<PAGE> 1
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)
August 27, 1997
CHARTER ONE FINANCIAL, INC.
- -------------------------------------------------------------------------------
(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
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
(1) Attached as Exhibit 99.1 are materials to be presented at
financial institutions conferences in September 1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) The following exhibits are filed as part of this Report and
incorporated herein by reference:
99.1 Supplemental Information
<PAGE> 3
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: September 3, 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
<PAGE> 1
Exhibit 99.1
[CHARTER ONE FINANCIAL, INC.(R) LOGO]
September 1997
<PAGE> 2
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
<TABLE>
<S> <C>
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 21.08
Price to book value 255%
Annualized dividend $1.00
Current dividend yield 1.9%
Inside ownership 10.6%
</TABLE>
Per share information has been adjusted for the 9/30/96 5% stock dividend.
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 3
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 RCSB Merger
cannot be fully realized or realized within the expected time frame; (2)
revenues following the RCSB 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.
1
<PAGE> 4
COFI Profile (6/30/97)
Nasdaq: COFI
<TABLE>
<S> <C>
Total Assets $14.6 B
Total Deposits $7.8 B
Market Cap $2.5 B
Shares Outstanding 46.2 M
Inside Ownership 10.6%
Book Value per Share $21.08
Equity to Assets 6.7%
Branch Locations 175
1-Year Gap -3.2%
</TABLE>
2
<PAGE> 5
Thrift Market Cap
in billions (8/18/97)
<TABLE>
<CAPTION>
LARGEST PUBLICLY TRADED THRIFTS MARKET CAP
- ------------------------------- ----------
<S> <C>
(1) Washington Mutual $15.9 B
(2) H.F. Ahmanson 4.9 B
(3) Golden West Financial 4.6 B
(4) GreenPoint Financial 3.0 B
(5) COFI 2.4 B
(6) Dime Bancorp 2.0 B
(7) People's Bank-CT 1.6 B
(8) Glendale Federal 1.4 B
(9) Washington Federal 1.3 B
(10) People's Heritage 1.0 B
</TABLE>
3
<PAGE> 6
COFI Strategic Plan
Mergers have consistently contributed to performance
4
<PAGE> 7
Merger History
<TABLE>
<S> <C>
1997 RCSB (pending 10/3/97)
1997 Haverfield (pending 9/19/97)
1996 First Nationwide
1995 FirstFed Michigan
1995 ICX Corporation (leasing company)
1994 Citizen's Equitable
1993 Women's Federal
1992 1st American
1991 1st Federal of Toledo
1991 Civic Savings
1990 Broadview Savings
1989 Western Reserve
1989 1st Federal of Akron
</TABLE>
COFI IPO 1/29/88
<TABLE>
<S> <C>
'81-'88 7 Ohio institutions
</TABLE>
5
<PAGE> 8
COFI PROFILE - EARNINGS GROWTH
COFI EARNINGS HAVE BEEN ACCELERATED THROUGH MERGERS
19% ANNUALLY
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 6/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST AKRON, WESTERN
BROADVIEW
CIVIC
[Graph plots earnings per share from 1988 ($.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
6
<PAGE> 9
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>
7
<PAGE> 10
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%
8
<PAGE> 11
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%
9
<PAGE> 12
RCSB Merger
Rochester fits COFI Strategic Plan
- - Energized asset generator
- - Synergy between finance sub & mortgage banking
- - Top tier share in contiguous market
- - Solid retail platform to support COFI products and services
- - Contribute to fee revenue growth
10
<PAGE> 13
RCSB Merger
Creates major financial institution with:*
- - 222 branches in 3 states
- - 734,000 households
- - 48 loan offices in 18 states
- - $10 B deposits
- - 7% equity
- - $3.2 B market cap, 4th largest in thrift industry
*Pro forma combined including Haverfield acquisition
11
<PAGE> 14
RCSB Merger
Deal Status:
- - Announced - 5/21/97
- - Shareholder meetings - 10/3/97
- - Scheduled close - 10/3/97
