-----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, RURVd/TDuzVp9izvEFHAM7I9UNLKQyfBqqOPNQrle3MXmlXzwotk5L4ivS9+07r8 LzUrR/usjKKZE/mOS1nt9g== 0000950152-99-004510.txt : 19990518 0000950152-99-004510.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950152-99-004510 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99624885 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. FORM 10-Q 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 March 31, 1999 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 April 30, 1999 was 166,367,691. 2 TABLE OF CONTENTS
Item Number Page - ------ ---- PART I - FINANCIAL INFORMATION 1. Financial Statements Consolidated Statements of Financial Condition -- March 31, 1999 and December 31, 1998..................... 1 Consolidated Statements of Income -- Three months ended March 31, 1999 and 1998............... 2 Consolidated Statement of Changes in Shareholders' Equity-- Three months ended March 31, 1999........................ 3 Consolidated Statements of Cash Flows -- Three months ended March 31, 1999 and 1998............... 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...... 25 PART II - OTHER INFORMATION 5. Other Information.............................................. 25 6. Exhibits and Reports on Form 8-K............................... 25 Signatures................................................................ 25
i 3 PART I - FINANCIAL CONDITION ITEM 1. FINANCIAL STATEMENTS CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Cash and deposits with banks .................................. $ 241,339 $ 334,054 Federal funds sold and other .................................. 677 65,453 ------------ ------------ Total cash and cash equivalents .......................... 242,016 399,507 Investment securities: Available for sale, at fair value ........................... 171,815 253,317 Held to maturity (fair value of $41,618 and $42,554) ........ 41,453 42,256 Mortgage-backed securities: Available for sale, at fair value ........................... 2,937,635 2,299,204 Held to maturity (fair value of $2,350,283 and $2,716,740) .. 2,305,275 2,668,980 Loans and leases, net ......................................... 17,178,260 17,502,729 Loans held for sale ........................................... 67,577 175,107 Federal Home Loan Bank stock .................................. 329,492 319,993 Premises and equipment ........................................ 230,895 218,788 Accrued interest receivable ................................... 115,690 117,493 Real estate and other collateral owned ........................ 19,500 18,094 Loan servicing assets ......................................... 96,764 90,838 Goodwill ...................................................... 155,290 158,709 Other assets .................................................. 663,147 202,240 ------------ ------------ Total assets ............................................. $ 24,554,809 $ 24,467,255 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Checking accounts: Interest-bearing ......................................... $ 1,216,841 $ 1,204,221 Noninterest-bearing ...................................... 981,107 1,015,650 Money market accounts ....................................... 2,663,499 2,505,846 Savings accounts ............................................ 1,727,214 1,828,087 Certificates of deposit ..................................... 8,538,325 8,611,260 ------------ ------------ Total deposits ........................................... 15,126,986 15,165,064 Federal Home Loan Bank advances ............................... 6,405,494 6,186,118 Reverse repurchase agreements ................................. 492,815 685,024 Other borrowings .............................................. 125,826 130,336 Advance payments by borrowers for taxes and insurance ......... 52,431 60,383 Accrued interest payable ...................................... 52,797 45,584 Accrued expenses and other liabilities ........................ 346,089 319,634 ------------ ------------ Total liabilities ........................................ 22,602,438 22,592,143 ------------ ------------ Shareholders' equity: Preferred stock - $.01 par value per share; 20,000,000 shares authorized and unissued ................................... -- -- Common stock - $.01 par value per share; 360,000,000 shares authorized; 166,247,556 and 165,399,180 shares issued and outstanding ............................................... 1,662 1,654 Additional paid-in capital .................................. 1,136,793 1,130,398 Retained earnings ........................................... 769,613 704,661 Borrowings of employee investment and stock ownership plan .. (4,758) (5,288) Accumulated other comprehensive income ...................... 49,061 43,687 ------------ ------------ Total shareholders' equity ........................... 1,952,371 1,875,112 ------------ ------------ Total liabilities and shareholders' equity ........... $ 24,554,809 $ 24,467,255 ============ ============
See Notes to Consolidated Financial Statements 1 4 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
THREE MONTHS ENDED MARCH 31, 1999 1998 ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME: Loans and leases ..................... $ 342,133 $ 319,475 Mortgage-backed securities: Available for sale ................. 34,292 28,230 Held to maturity ................... 41,868 71,116 Investment securities: Available for sale ................. 3,245 11,457 Held to maturity ................... 667 1,123 Other interest-earning assets ........ 7,216 10,522 ------------ ------------ Total interest income ............. 429,421 441,923 ------------ ------------ INTEREST EXPENSE: Deposits ............................. 146,779 150,639 FHLB advances ........................ 77,875 74,305 Other borrowings ..................... 10,563 35,898 ------------ ------------ Total interest expense ............ 235,217 260,842 ------------ ------------ Net interest income ............... 194,204 181,081 Provision for loan and lease losses .... 6,771 6,613 ------------ ------------ Net interest income after provision for loan and lease losses ....... 187,433 174,468 ------------ ------------ OTHER INCOME: Retail banking ....................... 32,221 22,914 Mortgage banking ..................... 11,256 15,435 Leasing operations ................... 2,048 2,210 Net gains ............................ 5,164 4,264 Other ................................ 2,865 1,508 ------------ ------------ Total other income ................ 53,554 46,331 ------------ ------------ ADMINISTRATIVE EXPENSES: Compensation and employee benefits ... 52,887 50,457 Net occupancy and equipment .......... 17,646 17,008 Federal deposit insurance premiums ... 1,591 1,717 Merger expenses ...................... 2,200 -- Amortization of goodwill ............. 3,363 3,363 Other administrative expenses ........ 32,144 37,313 ------------ ------------ Total administrative expenses ..... 109,831 109,858 ------------ ------------ Income before income taxes ............. 131,156 110,941 Income taxes ........................... 43,021 36,888 ------------ ------------ Net income ........................ $ 88,135 $ 74,053 ============ ============ Basic earnings per share ............... $ .53 $ .45 ============ ============ Diluted earnings per share ............. $ .52 $ .43 ============ ============ Average common shares outstanding(1) ... 165,780,329 165,562,826 ============ ============ Average common and common equivalent shares outstanding(1) ................ 170,022,254 171,408,428 ============ ============ Cash dividends declared per share(1) ... $ .14 $ .13 ============ ============
(1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998 and the 5% stock dividend issued September 30, 1998. 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 COMPREHENSIVE OWNERSHIP HOLDERS' STOCK CAPITAL EARNINGS INCOME PLAN EQUITY ------ ---------- --------- ------- ------- ----------- Balance, January 1, 1999 ..... $1,654 $1,130,398 $ 704,661 $43,687 $(5,288) $ 1,875,112 Comprehensive income: Net unrealized holding gain on securities ....... -- -- -- 5,374 -- 5,374 Net income ................. -- -- 88,135 -- -- 88,135 ------ ---------- --------- ------- ------- ----------- Comprehensive income ......... -- -- 88,135 5,374 -- 93,509 EISOP loan payment ........... -- -- -- -- 530 530 Issuance of common shares: stock option plans, 848,376 shares ............. 8 6,395 -- -- -- 6,403 Dividends paid ($.14 per share)...................... -- -- (23,183) -- -- (23,183) ------ ---------- --------- ------- ------- ----------- Balance, March 31, 1999 ...... $1,662 $1,136,793 $ 769,613 $49,061 $(4,758) $ 1,952,371 ====== ========== ========= ======= ======= ===========
