-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TeRUJFV8PbuAxYSDef6vXv7j8swgWW3L8b9FZC8KJqDgrp1/1k/ceKESupiwE8Sg c8HsdHXUX1Ek14SGZR3m0g== 0000950152-98-006696.txt : 19980814 0000950152-98-006696.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950152-98-006696 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARTER ONE FINANCIAL INC CENTRAL INDEX KEY: 0000819692 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 341567092 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16311 FILM NUMBER: 98685225 BUSINESS ADDRESS: STREET 1: 1215 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2165665300 MAIL ADDRESS: STREET 1: 1215 SUPERIOR AVENUE STREET 2: 1215 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114 10-Q 1 CHARTER ONE FINANCIAL, INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-16311 CHARTER ONE FINANCIAL, INC. --------------------------- (exact name of registrant as specified in its charter) DELAWARE 34-1567092 -------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 1215 SUPERIOR AVENUE, CLEVELAND, OHIO 44114 - ------------------------------------- ----- (Address of principal executive offices) (Zip Code) (216) 566-5300 -------------- (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the registrant's sole class of common stock as of July 31, 1998 was 127,458,996. ================================================================================ 2 TABLE OF CONTENTS ITEM NUMBER PAGE - --------- ---- PART I - FINANCIAL INFORMATION 1. Financial Statements Consolidated Statements of Financial Condition -- June 30, 1998 and December 31, 1997............................ 1 Consolidated Statements of Income -- Three and six months ended June 30, 1998 and 1997.............. 2 Consolidated Statement of Changes in Shareholders' Equity -- Six months ended June 30, 1998................................. 3 Consolidated Statements of Cash Flows -- Six months ended June 30, 1998 and 1997........................ 4 Notes to Consolidated Financial Statements....................... 5 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 6 3. Quantitative and Qualitative Disclosure About Market Risk.......... 22 PART II - OTHER INFORMATION 5. Other Information.................................................. 22 6. Exhibits and Reports on Form 8-K................................... 23 Signatures.................................................................. 23 i 3 PART I - FINANCIAL CONDITION ITEM 1. FINANCIAL STATEMENTS CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ------------------ (AS RESTATED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Cash and deposits with banks.......................................... $ 183,683 214,716 Federal funds sold and other.......................................... - 25,000 ------------- ------------ Total cash and cash equivalents.................................. 183,683 239,716 Investment securities available for sale, at fair value............... 30,759 582,589 Mortgage-backed securities: Available for sale, at fair value................................... 1,974,801 1,070,233 Held to maturity (fair value of $3,450,496 and $4,273,605).......... 3,399,777 4,215,249 Loans and leases, net................................................. 13,072,147 12,360,134 Loans held for sale................................................... 227,459 341,671 Federal Home Loan Bank stock.......................................... 374,098 366,647 Premises and equipment................................................ 159,060 158,500 Accrued interest receivable........................................... 99,301 110,181 Real estate owned..................................................... 13,708 13,726 Loan servicing assets................................................. 72,576 81,836 Goodwill.............................................................. 86,782 90,471 Other assets.......................................................... 119,103 129,312 ------------- ------------ Total assets..................................................... $ 19,813,254 19,760,265 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Checking accounts................................................... $ 1,497,116 1,181,528 Money market accounts............................................... 1,757,301 1,799,709 Savings accounts.................................................... 1,128,922 1,155,093 Certificates of deposit............................................. 6,524,040 6,082,870 ------------- ------------ Total deposits................................................... 10,907,379 10,219,200 Federal Home Loan Bank advances....................................... 5,036,901 5,370,503 Reverse repurchase agreements......................................... 1,799,846 2,096,524 Other borrowings...................................................... 239,088 229,798 Advance payments by borrowers for taxes and insurance................. 61,856 138,379 Accrued interest payable.............................................. 51,633 53,094 Accrued expenses and other liabilities................................ 237,169 275,878 ------------- ------------ Total liabilities................................................ 18,333,872 18,383,376 ------------- ------------ Shareholders' equity: Preferred stock - $.01 par value per share; 20,000,000 shares authorized and unissued........................................... - - Common stock - $.01 par value per share; 180,000,000 shares authorized; 129,915,210 shares issued(1).......................... 1,299 1,299 Additional paid-in capital(1)....................................... 706,155 706,155 Retained earnings................................................... 793,469 700,616 Less 2,280,614 and 2,217,536 shares of common stock held in treasury at cost(1)............................................... (53,526) (45,441) Borrowings of employee investment and stock ownership plan.......... (1,943) (2,349) Accumulated other comprehensive income.............................. 33,928 16,609 ------------- ------------ Total shareholders' equity................................... 1,479,382 1,376,889 ------------- ------------ Total liabilities and shareholders' equity................... $ 19,813,254 19,760,265 ============= ============ - --------------------------- (1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998.
See Notes to Consolidated Financial Statements 1 4 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- -------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (AS RESTATED) (AS RESTATED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME: Loans and leases.................................... $ 264,725 219,775 519,888 427,755 Mortgage-backed securities: Available for sale................................ 22,215 18,894 42,861 37,568 Held to maturity.................................. 62,862 88,219 133,501 180,030 Investment securities available for sale............ 3,220 5,676 10,652 10,414 Other interest-earning assets....................... 8,512 6,202 17,036 12,010 ------------- ------------ ------------ ------------ Total interest income............................ 361,534 338,766 723,938 667,777 ------------- ------------ ------------ ------------ INTEREST EXPENSE: Deposits............................................ 114,103 111,545 225,439 221,955 Federal Home Loan Bank advances..................... 71,703 52,159 145,744 100,976 Other borrowings.................................... 32,952 43,782 68,607 84,760 ------------- ------------ ------------ ------------ Total interest expense........................... 218,758 207,486 439,790 407,691 ------------- ------------ ------------ ------------ Net interest income.............................. 142,776 131,280 284,148 260,086 Provision for loan and lease losses................... 5,354 4,799 10,156 9,625 ------------- ------------ ------------ ------------ Net interest income after provision for loan and lease losses...................... 137,422 126,481 273,992 250,461 ------------- ------------ ------------ ------------ OTHER INCOME: Mortgage banking.................................... 15,625 15,806 30,426 31,170 Retail banking...................................... 23,925 16,575 42,183 30,122 Leasing operations.................................. 3,440 1,445 5,650 3,534 Net gains (losses).................................. 4,270 35 8,374 617 Other............................................... 524 (3) 1,276 110 ------------- ------------ ------------ ------------ Total other income............................... 47,784 33,858 87,909 65,553 ------------- ------------ ------------ ------------ ADMINISTRATIVE EXPENSES: Compensation and employee benefits.................. 39,520 42,269 78,170 83,095 Net occupancy and equipment......................... 12,792 12,646 25,256 25,464 Federal deposit insurance premiums.................. 1,176 1,386 2,533 2,696 Amortization of goodwill............................ 1,791 1,362 3,582 2,724 Other administrative expenses....................... 27,420 20,280 54,315 41,026 ------------- ------------ ------------ ------------ Total administrative expenses.................... 82,699 77,943 163,856 155,005 ------------- ------------ ------------ ------------ Income before income taxes............................ 102,507 82,396 198,045 161,009 Income taxes.......................................... 34,146 27,408 66,151 54,138 ------------- ------------ ------------ ------------ Net income....................................... $ 68,361 54,988 131,894 106,871 ============= ============ ============ ============ Basic earnings per share.............................. $ .53 .44 1.03 .85 ============= ============ ============ ============ Diluted earnings per share............................ $ .52 .43 1.00 .83 ============= ============ ============ ============ Average common shares outstanding(1).................. 128,105,248 124,833,976 128,005,966 125,212,660 ============= ============ ============ ============ Average common and common equivalent shares outstanding - assuming dilution(1).................. 132,320,964 128,191,828 131,953,537 128,600,906 ============= ============ ============ ============ Cash dividends declared per share(1).................. $ .14 .12 .265 .23 ============= ============ ============ ============ - --------------------------- (1) Restated to reflect the 2-for-1 stock split issued May 20, 1998.
