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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
July 29, 1997
CHARTER ONE FINANCIAL, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 0-16311 34-1567092
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
1215 Superior Avenue, Cleveland, Ohio 44114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 566-5300
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ITEM 5. OTHER EVENTS
Attached as Exhibit 99.1 are materials presented at a financial
institutions conference on July 29, 1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) The following exhibit is filed as part of this Report and incorporated
herein by reference:
99.1 Supplemental Information
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHARTER ONE FINANCIAL, INC.
Date: July 29, 1997 By: /s/ Richard W. Neu
----------------------------------------
Richard W. Neu
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
99.1 Supplemental Information.
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EXHIBIT 99.1
[CHARTER ONE FINANCIAL, INC.(R) LOGO]
7/29/97
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Please note: This presentation contains forward-looking statements which are
subject to risks and uncertainties that could cause actual results to differ
materially. These risks and uncertainties include unanticipated changes in
interest rates and in the competitive and regulatory environments.
COFI Update at 6/30/97
Closing price $53.88
12-month range $32.03-54.00
Trailing 4 qtr operating EPS $3.67
P/E (trailing 4 qtr operating earnings) 14.7x
Book value per share $21.15
Price to book value 255%
Annualized dividend $1.00
Current dividend yield 1.9%
Inside ownership 9.3%
Per share information has been adjusted for the 9/30/96 5% stock dividend.
For additional information: Charles John Koch Richard W. Neu
Chairman and CEO CFO
(216) 566-5314 (216) 566-5337
Ellen L. Batkie William Dupuy
Investor Relations Corp. Communications
(800) 262-6301 (216) 566-5311
1215 Superior Avenue
Cleveland, Ohio 44114
Investor fax: (800) 914-4721
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FORWARD-LOOKING INFORMATION
This presentation contains estimates of future operating results for
both Charter One Financial, Inc. and RCSB Financial, Inc. on a stand-alone
and pro forma combined basis, as well as estimates of financial condition,
operating efficiencies and revenue creation on a combined basis. These
estimates constitute forward-looking statements (within the meaning of the
Private Securities Litigation Reform Act of 1995), which involve significant
risks and uncertainties. Actual results may differ materially from the
results discussed in these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) expected cost
savings from the Merger cannot be fully realized or realized within the
expected time frame; (2) revenues following the Merger are lower than
expected; (3) competitive pressures among depository institutions increase
significantly; (4) costs or difficulties related to the integration of the
business of COFI and RCSB are greater than expected; (5) changes in the
interest rate environment reduce interest margins; (6) general economic
conditions, either nationally or in the states in which the combined company
will be doing business, are less favorable than expected; and (7)
legislation or regulatory changes adversely affect the businesses in which
the combined company would be engaged.
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COFI PROFILE (6/30/97)
Nasdaq: COFI
Total Assets $14.6 B
Total Deposits $7.8 B
Market Cap $2.5 B
Shares Outstanding 46.2 M
Inside Ownership 9.3%
Book Value per Share $21.15
Equity to Assets 6.7%
Branch Locations 175
1-Year Gap -3.2%
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COFI PROFILE - MARKET CAP
in billions (7/17/97)
LARGEST PUBLICLY TRADED THRIFTS MARKET CAP
- ------------------------------- ----------
(1) Washington Mutual $16.4 B
(2) H.F. Ahmanson 5.1 B
(3) Golden West Financial 4.3 B
(4) GreenPoint Financial 2.9 B
(5) COFI 2.5 B
(6) Dime Bancorp 1.7 B
(7) People's Bank-CT 1.6 B
(8) Glendale Federal 1.3 B
(9) Washington Federal 1.3 B
(10) People's Heritage 1.1 B
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COFI PROFILE - MERGER EXPERIENCE
1997 RCSB (pending)
1997 Haverfield (pending)
1996 First Nationwide
1995 FirstFed Michigan
1995 ICX Corporation (leasing company)
1994 Citizen's Equitable
1993 Women's Federal
1992 1st American
1991 1st Federal of Toledo