See Notes to Consolidated Financial Statements 3 6 CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
THREE MONTHS ENDED MARCH 31, 1999 1998 ----------- ----------- (AS RESTATED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income ....................................................... $ 88,135 $ 74,053 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan and lease losses ............................ 6,771 6,613 Net gains ...................................................... (2,955) (1,970) Accretion of discounts, amortization of premiums, amortization of goodwill and depreciation, net ................ 20,687 (3,365) Origination of real estate loans held for sale ................. (523,155) (403,459) Proceeds from sale of loans held for sale ...................... 521,058 401,466 Other .......................................................... 37,221 (4,227) ----------- ----------- Net cash provided by operating activities .................... 147,762 69,111 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net principal disbursed on loans and leases ...................... (712,240) (716,085) Proceeds from principal repayments and maturities of: Mortgage-backed securities held to maturity .................... 363,987 355,265 Investment securities held to maturity ......................... -- 16,412 Mortgage-backed securities available for sale .................. 144,224 5,174 Investment securities available for sale ....................... 101,715 324,096 Proceeds from sale of: Mortgage-backed securities available for sale .................. 371,374 412,100 Investment securities available for sale ....................... 59,162 -- Federal Home Loan Bank stock ................................... 500 1,138 Purchases of: Investment securities available for sale ....................... (79,724) (42,088) Loans .......................................................... (9,012) (36,982) Federal Home Loan Bank stock ................................... (4,516) (4,456) Loan servicing assets, including those originated .............. (9,582) (6,606) Bank Owned Life Insurance ...................................... (480,500) -- Other .......................................................... (11,226) 12,530 ----------- ----------- Net cash (used in) provided by investing activities ............ (265,838) 320,498 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings ................. 30,672 (1,781,352) Proceeds from long-term borrowings ............................... 202,453 1,545,980 Repayments of long-term borrowings ............................... (209,829) (534,465) Increase (decrease) in deposits .................................. (37,979) 363,705 Decrease in advance payments by borrowers for taxes and Insurance ....................................................... (7,952) (6,608) Payment of dividends on common stock ............................. (23,184) (18,303) Proceeds from issuance of common stock ........................... 6,404 -- Purchase of treasury stock, net of options exercised ............. -- 2,693 ----------- ----------- Net cash used in financing activities .............................. (39,415) (428,350) ----------- ----------- Net decrease in cash and cash equivalents .......................... (157,491) (38,741) Cash and cash equivalents, beginning of the period ................. 399,507 412,105 ----------- ----------- Cash and cash equivalents, end of the period ....................... $ 242,016 $ 373,364 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest on deposits and borrowings ................ $ 227,718 $ 255,752 Cash paid for income taxes ....................................... -- 45,048 SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES: Transfers from loans to real estate owned ........................ 1,109 4,051 Loans exchanged for mortgage-backed securities ................... 1,148,373 641,995
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 May 4, 1999, the Company announced a definitive agreement was reached with Chittenden ("Chittenden") Corporation to purchase 14 Vermont National Bank offices along with approximately $400 million in deposits and $120 million in commercial real estate and business loans. The deposits will be assumed for a deposit premium of approximately 10.5% and will result in approximately $42 million in tax deductible goodwill. The purchase is related to the branch divestiture required by federal regulators relative to Chittenden's pending merger with Vermont Financial Services Corp., the parent company of Vermont National Bank and United Bank in Massachusetts. The transaction is expected to close during the fourth quarter of 1999. 3. On November 30, 1998, the Company completed the merger with ALBANK Financial Corporation ("ALBANK"). ALBANK, the holding company of ALBANK, F.S.B., a federally chartered savings bank, and ALBANK Commercial, a state-chartered commercial bank, was headquartered in Albany, New York, had $4.1 billion in assets ($3.5 billion in deposits), and operated 88 branches in upstate New York and 21 in Massachusetts and Vermont. Terms of the agreement called for a tax-free exchange of common shares at a fixed exchange ratio of 2.268 shares (as adjusted for the 5% stock dividend issued September 30, 1998) of Charter One common stock for each of ALBANK's common shares, resulting in the issuance of 30,479,758 shares of Charter One common stock. 4. On October 16, 1998, Charter One completed its acquisition of CS Financial, Inc. ("CS Financial"), a $393.9 million privately-owned thrift holding company headquartered in Cleveland, Ohio. As a result of the merger, which was accounted for as a pooling of interests, Charter One issued an additional 2,131,500 shares of its common stock. The transaction added eight branches to the Ohio network, four of which have been consolidated, resulting in a net increase of four branches. 5. On January 1, 1999, the Company adopted SFAS No. 134 "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This statement amends SFAS No. 65, "Accounting for Certain Mortgage Banking Activities," and conforms the subsequent accounting for securities retained after the securitization of mortgage loans by a mortgage banking enterprise with the subsequent accounting for securities retained after the securitization of other types of assets by a non-mortgage banking enterprise. The adoption of this statement did not have a material effect on the Company's results of operations. 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 1998 have been reclassified to conform to the 1999 presentation. 5 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HOLDING COMPANY BUSINESS GENERAL Headquartered in Cleveland, Ohio, Charter One is now a bank holding company, having converted from a unitary savings institution holding company on November 30, 1998. The conversion was undertaken in conjunction with our November 30, 1998 acquisition of ALBANK, which included the acquisition of ALBANK Commercial, a New York chartered commercial bank. Charter One is a Delaware corporation and owns all of the outstanding capital stock of Charter Michigan Bancorp, Inc. and ALBANK Commercial. Charter Michigan Bancorp, Inc. owns all of the outstanding capital stock of Charter One Bank, F.S.B., a federally chartered thrift. The primary business of the company is operating these financial institutions. Their operations are jointly referred to in the following discussion as the bank. The bank's primary business is providing consumer and business banking services to certain major markets in Ohio, Michigan and New York and, as of November 1998, in some markets of Massachusetts and Vermont. At the end of the first quarter of 1999, the Bank and its subsidiaries were doing business through 339 full-service banking branches and 40 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 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; (viii) the possibility that revenues following the Merger will be lower than expected; and (ix) the possibility that year 2000 compliance failures could result in additional expense to the Company and significant disruption of its business and there can be no assurance that any contingency plans will completely mitigate the effects of any such failure. 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 $88.1 million, or $0.52 per diluted share, for the three months ended March 31, 1999. This was a $14.1 million, or 19.0%, increase over the results of the first quarter of 1998 when net income was $74.1 million, or $0.43 per diluted share. This increase was primarily attributable to increases in net interest income and retail banking income. The Company's net income for the first quarter of 1999 resulted in a return on average equity of 18.34% and a return on average assets of 1.45%. The comparable returns for the first quarter of 1998 were 16.39% and 1.22%, respectively. 6 9 SELECTED OPERATING RATIOS (Figure 1)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ------- ------- Annualized returns Return on average assets ..................... 1.45% 1.22% Return on average equity ..................... 18.34 16.39 Average equity to average assets ............. 7.89 7.45 Annualized operating ratios Net interest income to administrative expenses 1.77x 1.65x Administrative expenses to average assets .... 1.80% 1.81% Efficiency ratio ............................. 43.89 47.72