See Notes to Consolidated Financial Statements 2 5 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
BORROWINGS OF EMPLOYEE ACCUMULATED INVESTMENT TOTAL ADDITIONAL OTHER AND STOCK SHARE- COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE OWNERSHIP HOLDERS' STOCK CAPITAL EARNINGS STOCK INCOME Plan EQUITY --------- --------- -------- ------- ------------ --------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Balance, January 1, 1998 $ 1,299 706,155 700,616 (45,441) 16,609 (2,349) 1,376,889 Comprehensive income: Net unrealized holding gain on securities................. - - - - 34,626 - 34,626 Reclassification adjustment for (gains) losses included in net income................. - - - - (7,981) - (7,981) Income tax expense related to items of other comprehensive income........................ - - - - (9,326) - (9,326) Net income..................... - - 131,894 - - - 131,894 ------- -------- -------- ------- --------- ------- ---------- Comprehensive income............. - - 131,894 - 17,319 - 149,213 EISOP loan repayment............. - - - - - 406 406 Treasury stock purchased 540,000 shares(1).............. - - - (17,861) - - (17,861) Treasury stock reissued in connection with stock options exercised, 476,922 shares(1)... - - (5,117) 9,776 - - 4,659 Dividends paid ($.265 per share)(1)...................... - - (33,924) - - - (33,924) ------- -------- -------- ------- --------- ------- ---------- Balance, June 30, 1998........... $ 1,299 706,155 793,469 (53,526) 33,928 (1,943) 1,479,382 ======= ======== ======== ======= ========= ======= ========== - --------------------------- (1) Restated to reflect the 2-for-1 stock split issued May 20, 1998.
See Notes to Consolidated Financial Statements 3 6 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
SIX MONTHS ENDED JUNE 30, --------------------------- 1998 1997 ---- ---- (AS RESTATED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................................... $ 131,894 106,871 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan and lease losses......................................... 10,156 9,625 Net (gains) losses.......................................................... (3,376) (3,204) Accretion of discounts, amortization of premiums, amortization of goodwill and depreciation, net............................. 2,298 27,410 Origination of real estate loans held for sale.............................. (888,684) (725,518) Proceeds from sale of loans held for sale................................... 883,686 775,298 Other....................................................................... (22,441) 72,547 ------------ ------------ Net cash provided by operating activities................................. 113,533 263,029 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net principal disbursed on loans and leases................................... (1,920,089) (1,172,628) Proceeds from principal repayments and maturities of: Mortgage-backed securities held to maturity................................. 814,857 420,419 Mortgage-backed securities available for sale............................... 41,382 4,336 Investment securities available for sale.................................... 559,740 10,166 Sales of mortgage-backed securities available for sale........................ 418,198 35,996 Sales of Federal Home Loan Bank Stock......................................... 2,188 - Sales of loan servicing rights................................................ 13,937 35,708 Purchases of: Mortgage-backed securities held to maturity................................. (68) (469) Mortgage-backed securities available for sale............................... - (24,685) Investment securities available for sale.................................... (6,012) (126,026) Federal Home Loan Bank stock................................................ - (16,402) Loan servicing rights, including those originated........................... (16,149) (11,712) Other......................................................................... (22,390) (13,497) ------------ ------------ Net cash used in investing activities....................................... (114,406) (858,794) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings.............................. (1,619,002) 438,453 Proceeds from long-term borrowings............................................ 2,041,301 1,146,521 Repayments of long-term borrowings............................................ (1,042,155) (942,756) Increase (decrease) in deposits............................................... 688,345 (104,493) Increase (decrease) in advance payments by borrowers for taxes and insurance.................................................................... (76,523) 43,946 Payment of dividends on common stock.......................................... (33,924) (26,630) Purchase of treasury stock, net of options exercised.......................... (17,861) (39,172) Reissuance of treasury stock.................................................. 4,659 - ------------ ------------ Net cash provided by (used in) financing activities............................. (55,160) 515,869 ------------ ------------ Net decrease in cash and cash equivalents....................................... (56,033) (79,896) Cash and cash equivalents, beginning of the period.............................. 239,716 334,596 Adjustment to convert Rochester to a calendar year end.......................... - 28,163 ------------ ------------ Cash and cash equivalents, end of the period.................................... $ 183,683 282,863 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest on deposits and borrowings............................. $ 441,418 405,107 Cash paid for income taxes.................................................... 12,000 31,225 SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES: Transfers from loans to real estate owned..................................... 2,638 4,606 Loans exchanged for mortgage-backed securities................................ 1,347,422 -
See Notes to Consolidated Financial Statements 4 7 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Charter One Financial, Inc. ("the Company" or "Charter One") Annual Report on Form 10-K. The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. Such adjustments are of a normal recurring nature. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year. 2. On June 15, 1998, the Company announced a definitive agreement under which ALBANK Financial Corporation ("ALBANK") would be merged into a wholly owned subsidiary of Charter One. ALBANK, the holding company of ALBANK, F.S.B., a federally chartered savings bank, and ALBANK Commercial, a state-chartered commercial bank, is headquartered in Albany, New York, has $4.1 billion in assets ($3.5 billion in deposits), and operates 88 branches in upstate New York and 21 in Massachusetts and Vermont. Terms of the agreement call for a tax-free exchange of common shares at a fixed exchange ratio of 2.16 shares of Charter One common stock for each of ALBANK's common shares. The merger, which will be accounted for as a pooling of interests, is expected to close in the fourth quarter of 1998. The transaction has been approved by the boards of directors of both companies and is subject to approval by the Office of Thrift Supervision, the New York Superintendent of Banking, and each Company's shareholders. 3. On April 24, 1998, the Company announced a definitive agreement to acquire CS Financial Corporation, the holding company of Cuyahoga Savings Association in a stock-for-stock exchange. CS Financial, headquartered in Cleveland, Ohio, is a savings and loan holding company with $381 million in assets and eight branch offices. 4. On October 3, 1997, Charter One completed a strategic alliance with RCSB Financial, Inc. ("Rochester"), which was accounted for as a pooling of interests. Headquartered in Rochester, New York, RCSB Financial, Inc. was the holding company of Rochester Community Savings Bank, a $4 billion savings bank with primary business lines in retail banking, mortgage banking and automobile lending. The merger was effected through the issuance of .91 shares of Company common stock for each share of Rochester common stock resulting in the issuance of 28,358,770 shares as adjusted for the 5% stock dividend issued October 31, 1997 and 2-for-1 stock split in the form of a 100% stock dividend effected on May 20, 1998. 5. In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for the reporting of financial information about reportable operating segments in annual and interim financial statements. This statement required that financial information be reported on the basis that it is reported internally for evaluating segment performance and deciding how to allocate resources to segments. This statement may result in additional financial statement disclosures upon adoption; however, the Company does not expect to make material changes to its current segment reporting. SFAS No. 131 will become effective December 31, 1998. 6. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for financial statements for years beginning after June 15, 1999. Management has not completed the process of evaluating this statement and therefore has not determined the impact that adopting this statement will have on the financial position and results of operations. 7. Certain items in the consolidated financial statements for 1997 have been reclassified to conform to the 1998 presentation. 