10-K405

TABLE OF CONTENTS

Financial Overview
To Our Shareholders
Our Family
Along the Road
Generations of Customers
They Mean Business
SELECTED FINANCIAL DATA
FINANCIAL REVIEW
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
FORM 10-K
	Form 10-K Cross Reference Index
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
SIGNATURES
CHARTER ONE FINANCIAL, INC., CORPORATE DIRECTORY
INDEX TO EXHIBITS
EX-3.1 Second Restated Certificate of Incorp.
EX-4.1 Certificate of Common Stock
EX-11 Computation of Per Share Earnings
EX-21 Subsidiaries of the Registrant
EX-23.1 Consent of Deloitte & Touche LLP
EX-23.2 Consent of Ernst & Young LLP
EX-99.1 Auditors' Report from Ernst & Young LLP

FOR TWO MILLION

CUSTOMERS...

ANNUAL REPORT 2000

CHARTER ONE FINANCIAL, INC.®

WE’RE THE ONE

WE’RE THE ONE

Tailoring his business for his customers: When his personal trade business began to blossom 12 years ago, clothing designer Maurice Christopher decided to expand to a retail storefront location. He found an ideal location in Cleveland and a helpful partner in Charter One Bank. Today, Christophier, Inc. offers an exclusive line of men’s and women’s designs created by Mr. Christopher and tailored by his own staff together with topline offerings from leading manufacturers. Tailoring our services for two million customers: Our banking business has been built on providing convenience, service and the attractively priced financial services demanded by our markets.

PRODUCTS

RETAIL SERVICES

Totally Free Checking

VIP Checking

Energized Checking^sm

Privilege Money Market Gold®

MasterMoney™ Debit Card

MegaRewards^sm Program

Home Equity Loans

Student Loans

Specialty Loans

Retirement Services

Investments

Insurance

Free Online Banking/
Free Bill Payment

BUSINESS SERVICES

Commercial Real Estate Lending

Corporate Banking

Asset-Backed Lending

Small Business Services

Cash Management Services

Corporate Leasing

Auto Dealer Services

PERFORMANCE

RETAIL BANKING

Consumer checking: 18% growth in balances raised checking to 20% of total deposit base.

Business checking: Number of relationships nearly doubled the prior year’s total.

Core deposits: Combined core deposits in all consumer and business categories increased 10% and now represent 48% of total deposits.

Debit card: Increased fee generation through purchase volume elevated this category to 11% of revenue from branches.

Consumer lending: Balances grew 25% over 1999.

Investments: A convenience resource and a contributing cross-sell channel for core deposits.

MORTGAGE BANKING

Servicing and originations: Among the nation’s 30 largest loan servicers and among the top 20 retail lenders in retail lending volume.

AUTO DEALER SERVICES

Indirect auto finance: With loans originated through a dealer network in 11 states, this aspect of our energized assets portfolio grew 26% over 1999.

CORPORATE LEASING

Our portfolio of big-ticket leases to Fortune 1000 companies increased 56% over the prior year.

COMMERCIAL REAL ESTATE,
BUSINESS LENDING

Steady contributors to energized assets.

WE’RE THE ONE

Charter One is among the nation’s 30 largest bank holding companies. From headquarters in Cleveland, we manage $33 billion in total assets and operate 419 banking centers in six Midwest and Northeast states. In addition to retail and business banking services in those areas, our diverse product set also positions us to serve other areas of the nation with commercial leasing services, indirect auto lending and mortgage banking.

OUR MARKETS

Charter One Bank serves diverse and vibrant consumer and business markets along a virtually continuous corridor stretching from Ohio in the center, westward through Michigan and into Illinois and eastward through upstate New York into New England. This is an area of approximately 15 million consumers and more than a half million businesses in the small to medium-size target market. Our mortgage banking subsidiary, Charter One Mortgage Corp., originates loans in another 10 states and services loans for investors in yet others. Through our indirect auto lending unit, Charter One Auto Finance, we offer auto dealers in 11 states attractive loan options for their customers. Our equipment leasing subsidiary, ICX Corporation, generates a diversified portfolio of big-ticket leases to Fortune 1000 companies. Combined, our customer base totals 1.6 million households.

1999/2000

ILLINOIS

Begun with the 1999 merger of St. Paul Bancorp into Charter One, our expansion in the robust Chicago marketplace made new progress early in 2001. In January, we announced an agreement to purchase the branches and deposits of Alliance Bancorp. On approval later in 2001, the transaction will make Charter One the sixth largest retail bank in America’s third largest market.

When the acquisition is completed:

76 branches

1,100 employees

$4.7 billion in deposits

250,000 households

[PHOTO]

Chicago

6:35 pm

1995

MICHIGAN

Entering the southeastern Michigan market through our merger with First Federal of Michigan represented a watershed move for Charter One. We immediately gained access to a thriving economic marketplace, a retail area with known characteristics and a consumer and business demographic ready for the additional banking services we offer.

Today:

91 branches

1,090 employees

$3.9 billion in deposits

300,000 households

[PHOTO]

Detroit

1:15 pm

CHARTER ONE FINANCIAL, INC.

1934

OHIO

Founded in 1934 in Cleveland, we were the first in the nation to be titled a Federal Savings Bank. While growth came slowly at first, it came quickly through a series of strategic moves in the 1980s and 1990s.

We completed 19 mergers and acquisitions in Ohio between 1980 and 1998. We went public in January 1988 with $1.5 billion in assets and 42 branches.

Today:

112 branches

2,772 employees

$5.5 billion in deposits

400,000 households

[PHOTO]

Cincinnati

4:05 pm

1997/1998

NEW YORK

First with the addition of the Rochester and Buffalo markets in 1997, then with the integration of a large franchise centered in Albany, we have benefited from the geographic diversity of the Rochester Community Savings Bank and ALBANK mergers.

Today:

124 branches

1,771 employees

$5.6 billion in deposits

450,000 households

[PHOTO]

Lancaster

10:25 am

1998/1999

VERMONT

MASSACHUSETTS

As an outgrowth of the ALBANK merger, we gained entree into northern New England. Our presence in the region was further expanded in 1999 with the purchase of additional branches in Vermont.

Today:

35 branches

255 employees

$1.2 billion in deposits

125,000 households

[PHOTO]

Castleton

8:05 am

Our Markets

Retail

Subsidiaries

[MAP]

WE’RE THE ONE 1

Financial Overview

		At and for the Year Ended December 31,
(Dollars in thousands, except per share data)		2000			1999			1998
Net interest income		$	903,035		$	934,104		$	886,224
Top line revenue(1)			1,286,635			1,221,748			1,127,953
Recurring administrative expenses(2)			574,464			569,801			575,658
Operating earnings(3)			453,918			432,099			371,374
Net income			433,962			333,976			244,066
Earnings per share(4):
	Operating earnings(3)	$	2.09		$	1.89		$	1.60
	Earnings before extraordinary item		2.00			1.47			1.32
	Net income		2.00			1.46			1.05
Operating return on average equity(3)			18.82	%		17.46	%		15.61	%
Operating return on average assets(3)			1.43	%		1.39	%		1.24	%
Efficiency ratio(5)			43.39	%		45.49	%		49.83	%
Total assets		$	32,971,427		$	31,819,063		$	30,480,207
Loans and leases, net			24,008,174			22,312,850			22,219,411
Deposits			19,605,671			19,073,975			19,023,700
Shareholders’ equity			2,456,204			2,397,700			2,385,036
Total shareholders’ equity to total assets			7.45	%		7.54	%		7.82	%
Nonperforming assets to total assets(6)			.58	%		.45	%		.45	%

(1)	Net interest income and other operating income, excluding net gains and losses on the sale of assets.
(2)	Total administrative expenses less merger-related and other special charges.
(3)	Amounts are computed using net income, excluding the after-tax impact of merger-related and other special charges.
(4)	Restated to reflect all stock dividends and stock splits as of December 31, 2000.
(5)	The ratio of administrative expenses, excluding goodwill amortization and merger-related and other special charges, to net interest income and other income exclusive of net gains and losses on the sale of assets.
(6)	Excludes government guaranteed portion of nonperforming loans.