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 market 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 MARCH 31, ---------------------------------------------------------------------------------------- 1999 1998 ---------------------------------------------------------------------------------------- AVG. AVG. AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST COST BALANCE INTEREST COST ------- -------- ---- ------- -------- ---- (DOLLARS IN THOUSANDS) Interest-earning assets: Loans and leases(1) ............... $ 18,021,354 $ 342,133 7.62% $ 16,103,340 $319,475 7.95% Mortgage-backed securities: Available for sale .............. 2,050,736 34,292 6.69 1,619,884 28,230 6.97 Held to maturity ................ 2,414,742 41,868 6.94 4,006,420 71,116 7.10 Investment securities: Available for sale .............. 194,407 3,245 6.68 678,531 11,457 6.75 Held to maturity ................ 42,050 667 6.34 65,071 1,123 6.90 Other interest-earning assets(2) ........................ 464,304 7,216 6.22 613,240 10,522 6.86 ------------ ----------- ------------ -------- Total interest-earning assets .. 23,187,593 429,421 7.43 23,086,486 441,923 7.67 ----------- -------- Allowance for loan and lease losses (142,776) (142,094) Noninterest-earning assets(3) ..... 1,316,678 1,303,157 ------------ ------------ Total assets ................. $ 24,361,495 $ 24,247,549 ============ ============ Interest bearing liabilities(4): Deposits: Checking accounts ............... $ 2,095,801 3,714 0.72 $ 1,659,023 3,762 0.92 Savings accounts ................ 1,775,805 8,557 1.95 1,945,666 11,571 2.41 Money market accounts ........... 2,556,735 21,283 3.38 2,154,337 17,717 3.34 Certificates of deposit ......... 8,594,035 113,225 5.34 8,432,740 117,589 5.66 ------------ ----------- ------------ -------- Total deposits ................ 15,022,376 146,779 3.96 14,191,766 150,639 4.30 ------------ ----------- ------------ -------- FHLB advances ..................... 6,325,225 77,875 4.99 5,272,045 74,305 5.71 Other borrowings .................. 694,532 10,563 6.08 2,281,134 35,898 6.29 ------------ ----------- ------------ -------- Total borrowings ............... 7,019,757 88,438 5.10 7,553,179 110,203 5.89 ------------ ----------- ------------ -------- Total interest-bearing liabilities ................... 22,042,133 235,217 4.32 21,744,945 260,842 4.85 ----------- -------- Non interest-bearing liabilities .. 397,058 645,841 ------------ ------------ Total liabilities .............. 22,439,191 22,390,786 Corporation-obligated mandatorily redeemable capital securities of subsidiary trust ................ -- 50,000 Shareholders' equity ................ 1,922,304 1,806,763 ------------ ------------ Total liabilities and shareholders' equity .......... $ 24,361,495 $ 24,247,549 ============ ============ Net interest income ................. $ 194,204 $181,081 =========== ======== Interest rate spread ................ 3.11 2.82 Net yield on average interest- earning assets(5) .................. 3.35 3.14 Average interest-earning assets to average interest-bearing liabilities ........................ 105.20% 106.17%
(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 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 MARCH 31, -------------------------------------- 1999 V. 1998 -------------------------------------- INCREASE (DECREASE) DUE TO RATE VOLUME TOTAL ---- ------ ----- (DOLLARS IN THOUSANDS) Interest income: Loans and leases ........... $(16,034) $ 38,692 $ 22,658 Mortgage-backed securities: Available for sale ....... (1,183) 7,245 6,062 Held to maturity ......... (1,615) (27,633) (29,248) Investment securities: Available for sale ....... (130) (8,082) (8,212) Held to maturity ......... (85) (371) (456) Other interest-earning assets (924) (2,382) (3,306) -------- -------- -------- Total .................. (19,971) 7,469 (12,502) -------- -------- -------- Interest expense: Checking accounts .......... (920) 872 (48) Savings accounts ........... (2,064) (950) (3,014) Money market accounts ...... 218 3,348 3,566 Certificates of deposit .... (6,581) 2,217 (4,364) FHLB advances .............. (10,125) 13,695 3,570 Other borrowings ........... (2,872) (22,463) (25,335) -------- -------- -------- Total .................. (22,344) (3,281) (25,625) -------- -------- -------- Change in net interest income $ 2,373 $ 10,750 $ 13,123 ======== ======== ========
Net interest income for the first quarter of 1999 was $194.2 million as compared to $181.1 million for the first quarter of 1998. This $13.1 million, or 7.3%, increase is primarily attributable to the growth in the balances of loans and leases. The primary reason for this growth is the execution of the Company's strategy of shifting the interest-earning asset mix towards higher yielding interest-earning assets. With the high volume of loan and lease originations during the previous 12 months, the Company was able to increase the average balance of loans and leases by $1.9 billion for the first quarter of 1999 as compared to the first quarter of 1998. This increase in the balance of loans and leases caused interest income to increase by $38.7 million. That increase was partially offset by lower balances of other components of interest-earning assets; primarily, mortgage-backed securities, investments and other interest-earning assets during the first quarter of 1999 which caused interest income to decrease by $31.2 million as compared to the first quarter of 1998. The table below illustrates this shift in the interest-earning asset portfolio mix. 9 12 AVERAGE BALANCE PORTFOLIO MIX (Figure 4)
THREE MONTHS ENDED MARCH 31, ----------------------------------------------------------------------------------- 1999 1998 -------------------------------------- ------------------------------------- YIELD/ % OF YIELD/ % OF BALANCE COST TOTAL BALANCE COST TOTAL ----------- ----- ----- ----------- ----- ----- (DOLLARS IN THOUSANDS) Interest-earning assets: Loans and leases ............ $18,021,354 7.62% 77.7% $16,103,340 7.95% 69.8% Other interest-earning assets 5,166,239 6.76 22.3 6,983,146 7.01 30.2 ----------- ----- ----- ----------- ----- ----- Total .................... $23,187,593 7.43% 100.0% $23,086,486 7.67% 100.0% =========== ===== ===== =========== ===== ===== Interest-bearing liabilities: Deposits .................... $15,022,376 3.96% 68.2% $14,191,766 4.30% 65.3% Borrowings .................. 7,019,757 5.10 31.8 7,553,179 5.89 34.7 ----------- ----- ----- ----------- ----- ----- Total .................... $22,042,133 4.32% 100.0% $21,744,945 4.85% 100.0% =========== ===== ===== =========== ===== =====
The Company was also able to shift the balance of interest-bearing liabilities into lower costing (relative to borrowed funds) deposit balances. As set forth in Figure 4 above, the Company's average balance of interest-bearing liabilities for the first quarter of 1999 consisted of 68.2% deposit balances as opposed to 65.3% for the first quarter of 1998. This volume change caused interest expense to decrease by $3.3 million. The shift of interest-earning assets to higher yielding assets combined with the shift of interest-bearing liabilities to lower costing liabilities were the primary reason for the increase in net interest income and the improvement in the net interest rate spread and the net yield on interest earning assets. The interest rate spread and the net yield on interest-earning assets were 3.11% and 3.35% for the three months ended March 31, 1999 as compared to 2.82% and 3.14%, respectively for the three months ended March 31, 1998. Figure 5 sets forth the Company's yields and costs at period end for the dates indicated. YIELDS AND COSTS AT END OF PERIOD (Figure 5)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- YIELDS AND COSTS AT END OF PERIOD Weighted average yield: Real estate loans ..................... 7.35% 7.45% Automobile loans ...................... 8.61 8.70 Retail consumer loans ................. 7.90 8.11 Leases (1) ............................ 6.21 6.22 Corporate banking loans ............... 8.47 8.40 Total loans and leases .............. 7.60 7.69 Mortgage-backed securities ............ 6.79 6.88 Investment securities ................. 6.64 6.30 Other interest-earning assets ......... 6.94 6.38 Total interest-earning assets ..... 7.40 7.48 Weighted average cost (2): Checking .............................. .78 .67 Money market .......................... 3.42 3.36 Savings ............................... 1.91 2.15 Certificates of deposit ............... 5.23 5.46 Total deposits ...................... 3.88 4.02 FHLB advances ......................... 4.99 5.01 Other borrowings ...................... 6.23 6.15 Total interest-bearing liabilities 4.27 4.37 Interest rate spread .................... 3.13 3.11 Net yield on interest-earning assets .... 3.31 3.34