5 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HOLDING COMPANY BUSINESS GENERAL Charter One Financial, Inc. ("Charter One" or the "Company") is a Delaware corporation organized as a unitary savings and loan holding company and owns all of the outstanding capital stock of Charter Michigan Bancorp, Inc. which is a Michigan corporation organized as a unitary savings and loan holding company, which in turn owns all of the outstanding capital stock of Charter One Bank, F.S.B. (the "Bank"). The business of the Bank and, therefore, the primary business of the Company is providing consumer and business banking services to certain major markets in Ohio, Michigan, and, since October 1997, New York. At the end of the first quarter of 1998 the Bank and its subsidiaries were doing business through 225 full-service banking branches and 39 loan production offices. FORWARD-LOOKING STATEMENTS When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including but not limited to: (i) changes in economic conditions in the Company's market area; (ii) changes in policies by regulatory agencies; (iii) fluctuations in interest rates; (iv) demand for loans in the Company's market area; (v) competition; (vi) the possibility that expected cost savings from the proposed acquisition (the "Merger") of ALBANK cannot be fully realized within the expected time frame; (vii) the possibility that costs or difficulties relating to the integration of the businesses of the Company and ALBANK will be greater than expected; and (viii) the possibility that revenues following the Merger will be lower than expected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake--and specifically declines any obligation--to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. RESULTS OF OPERATIONS PERFORMANCE OVERVIEW The Company reported net income of $68.4 million, or $0.52 per diluted share, for the three months ended June 30, 1998. This was a $13.4 million, or 24.3%, increase over the net income for the second quarter of 1997 which was $55.0 million, or $0.43 per diluted share. The primary reason for this improvement was due to a $11.5 million, or 8.8%, increase in net interest income for the second quarter of 1998. In addition, the Company experienced increases in recurring fee income and gains on sale which were partially offset by increases in administrative expenses. Overall, income before the federal tax provision increased by $20.1 million for the second quarter of 1998 as compared to the same period in 1997. For the second quarter of 1998, the Company's reported net income resulted in a 18.6% annualized return on average equity and a 1.4% annualized return on average assets. For the 1997 period, those ratios were 17.2% and 1.2%, respectively. Net income for the first six months of 1998 was $131.9 million, or $1.00 per diluted share, as compared to $106.9 million, or $0.83 per diluted share for the first half of 1997. The increase of $25.0 million, or 23.4%, in net income was primarily due to increases in net interest income, recurring fee income and gains from sales of assets. These increases were partially offset by an increase in administrative expenses. For the six months ended June 30, 1998, the Company's reported net income resulted in a 18.3% annualized return on average equity and a 1.3% annualized return on average assets. For the 1997 period, those ratios were 16.7% and 1.2%, respectively. 6 9 SELECTED OPERATING RATIOS (Figure 1)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ------------------ 6/30/98 6/30/97 6/30/98 6/30/97 Annualized returns: Return on average assets......................................... 1.38% 1.20% 1.33% 1.18% Return on average equity......................................... 18.63 17.18 18.32 16.74 Average equity to average assets................................. 7.42 6.98 7.28 7.03 Annualized operating ratios: Net interest income to administrative expenses................... 1.73x 1.68x 1.73x 1.68x Administrative expenses to average assets........................ 1.67% 1.70% 1.66% 1.71% Efficiency ratio................................................. 43.43 46.38 44.07 46.85
NET INTEREST INCOME Net interest income is the principal source of earnings for the Company. It is affected by a number of factors including the level, pricing and maturity of interest-earning assets and interest-bearing liabilities, as well as interest rate fluctuations and asset quality. Figure 2 sets forth information concerning Charter One's interest-earning assets, interest-bearing liabilities, net interest income, interest rate spreads and net yield on average interest-earning assets during the periods indicated (including fees which are considered adjustments to yields). Average balance calculations are based on daily balances. 7 10 AVERAGE BALANCES, INTEREST RATES AND YIELDS/COSTS (Figure 2)
THREE MONTHS ENDED JUNE 30, -------------------------------------------------------------------------- 1998 1997 ---------------------------------- -------------------------------------- AVG. AVG. AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST COST BALANCE INTEREST COST ----------- --------- ------- ----------- --------- -------- (DOLLARS IN THOUSANDS) Interest-earning assets: Loans and leases(1)................ $ 13,502,239 $ 264,725 7.85% $ 10,976,352 $ 219,775 8.01% Mortgage-backed securities: Available for sale............... 1,253,100 22,215 7.09 1,097,253 18,894 6.89 Held to maturity................. 3,539,829 62,862 7.10 4,962,360 88,219 7.11 Investment securities available for sale................ 199,490 3,220 6.46 324,502 5,676 7.00 Other interest-earning assets(2)......................... 487,684 8,512 6.90 357,483 6,202 6.86 ----------- --------- ----------- --------- Total interest-earning assets... 18,982,342 361,534 7.62 17,717,950 338,766 7.65 --------- --------- Allowance for loan losses.......... (112,169) (91,933) Noninterest-earning assets(3)...... 903,547 697,815 ----------- ----------- Total assets.................. $ 19,773,720 $ 18,323,832 =========== =========== Interest bearing liabilities(4): Deposits: Checking accounts................ $ 1,447,135 2,956 .82 $ 1,112,450 3,138 1.13 Savings accounts................. 1,140,029 6,225 2.19 1,338,673 7,896 2.37 Money market accounts............ 1,776,502 14,369 3.24 1,650,168 14,226 3.46 Certificates of deposit.......... 6,372,908 90,553 5.70 6,017,000 86,285 5.75 ----------- --------- ----------- --------- Total deposits................. 10,736,574 114,103 4.26 10,118,291 111,545 4.42 ----------- --------- ----------- --------- FHLB advances...................... 5,107,368 71,703 5.62 3,587,247 52,159 5.81 Other borrowings................... 2,058,012 32,952 6.35 2,940,955 43,782 5.90 ----------- --------- ----------- --------- Total borrowings................ 7,165,380 104,655 5.83 6,528,202 95,941 5.84 ----------- --------- ----------- --------- Total interest-bearing liabilities.................... 17,901,954 218,758 4.89 16,646,493 207,486 4.98 --------- --------- Non interest-bearing liabilities... 403,844 397,116 ----------- ----------- Total liabilities............... 18,305,798 17,043,609 Shareholders' equity................. 1,467,922 1,280,223 ----------- ----------- Total liabilities and shareholders' equity........... $ 19,773,720 $ 18,323,832 =========== =========== Net interest income.................. $ 142,776 $ 131,280 ========= ========= Interest rate spread................. 2.73 2.67 Net yield on average interest- earning assets(5)................... 3.01 2.96 Average interest-earning assets to average interest-bearing liabilities......................... 106.04% 106.44% - --------------------------- (1) Average balances include nonaccrual loans and interest income includes loan fee amortization. (2) Includes FHLB stock, federal funds sold, interest-bearing deposits with banks and other. (3) Includes mark-to-market adjustments on securities available for sale. (4) The costs of liabilities include the annualized effect of interest rate risk management instruments. (5) Annualized net interest income divided by the average balance of interest-earning assets.
8 11
SIX MONTHS ENDED JUNE 30, -------------------------------------------------------------------------- 1998 1997 ---------------------------------- -------------------------------------- AVG. AVG. AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST COST BALANCE INTEREST COST ----------- --------- ------- ----------- --------- -------- (DOLLARS IN THOUSANDS) Interest-earning assets: Loans and leases(1)................ $ 13,214,992 $ 519,888 7.88% $ 10,678,013 $ 427,755 8.02% Mortgage-backed securities: Available for sale............... 1,209,369 42,861 7.09 1,103,041 37,568 6.81 Held to maturity................. 3,759,188 133,501 7.10 5,063,537 180,030 7.11 Investment securities available for sale................ 306,802 10,652 6.94 299,478 10,414 6.95 Other interest-earning assets(2)......................... 485,628 17,036 6.98 354,226 12,010 6.74 ----------- --------- ----------- --------- Total interest-earning assets... 18,975,979 723,938 7.64 17,498,295 667,777 7.64 --------- --------- Allowance for loan losses.......... (112,411) (92,868) Noninterest-earning assets(3)...... 930,184 727,660 ----------- ----------- Total assets.................. $ 19,793,752 $ 18,133,087 =========== =========== Interest bearing liabilities(4): Deposits: Checking accounts................ $ 1,323,001 5,895 .90 $ 1,090,277 6,156 1.14 Savings accounts................. 1,139,834 12,411 2.20 1,343,451 15,811 2.37 Money market accounts............ 1,780,211 28,859 3.27 1,645,189 28,602 3.51 Certificates of deposit.......... 6,298,826 178,274 5.71 6,056,704 171,386 5.71 ----------- --------- ----------- --------- Total deposits................. 10,541,872 225,439 4.31 10,135,621 221,955 4.42 ----------- --------- ----------- --------- FHLB advances...................... 5,179,691 145,744 5.67 3,487,880 100,976 5.81 Other borrowings................... 2,153,801 68,607 6.34 2,873,230 84,760 5.87 ----------- --------- ----------- --------- Total borrowings................ 7,333,492 214,351 5.87 6,361,110 185,736 5.84 ----------- --------- ----------- --------- Total interest-bearing liabilities.................... 17,875,364 439,790 4.95 16,496,731 407,691 4.96 --------- --------- Non interest-bearing liabilities... 478,239 359,625 ----------- ----------- Total liabilities............... 18,353,603 16,856,356 Shareholders' equity................. 1,440,149 1,276,731 ----------- ----------- Total liabilities and shareholders' equity........... $ 19,793,752 $ 18,133,087 =========== =========== Net interest income.................. $ 284,148 $ 260,086 ========= ========= Interest rate spread................. 2.69 2.68 Net yield on average interest- earning assets(5)................... 2.99 2.97 Average interest-earning assets to average interest-bearing liabilities......................... 106.16% 106.07% - --------------------------- (1) Average balances include nonaccrual loans and interest income includes loan fee amortization. (2) Includes FHLB stock, federal funds sold, interest-bearing deposits with banks and other. (3) Includes mark-to-market adjustments on securities available for sale. (4) The costs of liabilities include the annualized effect of interest rate risk management instruments. (5) Annualized net interest income divided by the average balance of interest-earning assets.
