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SCHEDULE 14A INFORMATION
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Commercial Federal
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(Name of Registrant as Specified In Its Charter)
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[Commercial Federal Logo]
Commercial Federal Corporation
October 1999
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Forward-Looking Statements
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This document contains certain forward-looking statements (within the meaning of
the Private Securities Litigation Reform Act) which involve risks and
uncertainties. The Corporation cautions readers that a number of important
factors could cause actual results to differ materially from the forward-looking
statements. These factors include unforeseen fluctuations in interest rates,
inflation, adverse changes in government regulations, unexpected costs resulting
from the process of integrating acquisitions, economic conditions, technology
changes and increased competition in the geographic and business areas in which
the Corporation conducts its operations.
[logo]
Commercial Federal Corporation
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Introduction
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. Demonstrated track record of shareholder oriented growth
. Building a powerful and profitable franchise in high-growth urban and rural
Midwest
. Evolving to a more bank-like business mix
. Invested in technology and upgrading and unifying systems to provide the best
customer service in the markets we serve
. Well-positioned for increased and sustainable growth and profitability
[logo]
Commercial Federal Corporation
1
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Repositioning the Company
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Carefully Managed Growth
(dollars in billions)
6/95 6/99 Growth
---- ---- ------
Assets $ 6.0 $12.8 115%
Loans 4.0 9.3 134
Deposits 3.6 7.7 113
Equity 0.3 1.0 212
Loans/Assets 67% 73%
Loans/Deposit 111 122
Tangible Common Equity/Assets 4.6 5.6
[logo]
Commercial Federal Corporation
2
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Expansion in Demographically Strong Markets
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Focused Acquisition Strategy
(dollars in billions)
Est. 5 Year
Net Deposits Population
Deposits Added Since Growth in
States at 6/99 1995 CFB Markets*
------ ------- ---- ------------
Colorado $2.2 $1.0 10.4%
Iowa 1.6 1.6 3.5
Nebraska 1.3 -- 4.0
Kansas 1.1 0.8 3.6
Oklahoma 0.8 -- 2.6
Missouri 0.5 0.5 5.2
Arizona 0.2 0.2 10.2
--- ---- ----
$7.7 $4.1 6.0%
Nationwide Average -- -- 4.3%
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*Weighted average by MSA based on deposits.
[logo]
Commercial Federal Corporation
3
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Expansion in Demographically Strong Markets
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CFB Deposit Franchise
[Regional Map Showing Branch Locations]
[Legend]
- --------
[icon] Commercial Federal
[icon] Midland First Financial
[icon] First Colorado Bancorp
[icon] AmerUs Bank
[logo]
Commercial Federal Corporation
4
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Expansion In Demographically Strong Markets
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Focused Acquisition Strategy
Estimated 5 Year Population Growth CFB
States Entire State CFB Markets(a) Advantage(b)
------ ------------ -------------- ---------
Colorado 10.2% 10.4% 1.9%
Iowa 1.8 3.5 94.4
Nebraska 2.8 4.0 42.8
Kansas 2.3 3.6 56.5
Oklahoma 2.4 2.6 8.3
Missouri 3.8 5.2 36.8
--- --- ----
Total (c) 4.9% 6.0% 22.4%
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(a) Weighted average by MSA based on deposits.
(b) Represents percentage growth advantage of CFB markets vs. entire state
growth.
(c) Weighted average based on deposits in states.
[logo]
Commercial Federal Corporation
5
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Disciplined Acquisition Strategy
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Value-Enhancing Acquisitions
. Each of CFB's 11 acquisitions since 1995 have been accretive to earnings
per share
. All acquisitions have met the following criteria established by CFB:
. Should not be greater than 30% of CFB's total assets
. Accretive to GAAP EPS within 12 months of the acquisition
. Use cash when able to actively manage CFB's capital position
. Pricing consistent with or below comparable transactions
. Located in or adjacent to CFB market
. Should result in immediate increase in perceived franchise value
Thrift Transactions Bank Transactions
-------------------------- --------------------------
Comparable
CFB Deals Deals CFB Deals
------------- ----------- ------------- -----------
Number of Transactions 8 -- 3 --
Assets Acquired $4.8 billion -- $1.2 billion --
Price/Book 1.6x 2.1x 2.8x 2.8x
Price/Tangible Book 1.6 2.3 3.0 2.9
Deposit Premium 10.5% 15.6% 15.6% 22.4%
[logo]
Commercial Federal Corporation
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Maintaining Focus on Fundamentals
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Operating Performance and Efficiency
(dollars in millions)
6/95 6/99 Growth
---- ---- ------
Operating Earnings $48.9 $119.5 144%
Cash Earnings 55.6 131.9 137
Return on Assets 0.85% 1.00% 18%
Cash Return on Assets 0.97 1.11 14
Efficiency Ratio 55.0% 51.6% 6%
[logo]
Commercial Federal Corporation
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Maintaining Focus on Fundamentals
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Continued Expense Management
Current initiatives underway which will result in further efficiencies include:
. Consolidation of Recent Acquisitions
. Completion of Major Data Processing Conversion
. The completion of CFB's $36 million data processing conversion
. Enhanced data processing capabilities will provide potential for
significant economies of scale from future acquisitions as CFB
will be able to add acquired operations to its systems without a
proportionate increase in operation expenses