(1) Excludes impact of related tax benefit. (2) The costs of liabilities include the annualized effect of interest rate risk management instruments. 10 13 OTHER INCOME Other income for the three months ended March 31, 1999 was $53.6 million as compared to $46.3 million for the first quarter of 1998. This $7.2 million, or 15.6%, increase was primarily attributable to increased retail banking income which increased $9.3 million, or 40.6%. Retail banking income increased primarily due to increases in checking account fee income and increases in commissions on the sale of annuities and mutual funds. Checking account fee income increased as a result of increases in the number of checking accounts and the effort to increase the revenues per account. Commission income increased as a result of increasing sales of tax deferred annuity and mutual fund products. The increase in retail banking income was partially offset by a $4.2 million, or 27.1%, decrease in mortgage banking income. The Company's mortgage banking subsidiary changed its mix of loan originations in 1999 as compared to 1998 to weigh more heavily on loans originated for the bank's portfolio. The decline in mortgage banking income was caused by a decrease in the volume of loans originated for sale by the mortgage banking subsidiary. Also, on March 9, 1999, the Company increased its Bank Owned Life Insurance ("BOLI") portfolio by $480.0 million bringing the total investment in BOLI to $535.1 million. This asset is classified with Other Assets on the balance sheet. Income from BOLI is the primary reason for the $1.4 million increase in other income. ADMINISTRATIVE EXPENSES Administrative expenses were $109.8 million for the three months ended March 31, 1999, relatively unchanged from the first quarter of 1998. The first quarter of 1999 also included $2.2 million of merger-related expenses as the Company continues the process of combining back-office operations associated with the ALBANK merger that was effective November 30, 1998. This consolidation process is expected to be completed by the end of the third quarter of 1999 and the Company expects to incur up to an additional total of $7.0 million of merger-related expenses (after tax) associated with this consolidation during the remainder of 1999. The Company's administrative expenses, excluding the merger-related expenses, resulted in a ratio of 1.77% of expenses to average assets for the three months ended March 31, 1999 as compared to 1.81% for the comparable period in 1998. FEDERAL INCOME TAXES Federal income tax expense for the three months ended March 31, 1999 was $43.0 million as compared to $36.9 million for the same period in 1998. The primary reason for this 16.6% increase in the provision for federal income tax expense was a 18.2% increase in pre-tax book income. The effective tax rates were 32.8% and 33.3% for the 1999 and 1998 periods, respectively. FINANCIAL CONDITION OVERVIEW At March 31, 1999, total assets were $24.6 billion relatively flat as compared to total assets at December 31, 1998. However, the Company has changed the mix of assets during the quarter. See "Net Interest Income" discussion above. 11 14 LOANS AND LEASES COMPOSITION OF LOANS AND LEASES (Figure 6)
MARCH 31, 1999 DECEMBER 31, 1998 ------------------------------- --------------------------------- AMOUNT % OF TOTAL AMOUNT % OF TOTAL ----------- ------ ----------- ------------- (DOLLARS IN THOUSANDS) LOAN AND LEASE PORTFOLIO, NET One-to-four family: Permanent: Fixed rate .............................. $ 6,289,703 36.47% $ 6,909,161 39.08% Adjustable rate ......................... 3,155,649 18.30 3,360,705 19.01 Construction ............................. 239,955 1.39 294,893 1.67 ----------- ------ ----------- ------------- 9,685,307 56.16 10,564,759 59.76 Commercial real estate: Multifamily ................................. 223,869 1.30 242,776 1.38 Other ....................................... 509,149 2.95 475,753 2.69 ----------- ------ ----------- ------------- 733,018 4.25 718,529 4.07 Consumer: Retail ...................................... 3,420,717 19.84 3,129,312 17.70 Automobile .................................. 2,139,840 12.40 2,020,157 11.43 ----------- ------ ----------- ------------- 5,560,557 32.24 5,149,469 29.13 Business: Leasing ..................................... 747,559 4.34 730,415 4.13 Corporate banking ........................... 519,396 3.01 514,664 2.91 ----------- ------ ----------- ------------- 1,266,955 7.35 1,245,079 7.04 ----------- ------ ----------- ------------- $17,245,837 100.00% $17,677,836 100.00% =========== ====== =========== ============= Portfolio of loans serviced for others .......... $ 9,140,660 $ 9,308,294 =========== =============
12 15 LOAN AND LEASE ACTIVITY (Figure 7)
THREE MONTHS ENDED MARCH 31, ---------------------------------- 1999 1998 ----------- ---------- (DOLLARS IN THOUSANDS) ORIGINATIONS: Real Estate: Permanent: One-to-four family ......................... $ 1,261,217 $1,451,547 Multifamily ................................ 14,817 5,289 Commercial ................................. 44,538 15,066 ----------- ---------- Total permanent loans ................... 1,320,572 1,471,902 ----------- ---------- Construction: One-to-four family ......................... 104,409 91,803 Multifamily ................................ 13,302 4,439 Commercial ................................. 10,326 2,201 ----------- ---------- Total construction loans ................ 128,037 98,443 ----------- ---------- Total real estate loans originated 1,448,609 1,570,345 ----------- ---------- Retail consumer .................................. 598,746 389,569 Automobile ....................................... 345,893 280,977 Leases ........................................... 50,267 79,911 Corporate banking ................................ 124,014 46,512 ----------- ---------- Total loans and leases originated ....... 2,567,529 2,367,314 ----------- ---------- Loans purchased .................................. 9,012 410 Sales and principal reductions: Loans sold ..................................... 523,155 403,767 Loans exchanged for MBS ........................ 1,148,373 641,995 Principal reductions ........................... 1,327,470 1,273,381 ----------- ---------- Total sales and principal reductions .... 2,998,998 2,319,143 ----------- ---------- Increase(decrease) before net items . $ (422,457) $ 48,581 =========== ==========
INVESTMENT SECURITIES Figure 8 summarizes the investment portfolio at March 31, 1999 and December 31, 1998. The amounts reflected represent the fair values of securities available for sale and the amortized cost of securities held to maturity. INVESTMENT SECURITIES PORTFOLIO (Figure 8)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (DOLLARS IN THOUSANDS) Available for Sale: U.S. Treasury and agency securities .............. $ 47,965 $ 48,999 Corporate notes and commercial paper ............. 61,057 135,520 Other ............................................ 62,793 68,798 -------- -------- Total investment securities available for sale 171,815 253,317 -------- -------- Held to maturity: U.S. Treasury and agency securities .............. 35,436 35,932 Other ............................................ 6,017 6,324 -------- -------- Total investment securities held to maturity . 41,453 42,256 -------- -------- Total ................................... $213,268 $295,573 ======== ======== Weighted average rate ............................ 6.64% 6.30% ======== ========