9 12 Figure 3 sets forth the changes in Charter One's interest income and interest expense resulting from changes in interest rates and the volume of interest-earning assets and interest-bearing liabilities. Changes not solely attributable to volume or rate have been allocated in proportion to the changes due to volume and rate. RATE/VOLUME ANALYSIS (Figure 3)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ------------------------------------ ------------------------------------ 1998 V. 1997 1998 V. 1997 ------------------------------------ ------------------------------------ INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO -------------------------- -------------------------- RATE VOLUME TOTAL RATE VOLUME TOTAL ---- ------ ----- ---- ------ ----- (DOLLARS IN THOUSANDS) Interest income: Loans and leases.................. $ (6,178) 51,128 44,950 (11,123) 103,256 92,133 Mortgage-backed securities: Available for sale.............. 572 2,749 3,321 1,569 3,724 5,293 Held to maturity................ (95) (25,262) (25,357) (207) (46,322) (46,529) Investment securities available for sale............... (410) (2,046) (2,456) (16) 254 238 Other interest-earning assets........................... 37 2,273 2,310 429 4,597 5,026 ------- -------- -------- -------- --------- -------- Total......................... (6,074) 28,842 22,768 (9,348) 65,509 56,161 ------- -------- -------- -------- --------- -------- Interest expense: Checking accounts................. (991) 809 (182) (1,436) 1,175 (261) Savings accounts.................. (557) (1,114) (1,671) (1,124) (2,276) (3,400) Money market accounts............. (909) 1,052 143 (2,004) 2,261 257 Certificates of deposit........... (795) 5,063 4,268 35 6,853 6,888 Federal Home Loan Bank advances ................... (1,825) 21,369 19,544 (3,181) 47,949 44,768 Other borrowings.................. 1,840 (12,670) (10,830) 4,214 (20,367) (16,153) ------- -------- -------- -------- --------- -------- Total......................... (3,237) 14,509 11,272 (3,496) 35,595 32,099 ------- -------- -------- -------- --------- -------- Change in net interest income............................. $ (2,837) 14,333 11,496 (5,852) 29,914 24,062 ======= ======== ======== ======== ========= ========
Net interest income for the second quarter of 1998 was $142.8 million as compared to $131.3 million for the second quarter of 1997. This $11.5 million, or 8.8%, increase was primarily attributable to the growth in interest-earning assets, mainly loans and leases, since June 30, 1997. Due to high volumes of loan and lease originations in 1997 and the first half of 1998, the average balance of loans and leases was $2.5 billion higher during the second quarter of 1998 as compared to the same period in 1997. This increase in the balance of loans and leases caused interest income to increase by $51.1 million. Overall, average interest-earning assets in the second quarter of 1998 were $1.3 billion higher than in the same period of 1997. The decrease in the remaining components of interest-earning assets, primarily mortgage-backed securities, helped fund the loan and lease growth. Mortgage-backed security balances were $1.3 billion lower in the second quarter of 1998 which caused interest income to decrease by $22.0 million, partially offsetting the increase in interest income created by the loan and lease growth. The primary funding for the remaining growth in the loan and lease portfolio came from increases in interest-bearing liabilities. The average balance of interest-bearing liabilities was $1.3 billion higher in the second quarter of 1998 as compared to the same period in 1997. This caused interest expense to increase by $14.5 million. Overall the volume changes in interest-earning assets and interest-bearing liabilities resulted in an increase of $14.3 million in net interest income, which was partially offset by a lower yield on interest-earning assets in the 1998 period. The yield on interest-earning assets declined by 3 basis points to 7.62% for the three months ended June 30, 1998. This caused interest income to decrease by $6.1 million. This decrease in the cost of interest-bearing liabilities for the second quarter of 1998 was 9 basis points which lowered interest expense by $3.2 million in the 1998 period as compared to the second quarter of 1997. These lower interest rates were primarily attributable to lower market interest rates and a continued flattening of the yield curve. Overall the interest rate spread was 2.73% for the second quarter of 1998 as compared to 2.67% for the second quarter of 1997. The net yield on interest-earning assets was 3.01% for the second quarter of 1998 as compared to 2.96% for the second quarter of 1997. Net interest income for the first six months of 1998 was $284.1 million, an increase of $24.1 million, or 9.3%, over the same period in 1997. This increase was primarily attributable to an increase in the balance of interest- 10 13 earning assets. The average balance of interest-earning assets for the six months ended June 30, 1998 was $1.5 billion higher than for the same period in 1997. This increase was primarily due to growth in the loan and lease portfolio. The average balance of loans and leases was $2.5 billion higher in the 1998 period as compared to 1997 which caused interest income to increase by $103.3 million. This increase was partially offset by declining balances of mortgage-backed securities. The average balance of mortgage-backed securities decreased by $1.2 billion for the first half of 1998 as compared to the same period in 1997. The declining balances of mortgage-backed securities caused interest income to decrease by $42.6 million as repayments and sales of mortgage-backed securities were used to fund loan and lease growth. The remaining growth of interest-earning assets was primarily funded by an increase in interest-bearing liabilities. The average balance of interest-bearing liabilities was $1.4 billion higher for the first half of 1998 as compared to the same period of 1997. This caused interest expense to increase by $35.6 million. The interest rate spread was 2.69% for the first half of 1998 as compared to 2.68% for the first six months of 1997. The net yield on interest-earning assets was 2.99% for the first half of 1998 as compared to 2.97% for the first six months of 1997. This increase was due to the larger average balance of interest-earning assets than the average balance of interest-bearing liabilities. Average interest-earnings assets were 106.16% of interest-bearing liabilities for the six months ended June 30, 1998 and 106.07% for the same period in 1997. This growth was primarily funded by increases in the average balance of equity primarily due to growth in retained earnings. Figure 4 sets forth the Company's yields and costs at period end for the dates indicated. YIELDS AND COSTS AT END OF PERIOD (Figure 4)
JUNE 30, 1998 DECEMBER 31, 1997 YIELDS AND COSTS AT END OF PERIOD Weighted average yield: Real estate loans..................................................................... 7.58% 7.72% Automobile loans...................................................................... 8.78 8.92 Retail consumer loans................................................................. 8.14 8.40 Leases(1)............................................................................. 6.63 8.04 Corporate banking loans............................................................... 9.14 8.86 Total loans and leases.............................................................. 7.82 8.00 Mortgage-backed securities............................................................ 7.08 7.20 Investment securities................................................................. 5.29 6.67 Other interest-earning assets......................................................... 7.41 7.29 Total interest-earning assets..................................................... 7.60 7.73 Weighted average cost (2): Checking.............................................................................. .76 1.02 Savings............................................................................... 2.16 2.33 Money market.......................................................................... 3.25 3.31 Certificates of deposit............................................................... 5.69 5.73 Total deposits...................................................................... 4.26 4.37 FHLB advances......................................................................... 5.64 5.83 Other borrowings...................................................................... 6.43 6.38 Total interest-bearing liabilities............................................... 4.89 5.07 Interest rate spread.................................................................... 2.71 2.66 Net yield on interest-earning assets.................................................... 3.01% 2.96% - --------------------------- (1) 1998 yield excludes impact of related tax benefits. (2) The costs of liabilities include the annualized effect of interest rate risk management instruments.