[BAR GRAPHS]

DEPOSITS	1996			1997			1998			1999			2000
(In billions)
Total Deposits	$	17.4		$	17.9		$	19.0		$	19.1		$	19.6
Core Deposits
LOANS
AND LEASES*	1996			1997			1998			1999			2000
(In billions)
Total Portfolio	$	16.3		$	19.7		$	22.4		$	22.5		$	24.2
Enerigized Assets
* Net balance before allowance for losses.
RETURN ON
AVERAGE ASSETS	1996			1997			1998			1999			2000
Operating Earnings		1.09	%		1.16	%		1.24	%		1.39	%		1.43	%
Net Income
RETURN ON
AVERAGE EQUITY	1996			1997			1998			1999			2000
Operating Expenses		13.95	%		15.14	%		15.61	%		17.46	%		18.82	%
Net Income
EARNINGS
PER SHARE	1996			1997			1998			1999			2000
Operating Expenses	$	1.21		$	1.40		$	1.60		$	1.89		$	2.09
Net Income

[PHOTO]

2 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 3

To Our Shareholders:

I never cease to marvel at the ability of this Company’s people to triumph over unexpected change. Despite the whipsaw effect of a string of interest rate hikes and a racing economy suddenly stopped still, we turned in very respectable results in 2000. Our returns on equity and assets and our operating efficiency position us favorably among the 50 largest financial services companies in the United States. We were rewarded with a 59% year-over-year increase in stock price.

This was the first year in recent memory when we weren’t busy completing a new merger or acquisition. We took the opportunity of a breather to put new systems in place that position us for the future. Along with directing significant resources at planning for development of the small business market, we completed and rolled out a major direct bank initiative, with online banking as a centerpiece.

Driving results for 2000 was a set of record achievements in the pillars of our business — our core competencies. First among these is growth of energized assets. Given the year’s unfavorable interest rate environment, we decided to limit balance sheet growth and instead continue to adjust the mix of loans further away from 1-4 family mortgages to assets that return superior yields. We made excellent progress. By year’s end, the mix of conventional mortgages had declined to approximately 45% of the loan portfolio as energized assets — consumer lines of credit and business loans and leases among them # increased to 55%. For 2001, we look to make energized assets 60% of our portfolio.

We view the change taking shape in the balance sheet as a stellar achievement. It demonstrates that we’ve reached the point where we can grow the portfolio without depending on single-family lending. It also means that any increase in mortgage prepayments during periods of refinance would have less effect on us than at any other time in our history. As for credit- worthiness, we remain comfortable with the portfolio’s quality. It’s well diversified and 97% of the loans are collateralized. We have identified no systemic credit deterioration in any of our lending areas. With a softening economy, one would expect some increase

Executive Management: (left to right) Richard W. Neu, Chief Financial Officer; Mark D. Grossi, Chief Retail Officer; Charles John Koch, Chief Executive Officer; John D. Koch, Chief Lending Officer.

in nonperforming loans, so we must obviously be vigilant. Our nonperforming assets remain at an extremely low level, and our charge-offs have been substantially lower than the experience of much of the banking industry.

A second core competency which we’re extremely proud of is demonstrated by the progress we’ve made in shifting the mix of deposits away from fixed-rate CDs to core deposits. We call core deposits energized liabilities. They are the heart of a well-run bank. Checking, money markets and regular savings accounts provide stable, lower-cost funds for funding loans. We grew core deposits by 10% in 2000, including an 18% jump in checking balances, without the aid of an acquisition or making large investments in new branches. We ended the year with 20% of deposits in checking accounts and nearly half of total deposits comprised of core products. This was actually ahead of our goal. So we’ve raised the bar in the year ahead along with a goal to increase core deposits by $1 billion, or 11%.

A big driver of top-line revenue at Charter One has been noninterest fee revenue. In the year just past, noninterest fee revenue stood at 30% of top-line revenue. Retail banking is a huge contributor to this number. For five straight years, the retail revenue stream has been growing at an annualized rate of 20%. This can really energize earnings when you consider that a 20% hike in noninterest revenue alone equates to earnings per share growth of 8%.

And 2000 was a year to demonstrate again just how good Charter One is at growing income faster than expenses. Flat operating expenses for the fourth consecutive year enabled us to post an operating efficiency ratio of 43%, one of the best in the industry.

Our newly integrated Chicago operations contributed to the year’s results. Adopting the Charter One sales culture, this division doubled its mortgage loan originations and quadrupled consumer lending bookings in its first full year. Chicago is a great market for us. Our products and services are ideally suited for the demographics of the area. With the early successes there, it was logical that we look for the opportunity to leverage our management team and marketing efforts by broadening our Chicago footprint. As a result of an agreement with Alliance Bancorp, we’ll acquire in the third quarter of 2001 $2 billion in assets, $1.3 billion in deposits and the 19 offices of Alliance’s Liberty Federal Bank.

As a result of the Federal Reserve tightening interest rates in 1999 and early 2000, we experienced substantial compression in our net interest margin. During the fourth quarter, the margin stabilized and started to recover. Given the current interest rate environment, we anticipate our net interest margin will continue to expand over the next 12 months.

Finally, we are reiterating our three-year financial goals of 1.60% return on average assets and 20% return on average equity. These goals are in conjunction with an annual earnings per share growth rate target greater than 10%. To get there, we intend to maintain tight cost controls, increase energized assets, continue to grow retail revenue, achieve double-digit core deposit growth and optimize the internet and direct banking channels.

None of this would be possible, of course, without the outstanding performance of 7,000 hard working employees and the guidance of a dedicated board of directors. With everyone behind the effort, we look forward to an enterprise that continues to excel and to another fine year ahead.

Sincerely,

/s/ Charles John Koch

Charles John Koch

Chairman, President and Chief Executive Officer

February 23, 2001

4 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 5

Our Family

[PHOTO]

Steve and Annette Terrigino are Certified Public Accountants who have
referred customers to us for a home equity loan. So it was no surprise that
the Rochester, New York couple, here with son Nicholas, 5, called us when their
own need arose. Mr. and Mrs. Terrigino: Thanks for making us The One.

[MAP] Rochester, New York 7:55 pm

[PHOTO]

[MAP] Castleton, Vermont 8:05 am

6 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 7

From expansive metropolitan areas of the
upper Midwest to the vistas of northern
New England, we deliver for our customers.

Along the Road

It crosses two time zones and covers a concentrated area of six states. It’s an area rich in history, vibrant for its diversity of people and stable for its economic underpinnings. Unlike some other parts of the nation that can surge and fall rapidly, there’s no boom then bust here. Instead, it’s a geographic region of steady progress. It’s a place where people go about their lives, accomplishing their personal and business goals and contributing to their communities. These people are our customers. They live and work in Charter One country.