13 16 MORTGAGE-BACKED SECURITIES Figure 9 summarizes the mortgage-backed securities portfolios at March 31, 1999 and December 31, 1998. 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 9)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE Participation certificates: Government agency issues: FNMA .............................................. $1,748,170 $1,053,324 FHLMC ............................................. 120,798 140,273 GNMA .............................................. 3,205 3,327 Collateralized mortgage obligations: Government agency issues: FHLMC ............................................. 320,496 337,658 FNMA .............................................. 246,679 255,238 GNMA .............................................. 8,850 9,374 Private issues ...................................... 489,437 500,010 ---------- ---------- Total mortgage-backed securities available for sale 2,937,635 2,299,204 ---------- ---------- HELD TO MATURITY Participation certificates: Government agency issues: FNMA .............................................. 673,002 741,828 FHLMC ............................................. 253,723 285,131 GNMA .............................................. 123,105 132,066 Private issues ...................................... 201,302 219,256 Collateralized mortgage obligations: Government agency issues: FNMA .............................................. 237,213 261,528 FHLMC ............................................. 108,873 126,279 Private issues ...................................... 708,057 902,892 ---------- ---------- Total mortgage-backed securities held to maturity 2,305,275 2,668,980 ---------- ---------- Total ........................................ $5,242,910 $4,968,184 ========== ==========
14 17 MORTGAGE-BACKED SECURITIES BY PAYMENT TYPE (Figure 10)
MARCH 31, 1999 DECEMBER 31, 1998 -------------------------- ----------------------- BOOK AVERAGE BOOK AVERAGE VALUE RATE VALUE RATE ----- ---- ----- ---- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE Adjustable rate: Participation certificates ........... $ 91,690 6.76% $ 104,582 6.77% Collateralized mortgage obligations .. 987,240 6.29 1,005,868 6.69 ---------- ---------- Total adjustable rate .............. 1,078,930 6.33 1,110,450 6.70 ---------- ---------- Fixed rate: Participation certificates ........... 1,780,483 6.91 1,092,342 6.87 Collateralized mortgage obligations .. 78,222 6.35 96,412 6.36 ---------- ---------- Total fixed rate ................... 1,858,705 6.89 1,188,754 6.83 ---------- ---------- Total available for sale ......... 2,937,635 6.68 2,299,204 6.76 ---------- ---------- HELD TO MATURITY Adjustable rate: Participation certificates ........... 500,346 6.76 547,989 6.92 Collateralized mortgage obligations .. 260,818 6.77 278,841 7.30 ---------- ---------- Total adjustable rate .............. 761,164 6.76 826,830 7.05 ---------- ---------- Fixed rate: Participation certificates ........... 750,786 7.30 830,292 7.30 Collateralized mortgage obligations .. 793,325 6.72 1,011,858 6.65 ---------- ---------- Total fixed rate ................... 1,544,111 7.00 1,842,150 6.94 ---------- ---------- Total held to maturity ........... 2,305,275 6.92 2,668,980 6.98 ---------- ---------- Total mortgage-backed securities $5,242,910 6.79% $4,968,184 6.88% ========== ==========
ASSET QUALITY ANALYSIS OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES (Figure 11)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1999 1998 --------- --------- (DOLLARS IN THOUSANDS) ALLOWANCE FOR LOAN AND LEASE LOSSES Balance, beginning of period ........................... $ 144,566 $ 142,985 Provision for loan and lease losses .................... 6,771 6,613 Loans and leases charged off: Mortgage ............................................ (1,022) (1,339) Automobile .......................................... (8,110) (6,129) Retail consumer ..................................... (1,519) (924) Leases .............................................. (900) -- Corporate banking ................................... (264) (59) --------- --------- Total charge-offs ................................ (11,815) (8,451) --------- --------- Recoveries: Mortgage ............................................ 122 134 Automobile .......................................... 1,370 1,075 Retail consumer ..................................... 171 196 Leases .............................................. -- -- Corporate banking ................................... 96 83 --------- --------- Total recoveries ................................. 1,759 1,488 --------- --------- Net loan and lease charge-offs .............. (10,056) (6,963) --------- --------- Balance, end of period ................................. $ 141,281 $ 142,635 ========= ========= Net charge-offs to average loans and leases (annualized) .22% .17%
15 18 Figure 12 sets forth information concerning nonperforming assets and the allowance for loan and lease losses. At March 31, 1999, the Bank had no outstanding commitments to lend additional funds to borrowers whose loans were on nonaccrual or restructured status. NONPERFORMING ASSETS (Figure 12)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (DOLLARS IN THOUSANDS) NONPERFORMING LOANS AND LEASES: Nonaccrual loans and leases: Real estate mortgage loans: One-to-four family(1) ................................ $ 71,177 $ 73,175 Multifamily and commercial ........................... 2,856 3,958 Construction and land ................................ 452 1,178 -------- -------- Total real estate mortgage loans ................... 74,485 78,311 Retail consumer ........................................ 19,467 21,032 Automobile ............................................. 279 327 Leases ................................................. -- -- Corporate banking ...................................... 7,997 8,810 -------- -------- Total nonaccrual loans and leases .................. 102,228 108,480 -------- -------- Accruing loans and leases delinquent more than 90 days: Real estate mortgage loans ............................. -- -- Retail consumer ........................................ 3,375 3,878 Automobile ............................................. 4,123 5,873 Leases ................................................. -- -- Corporate banking ...................................... 1,162 904 -------- -------- Total accruing loans and leases more than 90 days .. 8,660 10,655 -------- -------- Restructured real estate mortgage loans .................. 2,557 3,936 -------- -------- Total nonperforming loans and leases ............... 113,445 123,071 Real estate acquired through foreclosure and other ....... 19,209 17,803 -------- -------- Total nonperforming assets ......................... 132,654 140,874 Less government guaranteed loans ................... 22,308 22,429 -------- -------- Nonperforming assets net of guaranteed loans ....... $110,346 $118,445 ======== ======== Ratio of: Nonperforming loans and leases to total loans and leases .66% .70% Nonperforming assets to total assets ................... .54 .58 Allowance for loan and lease losses to: Nonperforming loans and leases ....................... 124.54 117.47 Total loans and leases before allowance .............. .81 .81 Ratio of (excluding guaranteed nonperforming loans): Nonperforming loans and leases to total loans and leases .53% .57% Nonperforming assets to total assets ................... .45 .48 Allowance for loan and lease losses to: Nonperforming loans and leases ....................... 155.02 143.64 Total loans and leases before allowance .............. .81 .81
(1) Includes $22.3 million and $22.4 million of government guaranteed loans at March 31, 1999 and December 31, 1998. At March 31, 1999, there were $45.7 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. 16 19 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 March 31, 1999 and December 31, 1998, 68% of interest-bearing liabilities were in the form of deposits and 32% 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 from within the Bank's primary market areas through the offering of a broad range of deposit instruments. COMPOSITION OF DEPOSITS (Figure 13)