OTHER INCOME Other income was $47.8 million for the second quarter of 1998 as compared to $33.9 million for the same period in 1997. This $13.9 million, or 41.1% increase was primarily due to increases in retail banking fee income and gains from asset sales. Retail banking income increased $7.4 million primarily due to checking account service charges, which increased $7.0 million. An increase in the number of checking accounts was the primary reason checking account fee income increased. Gains on the sale of assets, primarily mortgage loans that were securitized into mortgage-backed securities, increased by $4.2 million over the second quarter of 1997. These sales were 11 14 executed to assist the Bank in managing its interest rate risk as the assets sold primarily consisted of long term, fixed rate mortgage-backed securities classified as available for sale. Other income for the six months ended June 30, 1998 was $87.9 million, a $22.4 million, or 34.1%, increase compared to other income during the first six months of 1997. This increase was primarily attributable to increases in retail banking fee income and gains from asset sales. Retail banking income was $42.2 million for the six months ended June 30, 1998 which was a 40.0% increase over the $30.1 million of retail banking income for the first six months of 1997. As explained in the quarterly comparisons above, the growth in the number of checking accounts was the primary reason checking related fee income increased which was the driving factor for the increase in the retail banking income statement line item. Asset sales resulted in net gains of $8.4 million for the six months ended June 30, 1998 which was an increase of $7.8 million over the same period in 1997. The 1998 sales were primarily for interest rate risk management purposes as the assets sold primarily consisted of long term, fixed rate mortgage-backed securities classified as available for sale. ADMINISTRATIVE EXPENSES Administrative expenses were $82.7 million during the second quarter of 1998. This is a $4.8 million, or 6.1%, increase as compared to the second quarter of 1997 which had $77.9 million in administrative expenses. While the dollar level of expenses increased, those increases were consistent with the expanded operations of the Bank and its subsidiaries. The ratio of administrative expenses to average assets was 1.67% for the 1998 period and 1.70% during the second quarter of 1997. Also, the Company's efficiency ratio of 43.43% for the second quarter of 1998 compared favorably to the 46.38% efficiency ratio during the second quarter of 1997. Since efficiency ratios are a calculation of administrative expenses (excluding the amortization of goodwill) divided by net interest income plus recurring fee income, the lower the ratio the better for the Company. Administrative expenses were $163.9 million for the six months ended June 30, 1998 as compared to $155.0 million for the comparable period in 1997. While the 1998 administrative expenses increased, those increases were consistent with the expanded operations of the Bank and its subsidiaries. The ratio of administrative expenses to average assets was 1.66% for the 1998 period and 1.71% during the first half of 1997. Also, the Company's efficiency ratio of 44.07% for the first six months of 1998 compared favorably to the 46.85% efficiency ratio during the same period of 1997. FEDERAL INCOME TAXES Federal income tax expense was $34.1 million for the three months ending June 30, 1998. This was $6.7 million, or 24.6%, higher than the federal income tax expense during the three months ended June 30, 1997. This increase was primarily due to a $20.1 million, or 24.4%, increase in pre-tax income. The effective tax rates were 33.3% for the 1998 and 1997 period. Federal income tax expense was $66.2 million for the six months ending June 30, 1998. This was $12.0 million, or 22.2%, higher than the federal income tax expense during the six months ended June 30, 1997. This increase was primarily due to a $37.0 million, or 23.0%, increase in pre-tax income. The effective tax rates were 33.4% for the 1998 period and 33.6% for the 1997 period. FINANCIAL CONDITION OVERVIEW At June 30, 1998 the Company had total assets of $19.8 billion, a $53.0 million increase over the asset total at December 31, 1997. While the overall growth of total assets was relatively small, the Company was able to alter the mix of its balance sheet through a reduction in investment securities and an increase in loans and leases. 12 15 LOANS AND LEASES COMPOSITION OF LOANS AND LEASES(Figure 5)
JUNE 30, 1998 DECEMBER 31, 1997 ------------------------ ----------------------- % OF % OF AMOUNT TOTAL AMOUNT TOTAL ----------- ----------- ------------ -------- (DOLLARS IN THOUSANDS) LOAN AND LEASE PORTFOLIO, NET One-to-four family: Permanent: Fixed rate............................................ $ 5,220,450 39.25% $ 5,281,533 41.59% Adjustable rate....................................... 2,557,347 19.23 2,880,513 22.68 Construction............................................ 166,969 1.26 196,647 1.55 ----------- ------- ------------ ------- 7,944,766 59.74 8,358,693 65.82 Commercial real estate: Multifamily............................................. 223,388 1.68 265,360 2.09 Other................................................... 329,935 2.48 325,646 2.56 ----------- ------- ------------ ------- 553,323 4.16 591,006 4.65 Consumer: Retail.................................................. 2,264,973 17.03 1,606,128 12.64 Automobile.............................................. 1,779,629 13.38 1,542,230 12.14 ----------- ------- ------------ ------- 4,044,602 30.41 3,148,358 24.78 Business: Leasing................................................. 582,267 4.38 437,227 3.44 Corporate banking....................................... 174,648 1.31 166,521 1.31 ----------- ------- ------------ ------- 756,915 5.69 603,748 4.75 ----------- ------- ------------ ------- $ 13,299,606 100.00% $ 12,701,805 100.00% =========== ======= ============ ======= Portfolio of loans serviced for others...................... $ 9,136,900 $ 9,084,871 =========== ============
LOAN AND LEASE ACTIVITY (Figure 6)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Originations: Real estate: Permanent: One-to-four family................................. $ 1,493,448 1,036,201 2,850,863 1,765,094 Multifamily........................................ 11,559 12,720 16,114 17,289 Commercial......................................... 20,457 23,511 32,305 38,091 ---------- ----------- ----------- ---------- Total permanent.................................. 1,525,464 1,072,432 2,899,282 1,820,474 ---------- ----------- ----------- ---------- Construction: One-to-four family................................. 115,002 117,474 203,144 176,087 Multifamily........................................ 1,754 964 4,891 2,364 Commercial......................................... 6,860 4,300 8,758 9,595 ---------- ----------- ----------- ---------- Total construction............................... 123,616 122,738 216,793 188,046 ---------- ----------- ----------- ---------- Total real estate loans originated............. 1,649,080 1,195,170 3,116,075 2,008,520 ---------- ----------- ----------- ---------- Retail consumer...................................... 669,761 260,313 1,047,520 428,205 Automobile........................................... 325,827 324,716 599,196 550,578 Corporate banking.................................... 46,365 45,748 92,877 77,185 Leases............................................... 137,537 46,274 217,448 91,191 ---------- ----------- ----------- ---------- Total loans and leases originated.............. 2,828,570 1,872,221 5,073,116 3,155,679 ---------- ----------- ----------- ---------- Loans purchased.......................................... 16,149 - 16,149 - Sales and principal reductions: Loans sold............................................. 485,664 465,267 888,684 819,302 Loans exchanged for MBS................................ 705,427 - 1,347,422 - Principal reductions................................... 1,142,050 685,729 2,294,318 1,215,180 ---------- ----------- ----------- ---------- Total sales and principal reductions............. 2,333,141 1,150,996 4,530,424 2,034,482 ---------- ----------- ----------- ---------- Increase before net items...................... $ 511,578 721,225 558,841 1,121,197 ========== =========== =========== ==========
13 16 INVESTMENT SECURITIES The entire investment securities portfolio was classified as available for sale at both June 30, 1998 and December 31, 1997. Figure 7 summarizes the fair values of the portfolio at those dates. INVESTMENT SECURITIES PORTFOLIO (Figure 7)
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ------------------ (DOLLARS IN THOUSANDS) U.S. Treasury and agency securities.................................... $ 16,611 571,363 Corporate notes and commercial paper................................... 13,217 10,188 Other.................................................................. 931 1,038 -------- --------- Total................................................................ $ 30,759 582,589 ======== ========= Weighted average rate................................................ 5.29% 6.67% ======== =========
MORTGAGE-BACKED SECURITIES Figure 8 summarizes the mortgage-backed securities ("MBS") portfolios at June 30, 1998 and December 31, 1997. The amounts reflected represent the fair values of securities available for sale and the amortized cost of securities held to maturity. MORTGAGE-BACKED SECURITIES (Figure 8)