If you were to drive it, you might start a tour of our markets from northern Vermont, home to several hundred thousand people. From there, you’d wind your way through the mountains and valleys of upper New England into upstate New York. It might seem to you that Interstate 90 was strategically placed just for your drive, because it would connect you with the other major arteries joining the extreme eastern end of Charter One’s region to the market added most recently — the Chicago metropolitan area.

From start to finish, the total distance would be about 1,000 miles. Set at intervals along the way would be the cities of Albany, Rochester, Buffalo, Cleveland, Toledo,

Janet Carini, DVM, is flanked by some of her patients held by craftsmen working on the expansion of her Veterinary Clinic in Castleton, Vermont. “Business boomed with the expanding population,” says the Charter One customer, “so it was expand or move to a new location.” A staff of 17, including three veterinarians (one performs acupuncture when indicated), takes care of small animal outpatients as well as hospitalized patients.When the project is completed, the hospital will accommodate up to 30 animals. A construction loan is taking care of the current work, says Dr. Carini, who also has other business and personal accounts.

300,000 debit cards issued in 2000 alone

      [PHOTO]

      George Cherry, Cleveland, Ohio: checking and investment accounts.

Detroit and Chicago. Radiating out from the central route would be other highways, connecting still other metro areas. Included would be cities like Springfield, Binghamton, Akron/Canton and Kalamazoo.

The population along this route exceeds 15 million people. If you were to stop and chat with some of the people along the way, you would find a wealth of different backgrounds and personal interests. Very likely, you would be impressed with their personal accomplishments. But you wouldn’t be surprised at much else about any of them.

As typical as Americans anywhere, the people of the Charter One banking territory fit the predictable demographic of middle America. For the most part their work places are steady employers... their homes don’t suddenly soar or bottom out in value, but appreciate over time... their communities find ways to change and grow with circumstances.

The Chan family of Chicago represents one aspect of life at one end of this geographic span. Veterinarian Janet Carini of Vermont exemplifies the sound customer base out East. In the middle of this sizable geography,

Long-time banking customers Mr. and Mrs. F.L. Chan of Chicago know their customers like things done the old-fashioned way. That’s why they still prepare baked goods for their Happy Garden bakery by hand, the same method they used 30 years ago when they started their store soon after immigrating to the United States. Their daughter recently moved back to Chinatown with her husband and children to help form an expanded family enterprise.

[PHOTO]

8 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 9

[PHOTO]

Mr. and Mrs. Arthur Schaaf, Detroit, Michigan: checking, CD and retirement accounts.

for example, is Allen Chabin in Cleveland, who chose to retire in his native Ohio after a career that stationed him during his working life on both coasts of the United States.

All together, Charter One’s account base numbers three million accounts held by two million customers.

To serve them, we have 419 branches. Our customers like ATMs, so we have 913 of them. They told us they want extra convenience, so we issued more than 300,000 debit cards in 2000 alone.

They have responded enthusiastically to virtually every enhancement, including our newly introduced online banking feature. Early response puts us well on our way to achieving our 2001 goal for internet customers.

To Unlock the Equity in Your Home

[PHOTO]

We’re the One

As coach at the same Cleveland high school he attended, Bill Attewell knows how to give positive direction. Not surprisingly, his adult children and in-laws have their accounts with us, too. Attewell himself likes the benefit of a home equity line of credit which stands ready to serve when needed. Sparked by increased consumer lending, energized assets have grown to 55% of our total loan portfolio.

[PHOTO]

Mr. Attewell: Thanks for making us The One.

CHARTER ONE BANK charterone.com [LOGO]

[PHOTO]

[MAP] Cleveland, Ohio 2:05 pm

10 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 11

[PHOTO]

Made nearly 70 years ago,
our commitment to
customer service is paying off.

Generations of Customers

Operations were vigorous in 2000, a year with no mergers or acquisitions. Retail banking revenue posted a 23% gain. Average balances of core deposit accounts increased 19%. Home equity loan originations were a record $1.6 billion in a rising rate environment, spurred in large part by delivery channels that didn’t exist three years ago — mortgage loan cross sales, telephone direct banking and the internet. Our portfolio of consumer loans advanced to more than one-third of the loan portfolio and top-line revenues grew.

Ezra Levert retired twice — first from his supervisory post with a major steel company, then from a local high school where he maintained the heating plant. Now, says the Clevelander, it’s a life of boating, fishing and traveling. A veteran of the Korean War and a trustee and treasurer of his church, he maintains deposit and home equity accounts with us.

For Great Checking Accounts

[PHOTO]

We’re the One

When Allen Chabin returned to his native Ohio to retire, he found a checking account perfectly suited for a professional who had been assigned to posts on both coasts of the United States. Another 300,000 consumers also found us last year. Together, they helped increase core energized liabilities by 10% to a record 48% of total deposits.

[PHOTO]

Mr. Chabin: Thanks for making us The One.

[PHOTO]

Doug and Carolyn Spitler, Chicago, Illinois: mortgage customers.

Randolph Forde’s days are busy enough in Albany, New York. Between a hectic work schedule and the demands of graduate school, he looks forward to spending no more than the few minutes his banking requires of his time. It’s easy for him because it’s all online.

Nearly 500 miles away in Cleveland, Ohio, Ezra Levert is comforted by the fact that his borrowing arrangement has enabled him to consolidate the debts of his retirement lifestyle into a home equity line of credit with the potential of a tax benefit.

Newly transferred to Chicago, Doug and Carolyn Spitler spend their spare time furnishing a new home they financed with a familiar mortgage banker — the same one they had in Maryland.

Since we began nearly 70 years ago, we’ve served generations of customers. All ages. All income brackets. All walks of life. Serving them well has propelled us to a leadership position in our markets. A penchant for product innovation and a culture based on focused sales goals and cost control have resulted in solid earnings growth and enviable operating efficiency.

CHARTER ONE BANK charterone.com [LOGO]

12 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 13

[PHOTO]

Ron Coreno says he has never strayed from the Charter One branch in his Parma, Ohio neighborhood, where he and his wife have a number of deposit accounts. A retired mathematics professor, he knows numbers. So when the Corenos had a kitchen remodeling job to do, they went to their branch for a home equity loan.

Through a vast retail network across six states, we offer a proven set of competitively priced financial services designed to satisfy customer needs and return optimum results.

Heading the list is a set of compelling checking account options, which attracts great numbers of customers as prospects for other services. In 2000, we set another record in consumer checking by opening more than 300,000 new accounts. Increasing core deposits is a key strategy of this program. Among methods to accomplish this goal, a new referral initiative established for loan officers during the year resulted in cross-sales of our most profitable checking and money market accounts to 25% of all new mortgage customers.

The MasterMoney debit card issued with checking accounts represents significant revenue opportunity. Spurred by imaginative programs like our MegaRewards promotion, interchange fees from purchases made with these cards in 2000 grew 68% over the prior year. This income source today accounts for 11% of the revenue coming from our branch system.

Expanding our convenience channels of service enables us to retain existing customers and gain new ones. Our extensive network of ATMs not only builds customer loyalty, it’s a significant revenue generator. Approximately half of our ATMs are off-premise, most of which are in the Chicago market.

Newly introduced online web banking (no fees for online transactions or for paying bills makes it very attractive) offers powerful potential for revenue growth by expanding the market for our traditional deposit and loan products. It will also be the primary vehicle for a new checking/ brokerage account that we will be offering in partnership with Fidelity Investments.

Sparked by a remarkable 69% cross-sell penetration of all new first mortgages, home equity lending continued its strong growth curve, up 66% over the prior year. Including the 26% growth in the portfolio of Charter One Auto Finance, combined energized loan balances grew to 55% of the bank’s total loans.

