analysts said CoreStates may well join forces with another company down the road.

Analysts said the case for independence was weakened by CoreStates' third-quarter earnings report, released Wednesday. Net income rose barely 1% from a year earlier, to $199 million, though earnings per share of $1 were 1 cent ahead of analysts' expectations.

Fee-based businesses posted growth, but noninterest income was down overall due to securities gains in the third quarter last year. The company said it also benefited from buying back its own stock. +++

CoreStates Financial Corp.

Philadelphia Dollar amounts in millions (except per share) Third Quarter 3Q97 3Q96 Net income $198.8 $195.0 Per share 1.00 0.89 ROA 1.71% 1.80% ROE 24.53% 19.53% Net interest margin 5.13% 5.58% Net interest income 536.0 547.0 Noninterest income 235.0 237.0 Noninterest expense 410.0 432.0 Loss provision 50.0 40.0 Net chargeoffs 62.0 37.0 Year to Date 1997 1996 Net income $592.0 $579.0 Per share 2.91 2.64 ROA 1.77% 1.39% ROE 23.27% 19.76% Net interest margin 5.32% 5.55% Net interest income 1,608.0 1,625.0 Noninterest income 677.0 675.0 Noninterest expense 1,205.0 1,360.0 Loss provision 143.0 189.0 Net chargeoffs 174.0 151.0 Balance Sheet 9/30/97 9/30/96 Assets $47,591.0 $45,198.0 Deposits 33,741.0 32,303.0 Loans 35,085.0 32,834.0 Reserve/nonp. loans 276.9% 299.8% Nonperf. loans/loans NA NA Nonperf. assets/assets 0.55% 0.58% Nonperf. assets/loans + OREO 0.75% 0.80% Leverage cap. ratio 7.89% 8.69% Tier 1 cap. ratio 8.33% 9.52% Tier 1+2 cap. ratio 11.88% 12.92% ===

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