. Potential Branch Rationalization
. Commercial Federal is in the process of analyzing its entire
branch franchise with the potential to divest selected
unprofitable branches
. Restructuring
. Absorbed one-time charge with ongoing cost savings
[logo]
Commercial Federal Corporation
8
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More Bank-Like Business Mix
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Accelerating the Company's Transition
6/95 6/99
---- ----
Net Interest Margin 2.42% 2.99%
Fee Income/Avg Assets 0.68 0.80
Consumer Loans ($Mil.) $234 $1,111
As a % of Loans 5.9% 11.9%
Commercial Loans ($Mil.) $1 $383
As a % of Loans 0.0% 4.1%
Core Deposits ($Mil.) $1,037 $3,100
As a % of Total Deposits 25.9% 40.0%
[logo]
Commercial Federal Corporation
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More Bank-Like Business Mix
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Emphasizing "Bank-Like" Products
. With a core of very experienced and respected consumer and commercial
lenders, Commercial Federal is more sensitive to customer needs in its
local markets, and will capitalize on its commitment to relationship
banking which its larger competitors appear to have abandoned
. Consumer loans have grown to represent 12% of the total loan portfolio, up
from 6% in 1995, through internal growth and acquisition
. CFB is focused on leveraging its consumer loan franchise through
its new branches
. CFB is currently upgrading its cash management services offered
to small businesses
. Focus on income property and commercial real estate loans
. Becoming more of a community bank mortgage lender
[logo]
Commercial Federal Corporation
10
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Delivery Systems
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Focused on Traditional and Alternative Delivery
. Commercial Federal has actively analyzed and developed both its traditional
branch network as well as alternative delivery channels
. Supermarket Banking
. Telephone Banking
. Internet
. Telephone Bill Pay
. INVEST-mutual funds and annuities
. Commercial Lending
[logo]
Commercial Federal Corporation
11
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Capital Management
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Current Initiatives
Commercial Federal will continue to actively manage its capital base through
prudent use of:
. Share Repurchase Programs
. Since the Board reinitiated CFB's common stock repurchase program
earlier this year by authorizing the repurchase of up to 3.0
million shares, CFB has acquired over 2.0 million shares of its
outstanding common stock, representing approximately 3.9% of its
common shares
. During 1999, CFB invested approximately $48.1 million to
repurchase its shares
. CFB will continue to monitor its capital position, delivering
capital back to shareholders through share repurchases
. Dividend Payout Increases
. Since implementing a cash dividend payout in October 1995, CFB
has increased its dividend each year, including a 18% increase in
1999 to $0.26 per share
. CFB plans to continue to examine its dividend payout ratio,
currently at 16%, for possible future increases
[logo]
Commercial Federal Corporation
12
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Total Returns to Shareholders
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Historically Strong Returns*
[Bar chart showing returns of CFB and other institutions as indicated in the
following table]
CFB COFI WBST WM SVRN PHBK DME ASFC BNKU GPT RSLN
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24.9% 22.8% 20.6% 19.9% 15.6% 8.9% 3.4% N/A N/A N/A N/A
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*As of 10/22/99
[logo]
Commercial Federal Corporation
13
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Strategic Business Plan - 2000 and Beyond
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Strategic Initiatives to Build Value
. Continued Expense Management
. Data processing conversion
. branch rationalization
. Emphasizing "Bank-Like" Products, such as Commercial/Small Business Lending
. Continued development and growth of fee revenue generating businesses
. Capital Management
. Franchise and Shareholder Value Enhancing Acquisitions
[logo]
Commercial Federal Corporation
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Review of Franklin Proposal
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. Commercial Federal's Board has thoroughly analyzed and evaluated the
director slate proposal from Franklin and their single issue platform to
seek an immediate sale of the Company. It has unanimously and unequivocally
rejected it. Upon further analysis of the proposal, the following issues
were discussed:
. Current weakness in the general M&A market for financial
institutions, and thrifts, in particular
. Depressed current valuation and strategic interest of CFB's most
likely partners
. Significant future growth opportunities currently available to
CFB
. Attractive earnings growth and profitability outlook for CFB
given the successful consolidation of our recent acquisitions and
our recent data processing conversion
. Commercial Federal's board seeks the advice of industry experts, including
Merrill Lynch, on an ongoing basis to help it evaluate the strategic
landscape and alternatives facing the Company
. We feel Franklin's proposals is a last ditch effort by its management to
profit short term, not enabling CFB's long term shareholders to benefit
from CFB's superior franchise and growth opportunities
[logo]
Commercial Federal Corporation
15
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Conclusion
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. Demonstrated track record of shareholder oriented growth
. Building a powerful and profitable franchise in high-growth urban and rural
Midwest
. Evolving to a more bank-like business mix
. Invested in technology and upgrading and unifying systems to provide the
best customer service in the markets we serve
. Well-positioned for increased and sustainable growth and profitability
[logo]
Commercial Federal Corporation
16