When he heard online banking was in development at Charter One, Randolph Forde signed up to be one of the first users. Great time-saver, says the 24-year-old native of Georgetown, Guyana, whose parents moved to New York when he was a child. Randolph needs all the spare time he can get. He’s a graduate student in information resources management at SUNY-Albany (he already has another master’s degree in education curriculum development). He also works 80 hours a week at two jobs. One is as a child care worker in a school for boys, the other as an intern with the State of New York Education Department.

[PHOTO]

initiatives Online

leasing portfolio up 56%

From neighborhood stores
to big companies, our business
customers are energized.

They Mean Business

In 2000, Charter One made important progress in increasing the ratio of energized business and commercial real estate loans and leases to total loans. Now equal to nearly one-fifth of our total loan portfolio, these balances are a key component of our strategy to reposition our balance sheet with higher-yielding, energized assets.

Looking for a new banking relationship to help him launch his facilities maintenance business several years ago, James Vaughn, Jr. of Cleveland got a tip from his wife’s employer. A CPA, he suggested the Vaughns talk to his bank. They did. With a Charter One SmartBusiness® line of credit together with business checking and money market accounts, JDD, Inc. today is soaring with 60 employees and a prime contractor arrangement with a Cleveland-based federal agency.

For Dan Fleck, managing a fleet of 3,600 vehicles for a major power utility has been made easier with the help of Charter One’s leasing subsidiary, ICX Corporation. As Cincinnati-based Cinergy continues its multi-year program of converting from owned equipment to leases, ICX has become the primary lessor of Cinergy’s fleet, which includes sedans, service vehicles, tractor trailers and bucket trucks.

ICX had its biggest year ever in 2000, increasing its portfolio 56% to $1.8 billion in leases. Supported now by newly opened sales offices in Texas and New Jersey, ICX manages a diversified equipment lease portfolio with investment risk spread across various types of equipment and manufacturers to a wide array of credit-worthy customers. Over-the-road vehicles, like those supplied to Cinergy, represent 18% of the ICX portfolio.

Tom O’Connor, Jr., smiles a lot when he talks about the company his family founded in 1931. As president, he’s proud of the success of Mohawk Paper Company. Like the rolls of Mohawk Superfine paper behind him, the company’s performance is polished by the skills of its 375 employees working in two facilities near Albany, New York. With term loans and leases, cash management and group-banking employee services from Charter One, Mohawk serves international markets with a wide selection of papers ranging from commercial to fine art printing grades.

14 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 15

[PHOTO]

[MAP] Albany, New York 5:05 pm

[PHOTO]

Tammy Bennington (left) loves to fly. Karin Raaymakers, a native of Holland, speaks six languages. Several years ago, they pooled their talents and related business backgrounds to fulfill the dream of starting their own business. The result was Avanti Aerospace, an aircraft parts distributor based in Willoughby, Ohio. With a Charter One business line of credit and deposit accounts, they market themselves to commuter airlines throughout the world. Thanks to the language advantage, they say, Avanti is a leader in supplying the European market.

Accelerating the growth of energized assets is the prime objective of Charter One’s other business lending units as well. Commercial real estate lending remained a steady contributor to the loan portfolio.

In corporate banking, the portfolio grew by 18% as we stepped up our middle market lending programs aimed at customers like David Brobak in Albany, New York. The company he runs, Blasch Precision Ceramics, Inc. manufactures complex refractory shapes with unique qualities for a variety of worldwide industries, including metallurgical, chemical, heat-treating, glass and petro-chemical. An asset-based lending initiative established during the year has already begun to show good progress.

Among the strategies to round out our product offerings is continued development of our cash management services and proof-of-deposit capability.

As for the small business segment, we are convinced it is loaded with opportunity.

Dan Fleck, manager of transportation services for Cinergy, Inc., a diversified energy utility based in southern Ohio, is continually thinking about the 25,000 square miles of Cinergy’s service area. That’s the size of the territory his fleet of vehicles must travel. It’s a region that blankets two-thirds of Indiana, metropolitan Cincinnati and several northern counties of Kentucky. More than half of his fleet of leased vehicles are supplied by ICX Corporation.

[PHOTO]

16 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 17

[PHOTO]

Alan Pearce (right), president of Polyfusion Electronics took a look at how Charter One was handling his personal accounts. Pleased with the evaluation, he and Vice President Ron Folkman (left) moved their business accounts to Charter One as well, where they have a line of credit, a commercial mortgage and business deposit services. Pearce and Folkman started Polyfusion more than 25 years ago. At their 20,000-square-foot plant in Lancaster, New York, they design and produce specialized electronic assemblies for original equipment manufacturers and high-end audio components for audiophiles and the sound reinforcement industry.

Well over a half million small businesses are in operation from one end of our retail banking area to the other. Thanks to the huge presence of our 419 banking centers across the region, we believe we can leverage our visibility and proximity to this market into a steadily growing base of core deposit accounts, lines of credit and loans. Programs aimed at this segment were piloted successfully in 2000 and will be launched fully in the year ahead.

corporate banking portfolio grew 18%

For Your Business Banking Needs

[PHOTO]

We’re the One

For Rick Reinhold, quality is critical in the beef snack foods produced by American Foods, Inc., his company in Sterling Heights, Michigan. For his business checking and revolving credit arrangement, he looked to us for a quality partnership. His and tens of thousands of other small businesses have driven a seven-fold increase in our core business deposits over the past three years.

[PHOTO]

Mr. Reinhold: Thanks for making us The One.

CHARTER ONE BANK charterone.com [LOGO]

SELECTED FINANCIAL DATA Charter One Financial, Inc.

The selected financial data presented below is not necessarily indicative of future results due to, among other things, the effect of acquisitions. For a discussion of acquisitions, see Note 2 to the Notes to Consolidated Financial Statements.

   Performance returns include actual returns, operating returns and returns as initially reported. Operating returns are computed using net income, excluding the after-tax impact of merger-related and other special charges for each of the periods presented. Returns as initially reported exclude the after-tax impact of merger-related and other special charges and are computed as the sum of 1) amounts we reported in the respective year’s quarterly reports to shareholders for the three quarters ended September 30, not restated for mergers accounted for as pooling of interests that occurred in the fourth quarter of the respective year, and 2) fourth quarter results as reported in the Quarterly Financial Data table in the respective year’s annual report to shareholders, restated for the respective year’s mergers accounted for as pooling of interests. The efficiency ratio is the ratio of administrative expenses, excluding goodwill amortization and merger-related and other special charges, to net interest income and other income, excluding net gains and losses on the sale of assets and other special charges. We believe that presentation of operating returns and returns as initially reported will provide additional comparability and insight into the operations of Charter One. Dividend information represents historical amounts declared and paid by Charter One, as adjusted for stock dividends and stock splits, and is not adjusted for mergers accounted for as pooling of interests. Per share data has been restated to reflect all stock dividends and stock splits as of December 31, 2000.