MARCH 31, 1999 DECEMBER 31, 1998 -------------------------------------- -------------------------------------- WEIGHTED PERCENT WEIGHTED PERCENT AVERAGE OF AVERAGE OF AMOUNT RATE TOTAL AMOUNT RATE TOTAL ------ ---- ----- ------ ---- ----- (DOLLARS IN THOUSANDS) Checking accounts: Interest-bearing ............... $ 1,216,841 1.39% 8.04% $ 1,204,221 1.22% 7.94% Noninterest-bearing ............ 981,107 -- 6.49 1,015,650 -- 6.70 Money market accounts ............ 2,663,499 3.42 17.61 2,505,846 3.37 16.52 Savings accounts ................. 1,727,214 1.91 11.42 1,828,087 2.15 12.06 Certificates of deposit .......... 8,537,342 5.39 56.44 8,610,177 5.62 56.78 ----------- ------ ----------- ------ Total deposits .............. 15,126,003 3.98 100.00% 15,163,981 4.10 100.00% ====== ====== Plus unamortized premium on deposits purchased ........... 983 1,083 ----------- ----------- Total deposits, net ......... $15,126,986 $15,165,064 =========== =========== Including the annualized effect of applicable interest rate risk management instruments .......... 3.88% 4.02% ==== ====
BORROWINGS At March 31, 1999, 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 $8.7 billion in real estate loans and $2.2 billion in mortgage-backed securities. 17 20 FEDERAL HOME LOAN BANK ADVANCES (Figure 14)
MARCH 31, 1999 DECEMBER 31, 1998 ------------------------ ------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ---------- -------- ---------- -------- (DOLLARS IN THOUSANDS) Short-term ........................................... $ 823,000 4.98% $ 803,000 5.10% Long-term: Fixed-rate advances ................................ 5,308,764 5.01 5,109,388 4.99 Variable-rate advances ............................. 273,730 4.80 273,730 5.35 ---------- ---------- Total advances, net .............................. $6,405,494 5.00 $6,186,118 5.02 ========== ========== Including the annualized effect of applicable interest rate risk management instruments ................... 4.99% 5.01%
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)
MARCH 31, 1999 DECEMBER 31, 1998 ------------------------ ------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ---------- -------- ---------- -------- (DOLLARS IN THOUSANDS) Short-term ........................................... $ 42,815 4.62% $ 39,962 4.57% Long-term: Fixed-rate ......................................... 200,000 5.94 275,062 5.99 Variable-rate ...................................... 250,000 5.00 370,000 5.30 ---------- ---------- Weighted average cost including amortization of fees ........................................... $ 492,815 5.35 $ 685,024 5.53 ========== ========== Including the annualized effect of applicable interest rate risk management instruments ................... 5.32% 5.50%
INTEREST RATE RISK MANAGEMENT The company utilizes various types of interest rate contracts in managing its interest rate risk on certain of its deposits. 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. 18 21 INTEREST RATE SWAPS (Figure 16)
MARCH 31, 1999 DECEMBER 31, 1998 ----------------------------------- ----------------------------------- NOTIONAL RECEIVING PAYING NOTIONAL RECEIVING PAYING PRINCIPAL INTEREST INTEREST PRINCIPAL INTEREST INTEREST AMOUNT RATE RATE AMOUNT RATE RATE -------- ---- ---- -------- ---- ---- (DOLLARS IN THOUSANDS) Variable payment and fixed receipt: Maturing in: 2000 .......................... $ 60,000 5.58% 5.01% $120,000 5.80% 5.31% 2001 .......................... 80,000 5.67 5.02 -- -- -- 2003 .......................... 150,000 6.23 5.01 230,000 6.32 5.30 2004 .......................... 90,000 6.18 5.01 -- -- -- -------- ---- ---- -------- ---- ---- Total ....................... $380,000 6.00% 5.01% (1) $350,000 6.14% 5.30% (1) ======== ==== ==== ======== ==== ====
(1) Rates are based upon LIBOR. Swaps with a fixed payment and variable receipt totalling $50 million that were outstanding at December 31, 1998 matured during the first quarter of 1999. These swaps had a receiving interest rate of 5.22% and a paying interest rate of 5.16%. 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 MARCH 31, ---------------------------- 1999 1998 ------- ------- (DOLLARS IN THOUSANDS) Interest expense (income): Deposits .................... $(2,119) $(2,107) FHLB advances ............... (63) (71) Reverse repurchase agreements (122) 11 ------- ------- Total ..................... $(2,304) $(2,167) ======= =======
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 March 31, 1999, the Bank's one-year gap was a negative 1.14% 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 first quarter of 1999 was 9.07%. Management anticipates that the Bank will have sufficient funds available to meet current and future loan commitments. At March 31, 1999, the Bank and its subsidiaries had outstanding commitments to originate loans and leases of $1.2 billion, unfunded lines of consumer credit totaling $1.6 billion (a significant portion of which 19 22 normally remains undrawn) and unfunded lines of commercial (business loans) credit totaling $172.2 million. Outstanding letters of credit totaled $33.3 million as of March 31, 1999. Certificates of deposit scheduled to mature in one year or less at March 31, 1999 totaled $6.6 billion. Management believes that a significant portion of the amounts maturing will remain with the Bank because they are retail deposits. At March 31, 1999, the Bank had $823 million of advances from the FHLB system and $450 million 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 Following its November 1998 acquisition of ALBANK, Charter One became a bank holding company, converting from a unitary savings and loan holding company. As a bank holding company, Charter One is now subject to regulation by the FRB under the Bank Holding Company Act of 1956, and the regulations of the FRB, including various capital requirements. ALBANK Commercial and Charter One Bank, F.S.B. are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation ("FDIC") and the Office of Thrift Supervision ("OTS"), respectively. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by each regulator that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines must be met that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Quantitative measures established by regulation to ensure capital adequacy require Charter One and ALBANK Commercial to individually maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Charter One Bank, F.S.B. is required to maintain minimum amounts and ratios (also set forth in the table below) of total and Tier 1 capital to risk-weighted assets, of core capital to adjusted tangible assets, and of tangible capital to tangible assets. Each regulator of Charter One requires an institution to meet specific capital adequacy guidelines and the regulatory framework for prompt corrective action that involve quantitative measures of an institutions assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The institution's capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The actual regulatory capital ratios calculated for Charter One, ALBANK Commercial and Charter One Bank, F.S.B., along with the capital amounts and ratios for capital adequacy purposes and the amounts required to be categorized as well capitalized under the regulatory framework for prompt corrective action are as follows: REGULATORY CAPITAL (Figure 18)
AS OF MARCH 31, 1999 ---------------------------------------------------------------------------- FOR CAPITAL ACTUAL ADEQUACY PURPOSES ---------------------- -------------------------------------------- AMOUNT RATIO AMOUNT RATIO ------ ----- ------ ----- (DOLLARS IN THOUSANDS) CHARTER ONE: Total capital to risk-weighted assets $ 1,892,323 11.41% 1,326,674 greater than or equal to 8.00% Tier 1 capital to risk-weighted assets 1,744,626 10.52 663,337 greater than or equal to 4.00 Tier 1 capital to average assets 1,744,626 7.20 968,910 greater than or equal to 4.00 ALBANK COMMERCIAL: Total capital to risk-weighted assets 41,904 15.07 22,238 greater than or equal to 8.00 Tier 1 capital to risk-weighted assets 40,356 14.52 11,119 greater than or equal to 4.00 Tier 1 capital to average assets 40,356 5.56 29,048 greater than or equal to 4.00 CHARTER ONE BANK, F.S.B.: Total capital to risk-weighted assets 1,651,333 10.28 1,284,718 greater than or equal to 8.00 Tier 1 capital to risk-weighted assets 1,324,856 8.25 N/A N/A Core capital to adjusted tangible assets 1,331,101 5.53 721,768 greater than or equal to 3.00 Tangible capital to tangible assets 1,331,101 5.53 360,884 greater than or equal to 1.50
AS OF MARCH 31, 1999 --------------------------------------------- TO BE "WELL CAPITALIZED" UNDER PROMPT CORRECTIVE ACTION PROVISIONS --------------------------------------------- AMOUNT RATIO ------ ----- (DOLLARS IN THOUSANDS) CHARTER ONE: Total capital to risk-weighted assets 1,658,343 greater than or equal to 10.00% Tier 1 capital to risk-weighted assets 995,006 greater than or equal to 6.00 Tier 1 capital to average assets 1,211,138 greater than or equal to 5.00 ALBANK COMMERCIAL: Total capital to risk-weighted assets 27,797 greater than or equal to 10.00 Tier 1 capital to risk-weighted assets 16,678 greater than or equal to 6.00 Tier 1 capital to average assets 36,310 greater than or equal to 5.00 CHARTER ONE BANK, F.S.B.: Total capital to risk-weighted assets 1,605,897 greater than or equal to 10.00 Tier 1 capital to risk-weighted assets 963,538 greater than or equal to 6.00 Core capital to adjusted tangible assets 1,202,947 greater than or equal to 5.00 Tangible capital to tangible assets N/A N/A
