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[LETTERHEAD OF COMMERCIAL FEDERAL CORPORATION]
November 10, 1995
"WE STAND ON OUR RECORD!"
Dear Fellow Stockholder:
As your Company's Chairman and CEO, I continue to be disappointed by CAI's
criticism and distortion of the facts. Quite frankly, we're proud to stand on
our record of success. I urge you to look at the facts.
Commercial Federal went public in 1984, issuing stock at $8.50 per share.
Only two years later, we approved a stock split bringing per share costs down
to $5.66. By fiscal 1987, our stock price had more than tripled to over $19.00
per share. Difficult times, however, were ahead.
In June 1989, it became obvious to us that Congress would enact legislation
negatively affecting the thrift industry. Tough steps were required, and your
Board and I acted decisively. We took immediate action to downsize the
organization, closing 25 branches, reducing staff by 400, and liquidating or
selling all service corporations that did not qualify under FDIC guidelines.
It was painful, but necessary for our very survival.
In August 1989, the threat became reality and the legislation, FIRREA,
passed. With the stroke of a Congressional pen, Commercial Federal went from a
healthy to a sick company as we lost $204 million of previously-includable
regulatory capital. Supervisory goodwill totaling $144 million was put on the
books due to acquisitions previously encouraged by the government and $60
million was added from a convertible, cumulative preferred stock with a 20-
year term, as opposed to the new FIRREA guidelines of requiring regulatory
capital to include only perpetual, non-cumulative instruments.
Obviously, our decision to downsize was the right one because we garnered a
tremendous amount of support from our regulators for a company that was, by
new regulatory definitions, seriously undercapitalized. Now, management's new
objective was to return to a position of strength through improved earnings.
Through sacrifice and hard work, we succeeded in 1992 when we were declared a
"well capitalized company" -- the highest possible regulatory rating. The
goodwill story's not over yet -- twenty months ago we filed suit against the
federal government for the loss of the supervisory goodwill and the damages
that the "FIRREA" legislation brought on the Company. This suit is similar to
the one filed by Glendale Federal, which was decided in Glendale's favor in
the Court of Appeals. We intend to pursue our case vigorously.
As a result of our success, in late 1992, we set new, growth-oriented
objectives. Two of our main targets were to achieve a return on average assets
of 1.0 percent and continue expanding our valuable Midwest franchise. As of
June 30, 1995, our operating earnings equaled 85 basis points of average
assets and I am confident that we will meet the objective of 1.0 percent
during the next 24 months. That achieved, Commercial Federal will be among the
top 10 percent of earners in the industry.
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During the past two and one-half years, we have acquired five thrifts,
adding 41 branches to our system and an additional $1.4 billion to our savings
base. We have an additional acquisition pending final approval which will add
another nine branches and deposits of approximately $200 million.
Significantly, each one of these acquisitions were accretive to our earnings.
In another significant improvement, since 1990 we have increased our
mortgage servicing portfolio for third parties to $4.6 billion, creating
approximately $26.6 million in annual gross loan fee income. That income will
increase as we take full advantage of new technology to expand the number of
loans we can service without creating additional expense.
Commercial Federal is proud that we are operating as one of the most
efficient institutions in the country. This trend will continue, even as we
execute additional acquisitions to further enhance our franchise. There's much
more and I urge you to read closely our annual report to understand fully the
foundation we've established for future growth.
Since the passage of FIRREA, our stock has grown in value from $5.00 in
June, 1989, to $37.00 in September, 1995, an increase of 640%. If this is what
CAI refers to as "business as usual," then we would agree that you should vote
for the current Board of Directors of Commercial Federal. We stand on our
record and your vote will let the Board know that our accomplishments are
exactly what you would like a lot more of.
With the continuing and ongoing assistance of Merrill Lynch, one of the
world's premier investment banking firms, your Board of Directors will
continue to explore all options for maximizing the value of your investment.
We are mindful of the changing face of our industry and we have not foreclosed
any option to achieve our goal. You can endorse the Board's successes, protect
your future interests, and let the Board know that you expect their continued
open-minded guardianship by signing, dating and mailing your WHITE proxy card.
The CAI nominees have gone out of their way to distort the facts, provide
you with misleading information and attack our record and me personally. Are
these the type of individuals you, as stockholders, want to represent you and
your best interests? Your current Commercial Federal Board has always had, and
always will have, your best interest as its number one priority.
Thank you for your support.
Sincerely,
/s/ William A. Fitzgerald
William A. Fitzgerald
Chairman of the Board and
Chief Executive Officer
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