		At and for the Year Ended December 31,
(Dollars in thousands, except per share data)		2000			1999			1998			1997			1996
Financial condition:
Cash, federal funds sold and other		$	531,257		$	693,532		$	722,260		$	650,238		$	624,285
Investment securities			449,215			542,081			629,072			1,131,078			905,161
Mortgage-backed securities			5,593,371			6,100,380			5,570,286			6,743,347			7,853,039
Loans and leases, net			24,008,174			22,312,850			22,219,411			19,509,520			16,130,066
Other assets			2,389,410			2,170,220			1,339,178			1,399,409			1,213,185
	Total assets	$	32,971,427		$	31,819,063		$	30,480,207		$	29,433,592		$	26,725,736
Deposits		$	19,605,671		$	19,073,975		$	19,023,700		$	17,901,125		$	17,413,770
FHLB advances			9,636,277			9,226,150			7,512,203			5,778,649			3,949,243
Other borrowings			547,134			515,574			1,009,954			2,817,041			2,776,045
Other liabilities			726,141			605,664			549,314			638,549			548,519
Capital securities			—			—			—			50,000			—
Shareholders’ equity			2,456,204			2,397,700			2,385,036			2,248,228			2,038,159
	Total liabilities and shareholders’ equity	$	32,971,427		$	31,819,063		$	30,480,207		$	29,433,592		$	26,725,736
Other data:
Loan servicing portfolio		$	10,379,644		$	10,798,563		$	9,916,922		$	10,140,387		$	11,901,443
Book value per share			11.80			10.91			10.61			10.02			9.12
Dividends declared and paid per common share			.67			.57			.48			.41			.35
Common stock price range:
	High		30.00			29.14			31.65			27.65			18.41
	Low		14.52			16.67			15.99			16.91			11.16
	Close		28.88			18.22			25.17			27.27			17.28
Dividend payout ratio			33.50	%		39.04	%		45.71	%		37.61	%		36.08	%
Net yield on average interest-earning assets			3.02			3.19			3.11			3.10			3.16
Interest rate spread			2.84			3.01			2.85			2.81			2.86
Average shareholders’ equity to average assets			7.58			7.99			7.96			7.64			7.83
Total shareholders’ equity to total assets			7.45			7.54			7.82			7.64			7.63
Number of offices:
	Full service branches		419			417			405			395			341
	Loan production offices		32			36			41			37			49
Number of employees (FTEs)			6,573			7,055			7,104			7,155			6,703

18 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 19

SELECTED FINANCIAL DATA Charter One Financial, Inc.

		At and for the Year Ended December 31,
(Dollars in thousands, except per share data)		2000			1999			1998			1997			1996
Operating data:
Interest income		$	2,247,088		$	2,128,455		$	2,130,332		$	2,032,443		$	1,905,531
Interest expense			1,344,053			1,194,351			1,244,108			1,205,241			1,114,538
Net interest income			903,035			934,104			886,224			827,202			790,993
Provision for loan and lease losses			54,205			35,237			31,325			48,653			25,389
Net interest income after provision for loan and lease losses			848,830			898,867			854,899			778,549			765,604
Other income:
	Net gains (losses)		9,271			(57,047	)		30,865			700			3,579
	Other		383,600			287,644			241,729			185,266			170,862
Administrative expenses			603,955			633,327			665,340			598,040			600,622
Income before income taxes and extraordinary item			637,746			496,137			462,153			366,475			339,423
Income taxes			203,784			160,607			156,429			112,892			111,685
Income before extraordinary item			433,962			335,530			305,724			253,583			227,738
Extraordinary item – early extinguishment of debt, net of tax benefit			—			1,554			61,658			3,131			—
Net income		$	433,962		$	333,976		$	244,066		$	250,452		$	227,738
Basic earnings per share:
Income before extraordinary item		$	2.03		$	1.50		$	1.36		$	1.14		$	1.02
Extraordinary item – early extinguishment of debt			—			(.01	)		(.27	)		(.01	)		—
Net income		$	2.03		$	1.49		$	1.09		$	1.13		$	1.02
Diluted earnings per share:
Income before extraordinary item		$	2.00		$	1.47		$	1.32		$	1.10		$	.97
Extraordinary item – early extinguishment of debt			—			(.01	)		(.27	)		(.01	)		—
Net income		$	2.00		$	1.46		$	1.05		$	1.09		$	.97
Performance returns:
Actual:
	Return on average assets		1.36	%		1.08	%		.82	%		.90	%		.87	%
	Return on average equity		18.00			13.50			10.26			11.77			11.16
	Efficiency ratio		45.68			50.69			57.79			58.08			61.64
Operating:
	Return on average assets		1.43			1.39			1.24			1.16			1.09
	Return on average equity		18.82			17.46			15.61			15.14			13.95
	Efficiency ratio		43.39			45.49			49.83			50.93			52.51
	Operating earnings	$	453,918		$	432,099		$	371,374		$	322,063		$	284,714
	Operating earnings per share		2.09			1.89			1.60			1.40			1.21
As initially reported:
	Return on average assets		1.43	%		1.48	%		1.36	%		1.26	%		1.22	%
	Return on average equity		18.82			18.57			18.18			18.26			17.93
	Average shareholders’ equity to average assets		7.58			8.01			7.50			6.94			6.80
	Efficiency ratio		43.39			43.16			43.94			42.18			42.22
	Diluted earnings per share	$	2.09		$	1.99		$	1.77		$	1.58		$	1.42
	Total assets(1)		32,971,427			31,819,063			24,467,255			19,760,265			13,893,841

(1)  Represents the amount we reported in the respective year’s annual report to shareholders.

FINANCIAL REVIEW

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

The following financial review presents an analysis of the asset and liability structure of Charter One Financial, Inc. and a discussion of the results of operations for each of the periods presented in the annual report. The data presented in the following pages should be read in conjunction with the audited Consolidated Financial Statements contained elsewhere in this Annual Report.

Holding Company Business

Headquartered in Cleveland, Ohio, Charter One Financial, Inc., hereafter referred to as “Charter One” or the “Company,” is a financial holding company. Charter One is a Delaware corporation and owns all of the outstanding capital stock of Charter Michigan Bancorp, Inc. and Charter One 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 Charter One is operating these financial institutions which we sometimes refer to in this document collectively as the “Bank.” The Bank’s primary business is providing consumer banking services to certain major markets in Ohio, Michigan, Illinois, New York, Vermont and in some markets of Massachusetts. At the end of 2000, the Bank and its subsidiaries were doing business through 419 full-service branches and 32 loan production offices.

Results of Operations

For the year ended December 31, 2000, Charter One reported net income of $434.0 million, compared to $334.0 million and $244.1 million for the years ended December 31, 1999 and 1998, respectively. On a diluted per share basis, net income was $2.00, $1.46 and $1.05 in 2000, 1999 and 1998, respectively. As discussed below, operating results were affected by merger-related and other special charges in each of the last three years.

2000 Merger-Related Charges:

			Effect on Year Ended
			December 31, 2000
(Dollars in thousands)			Pretax		After Tax
St. Paul Bancorp, Inc. merger-related charges:
	Severance and other termination costs		$	20,710	$	14,024
	Duplicate assets, lease terminations and other costs to combine operations			8,781		5,932
		Total merger-related charges	$	29,491	$	19,956

1999 Merger-Related and Other Special Charges:

				Effect on Year Ended
				December 31, 1999
(Dollars in thousands)				Pretax		After Tax
St. Paul and ALBANK Financial Corporation merger-related charges:
	Transaction costs			$	10,053	$	10,053
	Severance and other termination costs				39,928		26,352
	Duplicate assets, lease terminations and other costs to combine operations				13,545		8,940
		Merger-related charges			63,526		45,345
Other special charges:
	Additional loan loss provisions				6,529		4,309
	Asset/liability management actions				71,083		46,915
	Loss on termination of debt				2,391		1,554
		Other special charges			80,003		52,778
			Total merger-related and other special charges	$	143,529	$	98,123

1998 Merger-Related and Other Special Charges:

				Effect on Year Ended
				December 31, 1998
(Dollars in thousands)				Pretax		After Tax
ALBANK, CS Financial Corporation, and Beverly Bancorporation, Inc. merger-related charges:
	Transaction costs			$	14,601	$	14,601
	Severance and other termination costs				20,088		13,456
	Duplicate assets, lease terminations and other costs to combine operations				29,993		20,288
		Merger-related charges			64,682		48,345
Other special charges:
	Cost reduction plan				25,000		17,305
	Loss on termination of debt				94,858		61,658
		Other special charges			119,858		78,963
			Total merger-related and other special charges	$	184,540	$	127,308

Excluding the above merger-related and other special charges presents more comparable operating earnings for the periods being reviewed. The following table summarizes the components of operating earnings.