20 23
AS OF DECEMBER 31, 1998 ---------------------------------------------------------------------------- FOR CAPITAL ACTUAL ADEQUACY PURPOSES ---------------------- -------------------------------------------- AMOUNT RATIO AMOUNT RATIO ------ ----- ------ ----- (DOLLARS IN THOUSANDS) CHARTER ONE: Total capital to risk-weighted assets $1,812,053 10.86% $1,335,073 greater than or equal to 8.00% Tier 1 capital to risk-weighted assets 1,659,578 9.94 667,537 greater than or equal to 4.00 Tier 1 capital to average assets 1,659,578 6.86 967,071 greater than or equal to 4.00 ALBANK COMMERCIAL: Total capital to risk-weighted assets 40,720 14.55 22,392 greater than or equal to 8.00 Tier 1 capital to risk-weighted assets 39,037 13.95 11,196 greater than or equal to 4.00 Tier 1 capital to average assets 39,037 5.92 26,375 greater than or equal to 4.00 CHARTER ONE BANK, F.S.B.: Total capital to risk-weighted assets 1,575,652 10.00 1,259,984 greater than or equal to 8.00 Tier 1 capital to risk-weighted assets 1,246,542 7.91 N/A N/A Core capital to adjusted tangible assets 1,246,542 5.19 720,077 greater than or equal to 3.00 Tangible capital to tangible assets 1,246,542 5.19 360,038 greater than or equal to 1.50
AS OF DECEMBER 31, 1998 --------------------------------------------- TO BE "WELL CAPITALIZED" UNDER PROMPT CORRECTIVE ACTION PROVISIONS --------------------------------------------- AMOUNT RATIO ------ ----- (DOLLARS IN THOUSANDS) CHARTER ONE: Total capital to risk-weighted assets $1,668,841 greater than or equal to 10.00% Tier 1 capital to risk-weighted assets 1,001,305 greater than or equal to 6.00 Tier 1 capital to average assets 1,208,838 greater than or equal to 5.00 ALBANK COMMERCIAL: Total capital to risk-weighted assets 27,990 greater than or equal to 10.00 Tier 1 capital to risk-weighted assets 16,794 greater than or equal to 6.00 Tier 1 capital to average assets 32,969 greater than or equal to 5.00 CHARTER ONE BANK, F.S.B.: Total capital to risk-weighted assets 1,574,980 greater than or equal to 10.00 Tier 1 capital to risk-weighted assets 944,988 greater than or equal to 6.00 Core capital to adjusted tangible assets 1,200,128 greater than or equal to 5.00 Tangible capital to tangible assets N/A N/A
As of June 8, 1998, the most recent notification from the OTS categorized Charter One Bank, F.S.B. 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. Charter One's and ALBANK Commercial's capital ratios exceed the minimum required to be well capitalized. Management does not know of any reasons why Charter One and ALBANK Commercial would not be considered well capitalized; however, as of March 31, 1999, Charter One and ALBANK Commercial had not received a classification from their respective regulators. Management believes that, as of March 31, 1999, Charter One, ALBANK Commercial and Charter One Bank, F.S.B., individually met all capital adequacy requirements to which they were subject. Events beyond management's control, such as fluctuations in interest rates or a downturn in the economy in areas in which the institution's loans and securities are concentrated could adversely affect future earnings and, consequently, the institution's ability to meet its future capital requirements. QUARTERLY STOCK PRICES AND DIVIDENDS (Figure 19)
1ST QTR 1999 4TH QTR 1998 3RD QTR 1998 2ND QTR 1998 1ST QTR 1998 ------------ ------------ ------------ ------------ ------------ MARKET PRICE OF COMMON STOCK (1): High ...................... $32.06 $30.56 $34.17 $34.89 $32.44 Low ....................... 25.19 17.63 21.84 28.57 22.86 Close ..................... 28.86 27.75 24.88 32.09 31.88 Dividends declared and paid .14 .14 .13 .13 .13
(1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998 and the 5% stock dividend issued September 30, 1998. YEAR 2000 STATE OF Y2K READINESS Preparing for the Year 2000 ("Y2K") is the result of the century date change issue caused by computer systems and related technology which are designed to recognize only the last two digits of a year and may recognize the date change from 12/31/99 to 01/01/00 as January 1, 1900, rather than January 1, 2000. The Company has made substantial progress in the implementation of our Y2K plan, which includes the remediation, testing and, if required, the implementation of upgrades or replacements of those systems and equipment which may be impacted by the century date change. 21 24 We have identified the following components of our Y2K project: Awareness Phase: Activities to identify the scope of our Y2K project have been completed. Inventory Phase: Computer and related technology were inventoried and the analysis of potential areas of Y2K risk have been identified and completed. Assessment Phase: The Y2K compliance status of computer systems and related technology has been completed. Also, the analysis of risks of major customers, vendors, suppliers of information and electronic data exchange partners has been determined and completed. Conversion Phase: The methodology for the conversion of non-Y2K mission critical compliant systems and equipment has been completed. Implementation Phase: Mission critical systems and related technology will be upgraded or replaced and fully tested to ensure their Y2K compliance. Post Implementation: Follow-up and the monitoring of problem resolution of Y2K solutions will be performed through December 31, 1999. This phase also includes the creation, testing and continual monitoring of our Y2K business resumption plan. With the exception of the Advance Loan System ("ALS") and Peps Plus, all mission critical systems and related technologies have been Company tested. ALS, which is used by both the Company's consumer loan department and Charter One Auto Finance for loan servicing, is in the process of being user certified and should be implemented no later than May 31, 1999. Alltel, the software vendor, has certified ALS as being Y2K compliant. Peps Plus processes all ACH transactions and the newest version was just received from the vendor, Checkfree, who has also certified it as Y2K compliant. This application will be implemented by May 31, 1999. The Company does not believe that there currently is a need to implement an alternate system at this time. In addition to evaluating the impact of mission critical systems and technology upon the Company, we have also performed an assessment of the impact posed by major customers, vendors, suppliers of information and electronic data exchange partners. As these assessments resulted in the identification of specific Y2K exposures, specific action plans, to either eliminate or reduce this risk to an acceptable level, were developed. These plans have been or are in the process of being implemented. As of March 31, 1999, the Company had successfully completed 98% of its Y2K remediation, testing and implementation for mission critical systems. It is anticipated that 100% of all mission critical systems will be tested and implemented on or before June 30, 1999. As of March 31, 1999, 75% of the computer systems requiring replacement or upgrade have been fixed or replaced. It is anticipated that 100% of all mission critical PC hardware and software systems will be upgraded or replaced by June 30, 1999. Efforts are also underway to insure that non-information technology systems are also Y2K compliant. All ATM hardware and software has been certified as Y2K compliant as of March 31, 1999. In addition an extensive review of branch offices and other Company facilities has been completed. As of March 31, 1999, all three major telephone switches had been successfully Y2K tested by the Company and the third party vendor which supplied the equipment. Security monitoring systems have been certified as Y2K compliant and contingency plans are being developed should they fail. All mission critical equipment (other than PC systems) has been replaced. For equipment that cannot be tested by the Company as Y2K compliant, contingency plans are being developed and should be completed by May 31, 1999. For most operations, the merger of ALBANK has resulted in the current Company operating procedures and systems being implemented in all ALBANK locations; however, the merger has resulted in the addition of both a student loan processing system and an ATM front end processing system to the Company's inventory of applications. Due to the small volume of processing and alternatives available, these applications are not deemed mission critical at this time. There are no additional Y2K issues requiring consideration due to the ALBANK merger. If there are unforeseen changes or enhancements made to the Company's processes, full Y2K testing will be performed prior to their implementation. 