JUNE 30, 1998 DECEMBER 31, 1997 ---------------- ----------------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE Participation certificates: Government agency issues: FNMA.................................................................. $ 921,261 - FHLMC................................................................. 1,653 1,897 GNMA.................................................................. 83 102 Collateralized mortgage obligations: Government agency issues: FHLMC................................................................. 347,347 360,732 FNMA.................................................................. 263,864 264,694 Private issues.......................................................... 440,593 442,808 ---------- ---------- Total mortgage-backed securities available for sale................... 1,974,801 1,070,233 ---------- ---------- HELD TO MATURITY Participation certificates: Government agency issues: FNMA.................................................................. 877,634 1,013,757 FHLMC................................................................. 355,597 439,816 GNMA.................................................................. 139,001 160,678 Private issues.......................................................... 266,854 316,046 Collateralized mortgage obligations: Government agency issues: FNMA.................................................................. 314,694 359,664 FHLMC................................................................. 145,212 176,074 Private issues.......................................................... 1,300,785 1,749,214 ---------- ---------- Total mortgage-backed securities held to maturity................... 3,399,777 4,215,249 ---------- ---------- Total............................................................ $ 5,374,578 5,285,482 ========== ==========
14 17 MORTGAGE-BACKED SECURITIES BY PAYMENT TYPE (Figure 9)
JUNE 30, 1998 DECEMBER 31, 1997 ------------------------ ------------------------- BOOK AVERAGE BOOK AVERAGE VALUE RATE VALUE RATE --------- ------- ----------- -------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE Adjustable rate: Collateralized mortgage obligations.............. $1,048,664 7.01% $ 1,062,903 7.31% --------- ----------- Total adjustable rate.......................... 1,048,664 7.01 1,062,903 7.31 --------- ----------- Fixed rate: Participation certificates....................... 922,997 7.09 1,999 8.02 Collateralized mortgage obligations.............. 3,140 6.36 5,331 6.36 --------- ----------- Total fixed rate............................... 926,137 7.09 7,330 6.81 --------- ----------- Total available for sale..................... 1,974,801 7.05 1,070,233 7.30 --------- ----------- HELD TO MATURITY Adjustable rate: Participation certificates....................... 665,294 7.13 792,765 7.18 Collateralized mortgage obligations.............. 310,240 7.43 326,864 7.76 --------- ----------- Total adjustable rate.......................... 975,534 7.22 1,119,629 7.35 --------- ----------- Fixed rate: Participation certificates....................... 973,792 7.30 1,137,532 7.34 Collateralized mortgage obligations.............. 1,450,451 6.87 1,958,088 6.99 --------- ----------- Total fixed rate............................... 2,424,243 7.04 3,095,620 7.12 --------- ----------- Total held to maturity....................... 3,399,777 7.09 4,215,249 7.13 --------- ----------- Total mortgage-backed securities........... $5,374,578 7.08% $ 5,285,482 7.20% ========= ===========
ASSET QUALITY ANALYSIS OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES (Figure 10)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, -------------------------- ------------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Balance, beginning of period................................ $ 112,884 92,456 113,868 94,112 Provision for loan and lease losses......................... 5,354 4,799 10,156 9,625 Adjustment to convert Rochester to a calendar year end...... - - - 650 Loans and leases charged off: Mortgage.................................................. (665) (646) (1,609) (3,842) Automobile................................................ (6,709) (4,291) (12,769) (8,721) Retail consumer........................................... (168) (741) (231) (1,453) Leases.................................................... - - - - Corporate banking......................................... - (3) - (42) -------- ------- -------- -------- Total charge-offs....................................... (7,542) (5,681) (14,609) (14,058) -------- ------- -------- -------- Recoveries: Mortgage.................................................. 157 364 275 445 Automobile................................................ 1,129 836 2,189 1,838 Retail consumer........................................... 160 145 237 307 Leases.................................................... - - - - Corporate banking......................................... - 5 26 5 -------- ------- -------- -------- Total recoveries....................................... 1,446 1,350 2,727 2,595 -------- ------- -------- -------- Net loan and lease charge-offs....................... (6,096) (4,331) (11,882) (11,463) -------- ------- -------- -------- Balance, end of period...................................... $ 112,142 92,924 112,142 92,924 ======== ======= ======== ======== Net charge-offs to average loans and leases (annualized) .18% .16% .18% .21%
15 18 ALLOCATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES (Figure 11)
JUNE 30, 1998 DECEMBER 31, 1997 -------------- ----------------- (DOLLARS IN THOUSANDS) Mortgage.......................................................................... $ 58,439 59,794 Automobile........................................................................ 37,781 39,455 Retail consumer................................................................... 9,001 8,255 Leases............................................................................ 2,307 1,777 Corporate banking................................................................. 4,614 4,587 -------- -------- Total........................................................................... $ 112,142 113,868 ======== ======== Percent of loans and leases to ending loans and leases: Mortgage........................................................................ 63.9% 70.0% Automobile...................................................................... 13.4 12.2 Retail consumer................................................................. 17.0 12.8 Leases.......................................................................... 4.4 3.6 Corporate banking............................................................... 1.3 1.4 -------- -------- Total......................................................................... 100.0% 100.0% ======== ========
Management believes that the allowance for loan and lease losses has been established in accordance with generally accepted accounting principles based on the best information available. However, future adjustments to reserves may be necessary and net income could be significantly affected if circumstances and/or economic conditions differ substantially from the assumptions used in making the initial determinations. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan and lease losses. Such agencies may require the recognition of additions to the allowance based on their judgments of information available to them at the time of their examination. Figure 12 sets forth information concerning nonperforming assets and the allowance for loan lease losses. At June 30, 1998, the Bank had no outstanding commitments to lend additional funds to borrowers whose loans were on nonaccrual or restructured status. 16 19 NONPERFORMING ASSETS (Figure 12)
JUNE 30, 1998 DECEMBER 31, 1997 --------------- ----------------- (DOLLARS IN THOUSANDS) Nonperforming loans and leases: Nonaccrual loans and leases: Mortgage loans: One-to-four family(1)................................................ $ 56,857 32,154 Multifamily and commercial........................................... 2,977 3,794 Construction and land................................................ 1,580 1,943 -------- ------- Total mortgage loans............................................... 61,414 37,891 Retail consumer........................................................ - - Automobile............................................................. - - Corporate banking...................................................... 4,773 716 Lease financings....................................................... - - -------- ------- Total nonaccrual loans and leases.................................. 66,187 38,607 -------- ------- Accruing loans and leases delinquent more than 90 days: Mortgage loans: One-to-four family................................................... - 8,356 Multifamily and commercial........................................... - - Construction and land................................................ - - -------- ------- Total mortgage loans............................................... - 8,356 Retail consumer........................................................ 10,456 4,671 Automobile............................................................. 3,351 3,547 Corporate banking...................................................... 337 290 Lease financings....................................................... - - -------- ------- Total accruing 90-day delinquent loans and leases.................. 14,144 16,864 -------- ------- Restructured real estate loans........................................... 6,281 6,722 -------- ------- Total nonperforming loans and leases............................... 86,612 62,193 Real estate acquired through foreclosure and other....................... 13,425 13,414 -------- ------- Total nonperforming assets......................................... 100,037 75,607 Less government guaranteed loans................................... 21,497 - -------- ------- Nonperforming assets net of guaranteed loans..................... $ 78,540 75,607 ======== ======= Ratio of: Nonperforming loans and leases to total loans and leases............... .66% .49% Nonperforming assets to total assets................................... .50 .38 Allowance for loan and lease losses to: Nonperforming loans and leases....................................... 129.48 183.09 Total loans and leases before allowance.............................. .84 .89 Ratio of (excluding guaranteed nonperforming loans): Nonperforming loans and leases to total loans and leases............... .50% .49% Nonperforming assets to total assets................................... .40 .38 Allowance for loan and lease losses to: Nonperforming loans and leases....................................... 172.22 183.09 Total loans and leases before allowance.............................. .84 .89 - --------------------------- (1) Includes $21.5 million of government guaranteed loans.