		Year Ended December 31,
(Dollars in thousands)		2000		1999		1998
Net interest income		$	903,035	$	934,104	$	886,224
Provision for loan and lease losses			54,205		28,708		31,325
Other income			392,871		301,680		272,594
Administrative expenses			574,464		569,801		575,658
Income taxes			213,319		205,176		180,461
	Operating earnings	$	453,918	$	432,099	$	371,374

20 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 21

Net Interest Income–Net interest income is the difference between the interest and dividend income earned on our loans and investments and the interest expense on our deposits and borrowings. Net interest income is our principal source of earnings. Net interest income is affected by a number of factors including the level, pricing and maturity of interest-earning assets and interest-bearing liabilities, interest rate fluctuations and asset quality, as well as general economic conditions and regulatory policies.

   The following table shows average balances, interest earned or paid and average interest rates for the years indicated. Nonaccrual loans are included in the average balance of loans. The mark-to-market adjustments on securities available for sale are included in noninterest-earning assets.

Average Balances, Interest and Yields/Costs

			Year Ended December 31,
			2000								1999
			Average					Average			Average					Average
(Dollars in thousands)			Balance			Interest		Yield/Cost			Balance			Interest		Yield/Cost
Interest-earning assets:
Loans and leases			$	23,830,266		$	1,810,608		7.60	%	$	22,646,524		$	1,683,662		7.43	%
Mortgage-backed securities:
	Available for sale			3,342,744			241,369		7.22			3,195,738			214,119		6.70
	Held to maturity			1,690,002			120,812		7.15			2,249,771			155,141		6.90
Investment securities:
	Trading			183			38		20.67			11,005			363		3.30
	Available for sale			458,299			33,412		7.29			578,607			36,276		6.27
	Held to maturity			29,008			1,594		5.49			39,860			2,453		6.15
Other interest-earning assets				543,450			39,255		7.10			557,417			36,441		6.45
		Total interest-earning assets		29,893,952			2,247,088		7.51			29,278,922			2,128,455		7.27
Allowance for loan and lease losses				(185,623	)							(181,503	)
Noninterest-earning assets				2,097,990								1,882,972
		Total assets	$	31,806,319							$	30,980,391
Interest-bearing liabilities:
Deposits:
	Checking accounts		$	3,632,640		$	57,229		1.58	%	$	2,952,893		$	29,968		1.01	%
	Money market and savings accounts			5,401,048			168,379		3.12			5,464,447			145,556		2.66
	Certificates of deposit			9,821,168			540,501		5.50			10,482,915			542,523		5.18
		Total deposits		18,854,856			766,109		4.06			18,900,255			718,047		3.80
FHLB advances				9,309,296			532,583		5.71			8,434,318			432,043		5.12
Other borrowings				613,875			45,361		7.32			717,173			44,261		6.13
		Total borrowings		9,923,171			577,944		5.81			9,151,491			476,304		5.20
		Total interest-bearing liabilities		28,778,027			1,344,053		4.67			28,051,746			1,194,351		4.26
Noninterest-bearing liabilities				616,804								454,312
		Total liabilities		29,394,831								28,506,058
Redeemable capital securities				—								—
Shareholders’ equity				2,411,488								2,474,333
		Total liabilities and shareholders’ equity	$	31,806,319							$	30,980,391
Net interest income						$	903,035							$	934,104
Interest rate spread									2.84	%							3.01	%
Net yield on average interest-earning assets									3.02	%							3.19	%
Average interest-earning assets to average interest- bearing liabilities									103.88	%							104.37	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Year Ended December 31,
			1998
			Average					Average
(Dollars in thousands)			Balance			Interest		Yield/Cost
Interest-earning assets:
Loans and leases			$	20,752,907		$	1,604,243		7.72	%
Mortgage-backed securities:
	Available for sale			2,383,167			165,628		6.95
	Held to maturity			3,733,286			261,743		7.01
Investment securities:
	Trading			—			—		—
	Available for sale			771,710			44,656		5.79
	Held to maturity			68,591			4,378		6.38
Other interest-earning assets				772,958			49,684		6.34
		Total interest-earning assets		28,482,619			2,130,332		7.48
Allowance for loan and lease losses				(182,337	)
Noninterest-earning assets				1,577,119
		Total assets	$	29,877,401
Interest-bearing liabilities:
Deposits:
	Checking accounts		$	2,536,717		$	19,330		.76	%
	Money market and savings accounts			5,158,849			144,628		2.80
	Certificates of deposit			10,764,028			602,144		5.59
		Total deposits		18,459,594			766,102		4.15
FHLB advances				6,235,159			341,211		5.47
Other borrowings				2,139,387			136,795		6.33
		Total borrowings		8,374,546			478,006		5.69
		Total interest-bearing liabilities		26,834,140			1,244,108		4.63
Noninterest-bearing liabilities				632,262
		Total liabilities		27,466,402
Redeemable capital securities				31,960
Shareholders’ equity				2,379,039
		Total liabilities and shareholders’ equity	$	29,877,401
Net interest income						$	886,224
Interest rate spread									2.85	%
Net yield on average interest-earning assets									3.11	%
Average interest-earning assets to average interest- bearing liabilities									106.14	%

The following rate/volume analysis shows the approximate relative contribution of changes in average interest rates and volume to changes in net interest income for the years indicated. Changes not solely attributable to volume or rate have been allocated in proportion to the changes due to volume and rate.

Rate/Volume Analysis

			Year Ended									Year Ended
			December 31, 2000 v. 1999									December 31, 1999 v. 1998
			Increase (Decrease)									Increase (Decrease)
			due to									due to
(Dollars in thousands)			Rate			Volume			Total			Rate			Volume			Total
Interest income:
Loans and leases			$	31,728		$	95,218		$	126,946		$	(71,396	)	$	150,815		$	79,419
Mortgage-backed securities:
	Available for sale			17,115			10,135			27,250			(6,146	)		54,637			48,491
	Held to maturity			5,505			(39,834	)		(34,329	)		(4,233	)		(102,369	)		(106,602	)
Investment securities:
	Trading			1,340			(1,665	)		(325	)		—			363			363
	Available for sale			5,368			(8,232	)		(2,864	)		3,494			(11,874	)		(8,380	)
	Held to maturity			(243	)		(616	)		(859	)		(152	)		(1,773	)		(1,925	)
Other interest-earning assets				3,748			(934	)		2,814			834			(14,077	)		(13,243	)
		Total		64,561			54,072			118,633			(77,599	)		75,722			(1,877	)
Interest expense:
Checking, money market and savings accounts				31,408			18,676			50,084			(5,415	)		16,981			11,566
Certificates of deposit				33,325			(35,347	)		(2,022	)		(44,200	)		(15,421	)		(59,621	)
FHLB advances				52,832			47,708			100,540			(22,897	)		113,729			90,832
Other borrowings				6,652			(5,552	)		1,100			(15,515	)		(77,019	)		(92,534	)
		Total		124,217			25,485			149,702			(88,027	)		38,270			(49,757	)
Change in net interest income			$	(59,656	)	$	28,587		$	(31,069	)	$	10,428		$	37,452		$	47,880