1991 Civic Savings
1990 Broadview Savings
1989 Western Reserve
1989 1st Federal of Akron
COFI IPO 1/29/88
'81-'88 7 Ohio institutions
4
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COFI PROFILE - EARNINGS GROWTH
COFI EARNINGS HAVE BEEN ACCELERATED THROUGH MERGERS
19% ANNUALLY
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 6/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST AKRON, WESTERN
BROADVIEW
CIVIC
[Graph plots earnings per share from 1988 ($.86) to 6/1997 ($3.78*)
TOLEDO
FIRST AMERICAN
WOMEN'S FEDERAL
FIRSTFED MICHIGAN
<FN>
*6 months ended 6/30/97, annualized
</TABLE>
BASED ON ORIGINALLY REPORTED OPERATING EARNINGS
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COFI PROFILE - EFFICIENCY
COFI EFFICIENCY HAS BEEN ENHANCED THROUGH MERGERS
EFFICIENCY RATIO*
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 6/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST AKRON, WESTERN
BROADVIEW
CIVIC
[Graph plots efficiency ratio from 1988 (71%) to 6/1997 (40%)
TOLEDO
FIRST AMERICAN
WOMEN'S FEDERAL
FIRSTFED MICHIGAN
<FN>
*OTHER EXPENSES DIVIDED BY NET INTEREST INCOME PLUS OTHER INCOME (EXCLUDING GAIN
ON SALE)
Prior period ratios have not been restated to reflect poolings
</TABLE>
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COFI PROFILE - SHARE PRICE GROWTH
COFI STOCK HAS OUTPERFORMED S&P 500 INDEX
<TABLE>
<CAPTION>
12-88 12-89 12-90 12-91 12-92 12-93 12-94 12-95 12-96 6-97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Growth
Curve
[Graph plots common stock prices from IPO ($3.385) to 6/97 ($53.88)
Actual Price
Line
<FN>
*S&P 500 INDEX RELATIVE TO COFI SHARE PRICE; DATA SOURCE - BLOOMBERG
</TABLE>
Quarter Close, Adjusted for Stock Splits/Dividends
COMPOUNDED ANNUAL TOTAL RETURN:
COFI - 38%
S&P 500 - 17%
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COFI PROFILE - ANNUAL PERFORMANCE GOALS
Greater than:
- 10% Growth in Earnings Per Share
- 18% Return on Equity
- 1.20% Return on Assets
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SECOND QUARTER 1997
FINANCIAL HIGHLIGHTS
- EPS up 12% to $.96
- ROE: 18.85% ROA: 1.28%
- Annualized loan portfolio growth: 23%
- Recurring fee revenue: up 35% over year ago
- Efficiency ratio: 40.0%
- Nonperforming asset ratio: .27%
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COFI PROFILE - "PERFORMANCE ENHANCERS"
- Capital management flexibility
- Increase "Energized" assets
- Consumer banking initiatives
- Superior efficiency
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CAPITAL MANAGEMENT FLEXIBILITY
- Clean Balance Sheet
- Low level of:
- Goodwill
- Nonperforming assets
- Fixed assets
- No double leverage
- Excess asset generation
- Cash flows from MBS of $150 M per qtr
- Capital accumulating at $137 M annually
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COFI PROFILE - "PERFORMANCE ENHANCERS"
- Capital management flexibility
- Increase "Energized" assets
- CONSUMER BANKING INITIATIVES
- Superior efficiency
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INCREASE ENERGIZED ASSETS
ENERGIZED ASSETS ARE CHARACTERIZED BY A HIGHER YIELD AND SHORTER DURATION THAN
1-4 LOANS:
- Leasing
- Consumer loans
- Business loans
- Finance company loans
- Multifamily & commercial real estate loans
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INCREASE ENERGIZED ASSETS
ENERGIZED ASSET TOTALS:
- $2.2 B at 6/30/97
- Goal of $4 B by 2000 (pre-RCSB)
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INCREASE ENERGIZED ASSETS
1997 LENDING STRATEGY
Focus LESS on absolute volume,
Focus MORE on:
- Mix of "Energized" assets to total
- Improved pricing & fee structure
- Prepayment penalties
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INCREASE ENERGIZED ASSETS
LENDING ACTIVITY
1996 VS 1997
<TABLE>
<CAPTION>
($ Billions)
3/31 6/30 9/30 12/31
<S> <C> <C> <C> <C>
1996 Actual
6/30/97 Actual
[Graph plots from 6/30/97 Actual (1.9 Billion) to 1995 Actual ($1.8 Billion)
1995 Actual
1997 Straight-Line Goal
</TABLE>
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INCREASE ENERGIZED ASSETS
CHANGING PORTFOLIO MIX
<TABLE>
<CAPTION>
End of Period Pipeline at
------------------------------------- --------
12/31/94 6/30/97 6/30/97
<S> <C> <C> <C>
Single family 80% 76% 53%
"Energized" assets 20% 24% 47%
-------------------------------------------------------
100% 100% 100%
=======================================================
Loan & lease balance $6,588 M $9,016 M $939 M
<FN>
Product mix of pipeline indicates trend toward changing portfolio mix.