Nonperforming assets at June 30, 1998 totaled $100.0 million, up from $75.6 million from December 31, 1997 primarily due to the purchase of government guaranteed loans out of the loans serviced for others portfolio. The ratio of nonperforming loans to total loans was .66% at June 30, 1998 as compared to .49% at December 31, 1997. At June 30, 1998, there were $36.3 million of loans not reflected in the table above, where known information about possible credit problems of borrowers caused management to have doubts as to the ability of the borrower to comply with present loan repayment terms and that may result in disclosure of such loans in the future. 17 20 SOURCES OF FUNDS GENERAL Deposits have historically been the most important source of the Bank's funds for use in lending and for general business purposes. The Bank also derives funds from Federal Home Loan Bank ("FHLB") advances, reverse repurchase agreements and other borrowings, principal repayments on loans and mortgage-backed securities, funds provided by operations and proceeds from the sale of loans and loan participations. At June 30, 1998 and December 31, 1997, 61% and 57% of interest-bearing liabilities were in the form of deposits and 39% and 43% were in borrowings. DEPOSITS Deposit inflows and outflows are significantly influenced by general interest rates, market conditions and competitive factors. The Bank reprices its deposits primarily based on competitive conditions. In order to decrease the volatility of its deposits, the Bank imposes stringent early withdrawal penalties on its certificates of deposit. Consumer and commercial deposits are attracted principally within the Bank's primary market areas through the offering of a broad range of deposit instruments. COMPOSITION OF DEPOSITS (Figure 13)
JUNE 30, 1998 DECEMBER 31, 1997 ---------------------------------- ---------------------------------- WEIGHTED PERCENT WEIGHTED PERCENT AVERAGE OF AVERAGE OF AMOUNT RATE TOTAL AMOUNT RATE TOTAL ------ ---- ----- ------ ---- ----- (DOLLARS IN THOUSANDS) Checking accounts: Interest-bearing..................... $ 812,895 1.40% 7.46% $ 783,768 1.54% 7.67% Noninterest-bearing.................. 684,221 - 6.28 397,760 - 3.89 Savings accounts....................... 1,128,922 2.16 10.35 1,155,093 2.33 11.30 Money market accounts.................. 1,757,301 3.25 16.11 1,799,709 3.30 17.61 Certificates of deposit................ 6,522,770 5.89 59.80 6,081,434 5.95 59.53 ----------- ------- ----------- ------- Deposits........................... 10,906,109 4.38 100.00% 10,217,764 4.50 100.00% ======= ======= Plus unamortized premium on deposits purchased................. 1,270 1,436 ----------- ----------- Deposits, net..................... $ 10,907,379 $ 10,219,200 =========== =========== Including the annualized effect of applicable interest rate risk management instruments................ 4.26% 4.37% ==== =====
BORROWINGS At June 30, 1998, borrowings primarily consisted of FHLB advances and reverse repurchase agreements. These positions were secured by Charter One's investment in the stock of the FHLB, as well as $6.6 billion in real estate loans and $2.7 billion in mortgage-backed securities. FEDERAL HOME LOAN BANK ADVANCES (Figure 14)
JUNE 30, 1998 DECEMBER 31, 1997 ----------------------- ------------------------ WEIGHTED WEIGHTED AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ------ ---- ------ ---- (DOLLARS IN THOUSANDS) Short-term................................................. $ 891,000 5.71% $ 2,300,000 5.79% Long-term: Fixed-rate advances...................................... 3,660,581 5.63 2,621,760 5.88 Variable-rate advances................................... 485,320 5.59 448,743 5.76 ---------- ---------- Total advances, net.................................... $ 5,036,901 5.64 $ 5,370,503 5.89 ========== ========== Including the annualized effect of applicable interest rate risk management instruments......................... 5.64% 5.83% ===== ====
18 21 Figure 15 presents a summary of outstanding reverse repurchase agreements. The Bank enters into short-term reverse repurchase agreements for terms up to one year, as well as longer term fixed- and variable-rate agreements. REVERSE REPURCHASE AGREEMENTS (Figure 15)
JUNE 30, 1998 DECEMBER 31, 1997 ------------------------ ------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ---------- --------- ---------- --------- (DOLLARS IN THOUSANDS) Short term..................................................... $ - -% $ 210,002 5.84% Long term: Fixed rate................................................... 1,229,846 6.04 1,316,522 6.02 Variable rate................................................ 570,000 5.73 570,000 5.89 ---------- ---------- Weighted average cost including amortization of fees...................................................... $ 1,799,846 5.95 $ 2,096,524 5.96 ========== ========== Including the annualized effect of applicable interest rate risk management instruments............................. 5.91% 5.96% ==== ====
INTEREST RATE RISK MANAGEMENT The company utilizes various types of interest rate risk management instruments to manage its interest rate risk profile. The Company has utilized fixed payment swaps to convert certain of its floating-rate or short-term, fixed-rate liabilities into longer term, fixed-rate instruments. Under these agreements, the Company has agreed to pay interest to the counterparty on a notional principal amount at a fixed rate defined in the agreement, and receive interest at a floating rate indexed to LIBOR. The amounts of interest exchanged are calculated on the basis of notional principal amounts. The Company also utilizes fixed receipt swaps to convert certain of its longer term callable certificates of deposit into short-term variable instruments. Under these agreements the Company has agreed to receive interest from the counterparty on a notional amount at a fixed rate defined in the agreement, and to pay interest at a floating rate indexed to LIBOR. INTEREST RATE SWAPS (Figure 16)
JUNE 30, 1998 DECEMBER 31, 1997 ------------------------------------ ------------------------------------ NOTIONAL RECEIVING PAYING NOTIONAL RECEIVING PAYING PRINCIPAL INTEREST INTEREST PRINCIPAL INTEREST INTEREST AMOUNT RATE RATE AMOUNT RATE RATE -------- ---------- ----------- -------- ---------- ----------- (DOLLARS IN THOUSANDS) Fixed payment and variable receipt: Maturing in: 1998............................ $ 75,000 5.65% 5.92% $ 175,000 5.81% 5.96% 1999............................ 150,000 5.70 5.52 150,000 5.85 5.52 -------- -------- Total......................... $ 225,000 5.68%(1) 5.65% $ 325,000 5.83%(1) 5.76% ======== ======== Variable payment and fixed receipt: Maturing in: 1998.......................... $ - -% -% $ 25,000 5.70% 5.83% 1999.......................... - - - 115,000 6.42 5.83 2000.......................... 135,000 6.11 5.69 - - - 2001.......................... - - - 15,000 6.39 5.85 2002.......................... 145,000 6.93 5.69 250,000 7.08 5.84 2003.......................... 120,000 6.51 5.69 - - - -------- -------- Total....................... $ 400,000 6.53% 5.69%(1) $ 405,000 6.78% 5.84%(1) ======== ======== - --------------------------- (1) Rates are based upon LIBOR.