Our net interest income for the year ended December 31, 2000 was $903.0 million, a decrease of $31.1 million, or 3.3%, over the $934.1 million of net interest income for the year ended December 31, 1999. The net yield on interest-earning assets during the year ended December 31, 2000 declined to 3.02% from 3.19% for the year ended December 31, 1999. The compression in the net yield on interest-earning assets was primarily attributed to the fact that our liabilities have repriced more quickly than our assets, as well as the effect of our stock buyback program. Interest rates rose considerably during 2000. This increase was accompanied by a flattening of the yield curve. Given this interest rate environment, management decided to slow balance sheet growth, with particular emphasis on accelerating the shift away from residential loans and securities by selling more of those portfolios. Instead, balance sheet capacity has been preserved for the current more favorable interest rate environment, and existing capital was allocated to our stock buyback program. Based on the current interest rate environment and repricing trends, management believes that the net interest margin has stabilized. See “Financial Condition  — Loans and Leases” for a summary of our loan and lease originations for each of the past three years.

   Our net interest income for 1999 was $934.1 million, an increase of $47.9 million, or 5.4%, over the $886.2 million of net interest income in 1998. The interest rate spread increased by 16 basis points in 1999 to 3.01% from 2.85% and the net yield on interest-earning assets increased by eight basis points during 1999 to 3.19% from 3.11%. The primary reason for these improvements related to the cost of funds, which decreased by 37 basis points during 1999 to 4.26% from 4.63%. This had the effect of reducing interest expense and therefore increasing net interest income by $49.8 million, as interest income remained at $2.1 billion for 1999 and 1998. The lower cost of funds was attributable to both a shift in the mix of interest-bearing liabilities and lower market interest rates. Relative to borrowed funds, retail deposits generally cost less. As such, growing retail deposits generally lowers the overall cost of funds. Additionally, we were able to reprice matured borrowings at lower interest rates.

   The following table sets forth Charter One’s yields and costs at period end for the dates indicated. The yields on leases excludes the impact of the related tax benefit. The cost of liabilities includes the annualized effect of interest rate risk management instruments.

Yields and Costs at End of Period

				December 31,
				2000			1999			1998
Weighted average yield:
	One-to-four family loans				7.31	%		7.15	%		7.25	%
	Commercial real estate loans				8.48			8.06			8.13
	Retail consumer loans				7.86			7.59			7.84
	Automobile loans				8.67			8.52			8.70
	Consumer finance				8.91			9.76			9.73
	Leases				6.33			6.08			6.22
	Corporate banking loans				8.89			8.58			8.35
		Total loans and leases			7.73			7.53			7.58
	Mortgage-backed securities				7.29			7.04			6.86
	Investment securities				7.40			7.26			5.80
	Other interest-earning assets				7.46			6.97			5.98
			Total interest-earning assets		7.64			7.41			7.37
Weighted average cost:
	Checking accounts				1.73			1.27			.66
	Money market and savings accounts				3.29			2.70			2.79
	Certificates of deposit				5.93			5.13			5.45
		Total deposits			4.35			3.79			3.98
	FHLB advances				5.86			5.32			5.04
	Other borrowings				7.21			6.99			6.24
			Total interest-bearing liabilities		4.89			4.34			4.35
Interest rate spread					2.75			3.07			3.02
Net yield on interest-earning assets					2.91			3.19			3.27

22 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 23

Provision for Loan and Lease Losses–The provision for loan and lease losses in 2000 was $54.2 million, up from $35.2 million in 1999. The increase in the provision for loan and lease losses of $19.0 million, or 53.8%, was primarily attributable to increased inherent losses in the loan and lease portfolio and a change in the loan mix related to growth in loans and leases with higher risk/reward profiles. See “Financial Condition — Loans and Leases” below and Note 5 to the Notes to Consolidated Financial Statements for discussion regarding the change in our mix of assets and our allowance for loan and lease losses.

   The provision for loan and lease losses in 1999 was $35.2 million, up from $31.3 million in 1998. The increase in the provision for loan and lease losses during 1999 was primarily attributable to the St. Paul merger. In connection with the St. Paul merger, we recognized an additional $6.5 million in loan loss provision to conform to a number of our credit administration and asset management policies.

Other Income–Other income for 2000 was $392.9 million, as compared to $230.6 million for 1999. This $162.3 million, or 70.4%, increase was primarily attributable to increases in income from retail banking, mortgage banking and net gains on sales. Retail banking income increased $46.3 million, or 23.5%, over 1999. The growth in income from retail banking continues to be driven by recent mergers, account acquisition in mature markets and continual product development. Mortgage banking income increased $29.3 million, or 60.4%, during 2000 and was primarily attributable to a $21.3 million gain resulting from a $3.0 billion sale of mortgage servicing. Net gains on sales were $9.3 million in 2000, compared to net losses of $57.0 million in 1999. As discussed in the next paragraph, the fourth quarter of 1999 included losses of $71.1 million on commitments to sell $2.1 billion in fixed-rate mortgage-backed securities.

   Other income for 1999 was $230.6 million, compared to $272.6 million for 1998. This $42.0 million, or 15.4%, decrease was primarily attributable to losses during the fourth quarter of 1999 from commitments to sell $2.1 billion in seasoned, fixed-rate mortgage-backed securities classified as available for sale. The sales generated a loss of $71.1 million and were done to reduce interest rate risk and normalize the residential mortgage portfolio to pre-St. Paul levels. Offsetting the loss on such sales was an increase in retail banking income during 1999, as well as income from our Bank Owned Life Insurance (“BOLI”) program. Retail banking income increased $36.0 million, or 22.3%, primarily due to increases in checking account fee income. 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 as we continued to introduce our products in new markets. In 1999, we increased our BOLI portfolio by $656.8 million, bringing the total investment in BOLI to $709.2 million as of December 31, 1999. The income from the BOLI program was the primary reason for the $21.3 million increase in other income over 1998. These increases in retail banking and other income were partially offset by a $13.6 million, or 21.9%, decrease in mortgage banking income due primarily to a reduction in production.

Administrative Expenses–Administrative expenses were $604.0 million for 2000, a decrease of $29.4 million, or 4.6%, from 1999. Each year included significant merger-related expenses. There were $29.5 million in merger-related expenses recorded in 2000 related to the St. Paul transaction, and $63.5 million in 1999 related to the St. Paul and ALBANK transactions. Excluding the merger-related charges, our administrative expenses were $574.5 million for 2000 and $569.8 million for 1999. This resulted in a ratio of administrative expenses to average assets of 1.81% for 2000 and 1.84% for 1999. Our efforts to control overhead costs were illustrated by an efficiency ratio (excluding merger-related and other special charges) of 43.39% for 2000, an improvement when compared to 45.49% for 1999. The efficiency ratio is the ratio of administrative expenses, excluding goodwill amortization and merger-related and other special charges, to net interest income and other income, exclusive of net gains and losses on the sale of assets and other special charges. See Note 2 to the Notes to Consolidated Financial Statements for further discussion of our business combinations.