- - System conversions - 1st Qtr 1998
- - Consolidation complete - 1st Qtr 1998
12
<PAGE> 15
COFI Strategic Plan
Annual performance goals - greater than:
- - 10% growth in earnings per share
- - 18% return on equity
- - 1.20% return on assets
13
<PAGE> 16
COFI Strategic Plan
Financial Road Map
(Mix of Core Earnings as a % of Avg Total Assets)
<TABLE>
<CAPTION>
1997 2nd Qtr
Model 1997*
------ -------
<S> <C> <C>
- --------------------------------------------------------------------------
| Spread 3.00 % 2.74%|
- --------------------------------------------------------------------------
Noninterest income .50 .49
------ -----
Income 3.50 3.23
Provision (.10) (.01)
Operating expenses (1.50) (1.32)
------ ------
Pretax core 1.90 1.90
Taxes (.67) (.62)
------- ------
After-tax core 1.23% 1.28%
======= ======
</TABLE>
6.5% equity, 1.20% return on assets = 18.5% return on equity
*Annualized
14
<PAGE> 17
COFI Strategic Plan
Increase spread income through growth in energized assets AND energized
liabilities
15
<PAGE> 18
Increase Energized Assets
Energized assets are characterized by a higher yield and shorter duration than
1-4 family loans:
- - Leasing
- - Consumer loans
- - Business loans
- - Finance company loans
- - Multifamily & commercial real estate loans
- - AUTOMOBILE LENDING
16
<PAGE> 19
Increase Energized Assets
Energized asset totals:
- - $2.2 B at 6/30/97
- - Goal of $4 B by 2000 (pre-RCSB)
- - PRO FORMA COMBINED $3.8 B AT 6/30/97
17
<PAGE> 20
Increase Energized Assets
COFI portfolio of energized assets has increased by nearly 50% in 18-month
period.
<TABLE>
<CAPTION>
Balance at end of period
------------------------
12/31/95 6/30/97
-------- -------
<S> <C> <C>
Consumer loans $.6 B $1.1 B
Commercial loans/leases .9 B 1.1 B
---- ---
Energized assets $1.5 B $2.2 B
==== ====
</TABLE>
18
<PAGE> 21
Increase Energized Assets
RCSB Merger
RCSB auto lending operation adds significant energized asset production.
<TABLE>
<CAPTION>
Pro forma combined
Balance at Annualized
end of production
2nd Qtr '97 2nd Qtr '97
----------- -----------
<S> <C> <C>
Consumer loans $1.5 B $.9 B
Commercial loans/leases 1.1 B .8 B
AUTO LOANS 1.2 B 1.3 B
---- ----
Energized loans $3.8 B $3.0 B
==== ====
</TABLE>
19
<PAGE> 22
Increase Energized Assets
RCSB Merger
Based on 2nd Qtr 1997, more than half of the combined company's production would
be in energized assets.
<TABLE>
<CAPTION>
Pro forma combined
Balance at Annualized
end of production
2nd Qtr '97 2nd Qtr '97
----------- -----------
<S> <C> <C>
Single family 66% 47%
Energized assets 34% * 53%
--- ---
100% 100%
==== ====
</TABLE>
*On a stand-alone basis, COFI portfolio mix included only 24% in energized
assets at end of 2nd Qtr '97.
20
<PAGE> 23
Increase Energized Assets
Consumer Finance Subsidiary "Equity One"
- - Launched 1/97
- - 7/31/97 mortgage equity portfolio:
- Balance - $55 M
- Yield - 11.34%
- A-/ B credit rating
- - Current production running at $10 M per month
- - 1997 portfolio goal of $100 M
21
<PAGE> 24
Increase Energized Assets
RCSB Merger
RCSB network of 39 retail loan origination offices in 14 states provides ideal
platform for COFI consumer finance products
22
<PAGE> 25
Increase Energized Liabilities
- - Lower cost core deposits
- - Accounts that build customer relationships
- - Retail banking products that generate fee revenue
23
<PAGE> 26
Increase Energized Liabilities
Aggressive checking account acquisition strategy
- - 400,000 existing checking accounts
- - 1997 goal to open 100,000 new accounts
- - Opened 10,000 new accounts in July
- - Average acquisition cost YTD of $36.80
24
<PAGE> 27
Increase Energized Liabilities
RCSB Merger
- - RCSB retail deposit share:
#2 in Rochester
#5 in Buffalo
(#1 thrift in both markets)
- - Entered Buffalo market de novo in 1990, grew deposits to $744 M by 7/31/97
- - RCSB has 19,000 "pay-by-phone" customers
25
<PAGE> 28
Increase Energized Liabilities