</TABLE>
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INCREASE ENERGIZED ASSETS
CONSUMER FINANCE SUBSIDIARY
- Launched January 1997:
- Sales executives in place
- Opened 7 offices
- 6/30/97 porfolio of $29 M in mortgage equity loans
- 1997 portfolio goal of $100 M
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COFI PROFILE - PERFORMANCE ENHANCERS
- Capital management flexibility
- Increase "Energized" assets
- CONSUMER BANKING INITIATIVES
- Superior efficiency
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PERFORMANCE ENHANCERS
CONSUMER BANKING INITIATIVES
- Account acquisition strategy
- Sales culture
- Alternative delivery channels
- Productivity and sales support technology
- Increase fee income across the board
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ACCOUNT ACQUISITION STRATEGY
- Build customer base for:
- fee income
- cross-selling
- Build long-term, core relationships
- Position Charter One as a full-service retail bank
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ACCOUNT ACQUISITION STRATEGY
SALES CULTURE
- Retail banking focus
- Strong sales orientation supported by training
- Cross-selling incentives for branch staff
- Retail product orientation
- Aggressive checking account acquisition program
- Competitive consumer lending product line
- Broad line of residential lending products
- Investment services
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ACCOUNT ACQUISITION STRATEGY
ALTERNATIVE DELIVERY CHANNELS
<TABLE>
<CAPTION>
COB Home RCSB Total
--- ---- ---- -----
Retail centers:
<S> <C> <C> <C> <C>
Traditional 170 4 38 212
Supermarket 4 3 7
Kiosk 1 1
Drive-up only 1 1
---------- ----------- ----------- ----------
175 8 38 221
ATMs:
On premise 137 13 45 195
Off premise 4 7 11
---------- ----------- ----------- ----------
141 20 45 206
</TABLE>
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PRODUCTIVITY & SALES SUPPORT
- MCIF
- Outbound call center
- Inbound call center in Ohio
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MERGER OF
CHARTER ONE FINANCIAL
& RCSB FINANCIAL
[GRAPHIC MAN WITH CAMERA]
[CHARTER ONE FINANCIAL, INC.(R) LOGO]
[RSCB FINANCIAL LOGO]
THE RCSB MERGER FITS COFI PROFILE OBJECTIVES
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RCSB MERGER
RCSB ADDS:
Top tier share in contiguous
market
[RCSB FINANCIAL LOGO]
Solid retail platform to support
[GRAPHIC MAN WITH CAMERA] COFI products & services
Synergy between finance sub
& mortgage banking
Energized asset generator
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RCSB MERGER
CONCENTRATION AND PROXIMITY
MAPS OF MI, OH, NY
WITH MILEAGE FROM CLEVELAND
AND PRO FORMA BRANCH
CONCENTRATIONS
(primarily the metropolitan
areas of Detroit, Toledo,
Cleveland/Akron, Buffalo
and Rochester)
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RCSB MERGER
MAJOR FINANCIAL INSTITUTION WITH:*
- 218 branches in 3 states
[MAN WITH CAMERA - 734,000 households
GRAPHIC]
- 67 loan offices in 18 states
- $18 B assets
- $10 B deposits
- 7% equity
- $2.9 B market capitalization, 5th largest in thrift
industry
*Pro forma combined, including Haverfield acquisition which was announced
4/23/97
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RCSB MERGER
DEAL DYNAMICS
- Logical market extension with similar demographics
- RCSB deposit share is #2 in Rochester, #5 in Buffalo (#1 thrift in both
markets)
- Buying a consumer bank balance sheet & a branch network with high sales
potential
- Significant synergies between RCSB mortgage banking & COFI lending
operations
- Adds energized asset product line in prime auto finance
- Adds 167,000 households to customer base
- Primary Western NY employers include Kodak, Xerox, Delphi, ITT Automotive
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RCSB MERGER
STRATEGIC PLAN
- Maintain one-bank structure to facilitate efficient operations
- Completion of operational conversion by end of 1st Q 1998
- Realize 25-30% cost savings
- Export COFI deposit & lending product sets into NY branches
- Leverage RCSB mortgage banking with COFI mortgage
lending & consumer finance operation
- Manage excess capital
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RCSB MERGER
- Rochester & Buffalo attractive banking markets
- Households/branch:
- Buffalo 1,800
- Rochester 1,500
- Detroit 1,500
- Cleveland 1,000
- Low deposit costs
- Ohio 4.63%
- New York 4.34%
- Michigan 4.12%
- Branch network with high sales potential (but strong market
share)
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RCSB MERGER
FUTURE OPERATING GOALS IN NY
- Incremental residential lending $300 M/yr
- Incremental consumer lending $100 M/yr
- Incremental commercial / C&I lending $50 M/yr
- Incremental retail fee revenue $7 to 8 M/yr
- Leverage excess capital $54 M
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RCSB MERGER
RISK PROFILE OF THE RESULTANT COMPANY
- Superior asset quality (NPAs at .43%)
- Excess capital (7%)
- Low efficiency ratio (41.5%)
- Low level of goodwill
- Improved long-term asset matching
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THE MICHIGAN EXPERIENCE
COFI/FirstFed merger completed 10/31/95
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
mortgage loan originations $ 426 M 1,081 M
consumer loan originations $ 5 M 153 M
# new checking accounts 11 K 30 K
total checking acct fee revenue $ 5.3 M 8.3 M
checking acct fees/acct $ 59 88
</TABLE>
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THE MICHIGAN EXPERIENCE
Only 18 months after merger, in 1st Q 1997, Michigan franchise accounted for
(as % of COFI overall):
- 54% of new checking accounts
- 43% of checking acct fee revenue
- 51% of brokerage service sales
- 44% of mortgage originations
- 28% of consumer loan originations
- 41% of deposits
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RCSB MERGER
IMPACT OF COMBINATION
- Estimated 3 to 5% accretion based on cost saves alone
- Significant revenue enhancement
- Accelerates COFI consumer bank strategy
- Outstanding asset quality
- Substantial excess capital
36