22 25 COSTS TO ADDRESS Y2K ISSUES We estimate the out-of-pocket Y2K initiative to cost approximately $4 million. This will provide for replacement or upgrade of PC hardware, software and the use of consultants. The cost of internal resources for the Y2K initiative has not been estimated. Other Y2K related costs are being accounted for as operating expenditures as they represent an improvement in Company operations. Management believes that there will not be any additional expenses which will have a material impact on the operations, cash flow, or financial condition of future periods. RISKS OF Y2K ISSUES Corporate wide efforts have been taken to identify and assess the risk and adequacy of systems and equipment for Y2K readiness. The Company has implemented a policy that all new systems or changes, which could be affected by the year 2000 date change, to existing systems will be Y2K certified and tested prior to implementation thus eliminating the risks these changes could create. The risk of major customers and their impact on the Company was determined not to be material, as the Company has a widely diversified portfolio of major customers. To avoid future impact, credit approval procedures for large lending relationships have been implemented which take into account the Y2K risks prior to the loan being approved. The Y2K risks of investors were also reviewed and certification was received as to their Y2K compliance. A regular review is completed by the Company. The risks presented by vendors and suppliers of information have been assessed and, where applicable, corrective action taken. These actions ranged from replacement to reducing the risk to an acceptable level. Testing with electronic data exchange partners, identified as being critical to continued operations, has been 100% completed. We have successfully participated with the Mortgage Bankers Association (MBA) and Alltel as part of a nationwide test for several software applications used for mortgage origination and servicing as well as interfacing to third party investors such as Fannie Mae and Ginnie Mae. The Company has also identified those business functions critical to the corporation as well as their requirements for continuing to do business. For each function a business resumption plan is being created and will be reviewed and tested. A quarterly review of all business functions is completed by Management to insure that the core functions identified remain accurate and up to date. As a result of the above, it is Management's belief that any of the most reasonably likely worst case Y2K scenarios would not have a material effect on the Company. We recognize that if certain government regulated third party providers experience significant Y2K failures, the result could create a disruption to our business operations. We have received written assurances from these providers that they will be Y2K compliant as well as tested many of the electronic interfaces with them and therefore it is our opinion these types of disruptions are unlikely to occur. CONTINGENCY PLAN In the event the onset of Y2K causes business operations or customer service to not properly function or prevents them from completely functioning, we are prepared to implement contingency plans which are continually being refined by the various corporate departments of the Company. These contingency plans provide the departments with the ability to implement either alternative computer systems and equipment or manual procedures or outsourcing activities to provide alternate means for servicing customers and processing data. The Company is also addressing global facilities issues such as electrical and heating needs through a systematic review of all locations and if warranted, the development of contracts with alternate source vendors. To ensure Y2K preparedness of branches and corporate departments, training will be performed during the third and fourth quarters of 1999. This training will furnish Company employees with transition procedures to alternative methods of servicing customers and maintaining business activity as needed. The Company is also developing plans for the physical rollover to allow all issues to be identified quickly and communicated to both a regional and corporate coordination site where resources will be dispatched to resolve 23 26 issues on a priority basis and issue resolutions will be tracked. CUSTOMER AND EMPLOYEE AWARENESS Our marketing department has implemented a series of notifications to our customers via statement inserts. Plans are in process to further develop website information allowing the customer to leave an e-mail to request further updates as well as the establishment of a Y2K hotline which will consist of an 800 number which employees and customers can call to get the latest Y2K project updates. Additionally we are developing a question and answer brochure which addresses the most common Y2K questions to date. Additional training for employees is scheduled for the third and fourth quarter of 1999. 24 27 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, 1998 Form 10-K. No material changes in the assumptions used or results obtained from the model have occurred. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION DIVIDEND On April 21,1999, the Directors of Charter One Financial, Inc. declared a quarterly cash dividend of 16 cents per common share. The dividend will be payable on May 20, 1999 to shareholders of record as of May 5, 1999. 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 There were no reports on Form 8-K filed during the quarter ended March 31, 1999. 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: May 17, 1999 /s/ Robert J. Vana ------------------------------------- Robert J. Vana Chief Corporate Counsel and Secretary Date: May 17, 1999 /s/ Richard W. Neu ------------------------------------- Richard W. Neu Executive Vice President and Chief Financial Officer 25 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 CHARTER ONE FINANCIAL, INC. COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, --------------------------------------- 1999 1998 ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE) BASIC EARNINGS PER SHARE(1): Weighted average number of common shares outstanding .................. 165,780,329 165,562,826 ============ ============ Net income ............................ $ 88,135 $ 74,053 ============ ============ Basic earnings per share .............. .53 .45 ============ ============ DILUTED EARNINGS PER SHARE(1): Weighted average number of common shares outstanding .................. 165,780,329 165,562,826 Add common stock equivalents for shares issuable under Stock Option Plan .... 4,241,925 5,845,602 ------------ ------------ Weighted average number of common and common equivalent shares outstanding 170,022,254 171,408,428 ============ ============ Net income ............................ $ 88,135 $ 74,053 ============ ============ Diluted earnings per share ............ .52 .43 ============ ============
(1) Restate to reflect the 2-for-1 stock split issued on May 20, 1998 and the 5% stock dividend issued September 30, 1998. EX-27.1 3 EXHIBIT 27.1
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 THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 235,635 5,704 677 0 3,109,450 2,346,728 2,391,901 17,387,118 141,281 24,554,809 15,126,986 865,815 451,317 6,158,320 0 0 1,662 1,950,709 24,554,809 342,133 80,072 7,216 429,421 146,779 235,217 194,204 6,771 5,164 109,831 131,156 0 0 0 88,135 .53 .52 3.35 79,920 8,660 2,557 45,723 144,566 11,815 1,759 141,281 141,281 0 0
EX-27.2 4 EXHIBIT 27.2
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 THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 240,743 4,369 128,253 0 2,373,654 3,937,975 3,992,427 16,123,893 142,635 23,914,712 14,417,210 797,397 589,642 6,234,220 0 0 1,689 1,824,554 23,914,712 319,475 111,926 10,522 441,923 150,639 260,842 181,081 6,613 3,993 109,858 110,941 74,053 0 0 74,053 .45 .43 3.14 64,963 20,445 6,696 30,800 142,985 8,451 1,488 142,635 142,635 0 0
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