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 4.65%
New York 4.32%
Michigan 4.13%
- - Branch network with high sales potential
26
<PAGE> 29
COFI Strategic Plan
Financial Road Map
(Mix of Core Earnings as a % of Avg Total Assets)
<TABLE>
<CAPTION>
1997 2nd Qtr
Model 1997*
----- -----
<S> <C> <C>
Spread 3.00 % 2.74%
- --------------------------------------------------------------------------
| Noninterest income .50 .49 |
| --- --- |
- --------------------------------------------------------------------------
Income 3.50 3.23
Provision (.10) (.01)
Operating expenses (1.50) (1.32)
------ ------
Pretax core 1.90 1.90
Taxes (.67) (.62)
------ ------
After-tax core 1.23 % 1.28%
====== ======
</TABLE>
6.5% equity, 1.20% return on assets = 18.5% return on equity
*Annualized
27
<PAGE> 30
Increase Fee Revenue
COFI fee revenue has shown dramatic growth, up 78% in 18-month period
<TABLE>
<CAPTION>
4th Qtr 2nd Qtr
1995 1997
---- ----
<S> <C> <C>
Deposit fees $6.6 M $10.4 M
Brokerage services .7 M 2.6 M
---- -----
$7.3 M $13.0 M
==== =====
</TABLE>
28
<PAGE> 31
Increase Fee Revenue
RCSB Merger
RCSB $9 B mortgage servicing portfolio will make a significant contribution to
noninterest income
29
<PAGE> 32
COFI Strategic Plan
Financial Road Map
(Mix of Core Earnings as a % of Avg Total Assets)
<TABLE>
<CAPTION>
1997 2nd Qtr
Model 1997*
----- -----
<S> <C> <C>
Spread 3.00 % 2.74%
Noninterest income .50 .49
----- -----
Income 3.50 3.23
- ---------------------------------------------------------------------------
| Provision (.10) (.01)|
- ---------------------------------------------------------------------------
Operating expenses (1.50) (1.32)
------ ------
Pretax core 1.90 1.90
Taxes (.67) (.62)
------ ------
After-tax core 1.23 % 1.28%
====== ======
</TABLE>
6.5% equity, 1.20% return on assets = 18.5% return on equity
*Annualized
30
<PAGE> 33
Credit Quality
RCSB Merger
Credit quality statistics, based on 1st 6 mos 1997
<TABLE>
<CAPTION>
Pro forma
COFI RCSB combined
---- ---- --------
<S> <C> <C> <C>
Nonperforming assets to assets .27% .76% .38%
Reserves to nonperforming loans 188% 104% 153%
Net charge-offs, annualized $.9 M $15.8 M $16.7 M
Charge-off coverage ratio 70.4 yrs 1.7 yrs 5.5 yrs
</TABLE>
31
<PAGE> 34
Credit Quality
RCSB Merger
Auto finance credit quality statistics as of 2nd Qtr 1997:
- - Projected reserves to auto loans to merger date in excess of 2%
- - Annualized net charge-offs:
- first half 1997 = 117 bp
- second quarter 1997 = 107 bp
- - Average static pool portfolio migration analysis indicated 1.50 - 1.75%
cumulative life-time losses
32
<PAGE> 35
COFI Strategic Plan
Financial Road Map
(Mix of Core Earnings as a % of Avg Total Assets)
<TABLE>
<CAPTION>
1997 2nd Qtr
Model 1997*
----- -----
<S> <C> <C>
Spread 3.00% 2.74%
Noninterest income .50 .49
----- -----
Income 3.50 3.23
Provision (.10) (.01)
- -----------------------------------------------------------------------------
Operating expenses (1.50) (1.32) |
------ ------ |
- -----------------------------------------------------------------------------
Pretax core 1.90 1.90
Taxes (.67) (.62)
----- -----
After-tax core 1.23% 1.28%
====== ======
</TABLE>
6.5% equity, 1.20% return on assets = 18.5% return on equity
*Annualized
33
<PAGE> 36
Maintain Efficiency Level
In a commodity business, the low cost provider wins
2nd Qtr 1997:
Efficiency ratio 40.0%
Expenses to assets 1.32%
34
<PAGE> 37
Maintain Efficiency Level
RCSB Merger
- - Projected cost saves in RCSB merger approximate 25% of RCSB operating
expenses
- - Pro forma 2nd Qtr, after cost saves:
Efficiency ratio 41.8%
Expenses to assets 1.57%
35
<PAGE> 38
COFI Strategic Plan
- - Increase energized assets AND liabilities
- - Increase noninterest income
- - Maintain operating efficiency
- - Maintain strong credit quality profile
Conclusion: Charter One is well on the way to becoming a consumer bank.
36