19 22 The cost (benefit) of interest rate risk management instruments included in interest expense was as follows: COST OF INTEREST RATE RISK MANAGEMENT (Figure 17)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, -------------------------- ------------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Interest expense (income): Deposits................................................. $ (2,246) (4,397) (4,353) (8,197) FHLB advances............................................ (71) (71) (142) 186 Reverse repurchase agreements............................ (120) (62) (109) (63) ------- ------- -------- ------- Total.................................................. $ (2,437) (4,530) (4,604) (8,074) ======= ======= ======== =======
LIQUIDITY The Bank's principal sources of funds are deposits, advances from the FHLB of Cincinnati, reverse repurchase agreements, repayments and maturities of loans and securities, proceeds from the sale of loans and securities, and funds provided by operations. While scheduled loan, security and interest-bearing deposit amortization and maturity are relatively predictable sources of funds, deposit flow and loan and mortgage-backed security repayments are greatly influenced by economic conditions, the general level of interest rates and competition. The Bank utilizes particular sources of funds based on comparative costs and availability and may supplement deposits with longer term and/or less expensive alternative sources of funds such as FHLB advances and reverse repurchase agreements. Management also considers the Bank's interest-sensitivity profile when deciding on alternative sources of funds. At June 30, 1998, the Bank's one-year gap was a negative 2.52% of total assets. The Bank is required by regulation to maintain specific minimum levels of liquid investments. Regulations currently in effect require the Bank to maintain average liquid assets at least equal to 4.0% of the sum of its average daily balance of net withdrawable accounts and borrowed funds due in one year or less. This regulatory requirement may be changed from time to time to reflect current economic conditions. The Bank's average regulatory liquidity ratio for the second quarter of 1998 was 7.22%. Management anticipates that the Bank will have sufficient funds available to meet current and future loan commitments. At June 30, 1998, the Bank and its subsidiaries had outstanding commitments to originate loans and leases of $984 million, unfunded lines of consumer credit totaling $1.1 billion (a significant portion of which normally remains undrawn) and unfunded lines of commercial (business loans) credit totaling $48.5 million. Outstanding letters of credit totaled $39.1 million as of June 30, 1998. Certificates of deposit scheduled to mature in one year or less at June 30, 1998 totaled $4.6 billion. Management believes that a significant portion of the amounts maturing will remain with the Bank because they are retail deposits. At June 30, 1998, the Bank had $525 million of advances from the FHLB system and $1.6 billion in reverse repurchase agreements which mature in one year. Management intends to replace the majority of these borrowings when they mature with new borrowings and believes it has significant additional borrowing capacity with the FHLB and investment banking firms to meet any need for additional borrowings. CAPITAL AND DIVIDENDS The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. The regulations require the Bank to meet specific capital adequacy guidelines and the regulatory framework for prompt corrective action that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based, Tier 1 risk-based, Tier 1 leverage and tangible capital as set forth in the tables below. 20 23 REGULATORY CAPITAL (Figure 18)
AS OF JUNE 30, 1998 ------------------------------------------------------------------- TO BE WELL CAPITALIZED FOR CAPITAL UNDER PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS ---------------------- ------------------- ---------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO (DOLLARS IN THOUSANDS) Total capital (to risk-weighted assets).......... $ 1,346,025 10.94% 983,923 8.0% 1,229,904 10.0% Tier 1 capital (to risk-weighted assets)......... 1,237,076 10.06 N/A N/A 737,942 6.0 Tier 1 capital (to adjusted tangible assets)..... 1,237,076 6.27 592,084 3.0 986,807 5.0 Tangible capital (to adjusted tangible assets)... 1,237,076 6.27 296,042 1.5 N/A N/A * Greater than or equal to
AS OF DECEMBER 31, 1997 ------------------------------------------------------------------- TO BE WELL CAPITALIZED FOR CAPITAL UNDER PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS ---------------------- ------------------- ---------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO (DOLLARS IN THOUSANDS) Total capital (to risk-weighted assets).......... $ 1,205,750 10.00% 964,459 8.0% 1,205,574 10.0% Tier 1 capital (to risk-weighted assets)......... 1,095,084 9.08 N/A N/A 723,344 6.0 Tier 1 capital (to adjusted tangible assets)..... 1,095,084 5.55 592,272 3.0 987,120 5.0 Tangible capital (to adjusted tangible assets)... 1,095,084 5.55 296,136 1.5 N/A N/A * Greater than or equal to
As of December 31, 1996, the most recent notification from the Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for Prompt Corrective Action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table above. There are no conditions or events since that notification that have changed the Bank's category. Management believes, as of June 30, 1998, that the Bank meets all capital requirements to which it is subject. Events beyond management's control, such as fluctuations in interest rates or a downturn in the economy in areas in which the Bank's loans and securities are concentrated, could adversely affect future earnings and, consequently, the Bank's ability to meet its future capital requirements. During 1998, the Company's board of directors authorized management to purchase up to 2.5 million shares of the Company's common stock in a systematic program of open market or privately negotiated purchases. The shares will be reserved for later reissuance in connection with future stock dividends as well as employee benefit plans. As of July 31, 1998 approximately 720,000 shares of common stock had been purchased under this authorization. The Company intends to rescind the buy back program upon the close of its acquisition of CS Financial, Inc., which is anticipated to occur early in the fourth quarter of 1998 and is expected to be accounted for as a pooling of interests. QUARTERLY STOCK PRICES AND DIVIDENDS (Figure 18)
2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER 2ND QUARTER 1998 1998 1997 1997 1997 ----------- ----------- ----------- ----------- ----------- Market price of common stock(1): High......................................... $ 36.63 34.06 32.00 29.29 25.72 Low.......................................... 30.00 24.00 27.06 24.53 20.12 Close........................................ 33.69 33.47 31.56 28.16 25.66 Dividends declared and paid.................... .14 .125 .125 .12 .12 - --------------------------- (1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998.
21 24 YEAR 2000 As with other companies, many of the Company's computer programs and other applications were originally designed to recognize calendar years by their last two digits. Calculations performed using these truncated fields will not work properly with dates from the year 2000 and beyond. The Company began reviewing its year 2000 conversion needs mid-1996 and has a project committee that meets to review the status of the conversion. A comprehensive review to identify the systems affected by this issue was completed, estimated cost projections were determined and an implementation plan was compiled and is currently being executed. As a result of the procedures already completed, the Company expects to either modify or upgrade existing systems or replace some systems altogether. Considerable progress has been made and it is anticipated that this project will be largely completed by internal staff. The Company does not expect to spend any significant amounts with outside contractors relative to the completion of this task. Therefore, costs do not represent any material incremental costs, but rather will represent the redeployment of existing technology resources. Many of the systems are vendor-supplied, and most vendors have provided the Company with certification or a delivery commitment letter. The Company presently believes that with the planned modifications to existing systems, conversion to new systems, and vendor delivery of millennium-compliant systems, all material year 2000 compliance issues will be resolved no later than the first quarter of 1999. Additionally, the Company believes that any related costs will not have a material impact on the operations, cash flows, or financial condition of future periods. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK A comprehensive qualitative and quantitative analysis regarding market risk was disclosed in the Company's December 31, 1997 Form 10-K. No material changes in the assumptions used or results obtained from the model have occurred. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In connection with the Annual Meeting of Shareholders of Charter One Financial, Inc. held on April 22, 1998, unsolicited proxies representing 55,161,369 shares of Common Stock or 86% of the total outstanding were voted. The Board of Directors of the Company was re-elected in its entirety. The voting on selection of Deloitte & Touche LLP as independent auditors of the Company was tabulated as follows: For 54,851,512 Against 114,456 Abstain 195,401 ITEM 5. OTHER INFORMATION DIVIDEND On July 22, 1998, the Directors of Charter One Financial, Inc. declared a quarterly cash dividend of 14 cents per common share. The dividend will be payable on August 20, 1998 to shareholders of record as of August 6, 1998. On July 22, 1998 the Directors of Charter One Financial, Inc. approved a 5% stock dividend to be distributed September 30, 1998 to shareholders of record on September 14, 1998. During 1998, the Company's board of directors authorized management to purchase up to 2.5 million shares of the Company's common stock in a systematic program of open market or privately negotiated purchases. The shares will be reserved for later reissuance in connection with future stock dividends as well as employee benefit plans. As of July 31, 1998 approximately 720,000 shares of common stock had been purchased under this authorization. The Company intends to rescind the buy back program upon the close of its acquisition of CS Financial, Inc., which is anticipated to occur early in the fourth quarter of 1998 and is expected to be accounted for as a pooling of interests. 22 25 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K On June 15, 1998, a Form 8-K was filed to report an Agreement and Plan of Merger between the Company and ALBANK Financial Corporation. SIGNATURES 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: August 13, 1998 /s/ Robert J. Vana --------------------------------------------------- Robert J. Vana Chief Corporate Counsel and Secretary Date: August 13 , 1998 /s/ Richard W. Neu --------------------------------------------------- Richard W. Neu Executive Vice President and Chief Financial Officer 23 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 CHARTER ONE FINANCIAL, INC. COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- --------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) BASIC EARNINGS PER SHARE(1): Weighted average number of common shares outstanding................................ 128,105,248 124,833,976 128,005,966 125,212,660 ============= ============= ============ ============ Net income............................................ $ 68,361 54,988 131,894 106,871 ============= ============= ============ ============ Basic earnings per share.............................. $ .53 .44 1.03 .85 ============= ============= ============ ============ DILUTED EARNINGS PER SHARE(1): Weighted average number of common shares outstanding........................................ 128,105,248 124,833,976 128,005,966 125,212,660 Add common stock equivalents for shares issuable under Stock Option Plan................... 4,215,716 3,357,852 3,947,571 3,388,246 ------------- ------------- ------------ ------------ Weighted average number of common and common equivalent shares outstanding............ 132,320,964 128,191,828 131,953,537 128,600,906 ============= ============= ============ ============ Net income............................................ $ 68,361 54,988 131,894 106,871 ============= ============= ============ ============ Diluted earnings per share............................ $ .52 .43 1.00 .83 ============= ============= ============ ============ - --------------------------- (1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998.
24 EX-27 3 EXHIBIT 27
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 179,151 4,532 0 0 2,005,560 3,399,777 3,450,496 13,411,748 112,142 19,813,254 10,907,379 891,000 350,658 6,184,835 0 0 1,299 1,478,083 19,813,254 519,888 187,014 17,036 723,938 225,439 439,790 284,148 10,154 0 163,856 198,045 198,045 0 0 131,894 1.03 1.00 2.73 66,187 14,144 6,281 36,300 112,884 7,542 1,446 112,142 112,142 0 0
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