   Administrative expenses were $633.3 million for 1999, a decrease of $32.0 million, or 4.8%, from 1998. Each year included significant merger-related expenses. There were $63.5 million in merger-related expenses recorded in 1999 related to the St. Paul and ALBANK transactions, and $64.7 million in 1998 related to the ALBANK, CS Financial, and Beverly transactions. Additionally, other administrative expenses in 1998 included a $25.0 million charge associated with a cost reduction plan and certain information technology initiatives undertaken by St. Paul. Excluding the merger-related and cost reduction plan charges, our administrative expenses were $569.8 million for 1999 and $575.7 million for 1998. This resulted in a ratio of administrative expenses to average assets of 1.84% for 1999 and 1.93% for 1998. Our efficiency ratio (excluding merger-related and other special charges) was 45.49% for 1999, an improvement when compared to 49.83% for 1998.

Income Tax Expense–The provision for income taxes was $203.8 million, $160.6 million, and $156.4 million for the years ended December 31, 2000, 1999, and 1998, respectively. The effective tax rates were 32.0%, 32.4%, and 33.8% for the years ended December 31, 2000, 1999, and 1998, respectively. For a further analysis of our income taxes, see Note 11 to the Notes to Consolidated Financial Statements.

Financial Condition

At December 31, 2000, total assets were $33.0 billion, an increase of $1.2 billion, or 3.6%, from $31.8 billion at December 31, 1999.

Loans and Leases–Total loans and leases at December 31, 2000 were $24.0 billion, compared to $22.3 billion at December 31, 1999. Growth in our loan and lease portfolios was achieved despite $4.0 billion in residential loan securitizations that occurred during the year. Over the past few years, we have continued our emphasis in originating consumer and commercial loans due to the higher yields and shorter terms provided by these types of loans. The consumer and commercial loan portfolios represented 55.0% of loans and leases at December 31, 2000, compared to 47.8% at

December 31, 1999. As illustrated in the table below, loan originations for the year totaled $11.8 billion, with 53.3% in consumer and commercial loans and 46.7% in residential loans. See Note 5 to the Notes to Consolidated Financial Statements for additional discussion regarding our loans and leases.

Loan and Lease Activity

					Year Ended December 31,
(Dollars in thousands)					2000		1999		1998
Originations:
	Real estate mortgage:
		Permanent:
			One-to-four family		$	4,916,631	$	5,101,662	$	6,831,837
			Multifamily			34,454		205,876		339,222
			Commercial			199,648		241,568		188,702
				Total permanent		5,150,733		5,549,106		7,359,761
		Construction:
			One-to-four family			605,240		542,903		459,655
			Multifamily			78,542		71,748		40,869
			Commercial			104,045		89,331		62,890
				Total construction		787,827		703,982		563,414
				Total real estate mortgage loans originated		5,938,560		6,253,088		7,923,175
	Retail consumer					2,063,352		1,968,091		1,817,937
	Automobile					1,791,772		1,406,966		1,224,348
	Consumer finance					405,193		386,998		417,153
	Leases					794,947		552,142		370,724
	Corporate banking					818,394		666,972		277,330
				Total loans and leases originated		11,812,218		11,234,257		12,030,667
Loans purchased						18,809		465,773		1,714,529
Sales and principal reductions:
Loans sold						472,622		989,571		2,144,603
Loans exchanged for mortgage-backed securities						3,991,087		3,606,946		1,875,449
Principal reductions						5,593,663		6,942,978		7,042,442
				Total sales and principal reductions		10,057,372		11,539,495		11,062,494
Increase before net items					$	1,773,655	$	160,535	$	2,682,702

Our lending operations are primarily concentrated in Ohio, Michigan, New York, Illinois, Vermont and Massachusetts. As a result, our financial condition and results of operations will be subject to general economic conditions prevailing in those states. If economic conditions in those states worsen, we may experience higher default rates in our existing portfolio as well as a reduction in the value of collateral securing individual loans. Separately, our ability to originate the volume of loans or achieve the level of deposits currently anticipated could be affected.

   The following table sets forth certain information concerning our nonperforming assets for the periods reported. Nonperforming assets consist of (1) nonaccrual loans and leases, (2) loans and leases past due 90 days or more as to principal or interest, (3) restructured real estate mortgage loans and (4) real estate acquired through foreclosure and other collateral owned. See Note 1 to the Notes to Consolidated Financial Statements for further discussion regarding our nonperforming assets.

Nonperforming Assets

				December 31,
(Dollars in thousands)				2000		1999		1998		1997		1996
Nonperforming loans and leases:
	Nonaccrual loans and leases:
		Real estate mortgage loans:
			One-to-four family(1)	$	71,269	$	75,682	$	79,768	$	54,144	$	39,059
			Multifamily and commercial		8,132		3,369		7,002		6,034		10,793
			Construction and land		8,806		1,095		1,178		1,943		873
			Total real estate mortgage loans		88,207		80,146		87,948		62,121		50,725
		Retail consumer			11,120		16,607		14,888		749		2,335
		Automobile			130		482		454		37		29
		Consumer finance			48,673		23,031		7,752		811		—
		Leases			—		—		—		—		—
		Corporate banking			18,707		6,037		9,559		7,179		4,275
			Total nonaccrual loans and leases		166,837		126,303		120,601		70,897		57,364
	Accruing loans and leases delinquent more than 90 days:
		Real estate mortgage loans:
			One-to-four family(2)		—		—		5,690		14,171		18,143
			Multifamily and commercial		—		—		—		251		324
			Construction and land		—		—		—		3		—
			Total real estate mortgage loans		—		—		5,690		14,425		18,467
		Retail consumer(1)			2,586		2,562		3,878		8,516		4,478
		Automobile			6,911		4,973		5,873		3,695		1,555
		Consumer finance			—		—		—		—		—
		Leases			2,956		—		—		—		—
		Corporate banking			2,086		2,463		904		976		516
			Total accruing loans and leases delinquent more than 90  days		14,539		9,998		16,345		27,612		25,016
	Restructured real estate mortgage loans				666		1,009		4,193		7,579		15,294
			Total nonperforming loans and leases		182,042		137,310		141,139		106,088		97,674
	Real estate acquired through foreclosure and other collateral owned				27,523		24,453		19,900		18,997		23,468
			Total nonperforming assets		209,565		161,763		161,039		125,085		121,142
			Less government guaranteed loans		19,225		18,841		22,429		—		—
			Nonperforming assets net of guaranteed loans	$	190,340	$	142,922	$	138,610	$	125,085	$	121,142

24 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 25

			December 31,
			2000			1999			1998			1997			1996
Ratio of:
	Nonperforming loans and leases to total loans and leases			.76	%		.62	%		.64	%		.54	%		.61	%
	Nonperforming assets to total assets			.64			.51			.53			.42			.45
	Allowance for loan and lease losses to:
		Nonperforming loans and leases		104.16			135.75			131.07			171.14			161.97
		Total loans and leases before allowance		.78			.83			.83			.92			.97
Ratio of (excluding guaranteed nonperforming loans):
	Nonperforming loans and leases to total loans and leases			.68	%		.53	%		.53	%		.54	%		.61	%
	Nonperforming assets to total assets			.58			.45			.45			.42			.45
	Allowance for loan and lease losses to:
		Nonperforming loans and leases		116.46			157.34			155.83			171.14			161.97
		Total loans and leases before allowance		.78			.83			.83			.92			.97

(1)

Includes government guaranteed loans.

(2)

In 1998, Charter One changed the accrual policy on one-to-four family loans to stop accruing on loans delinquent 90 or more days. Balance of $5.7 million at December 31, 1998 represents one-to-four family loans related to St. Paul Bancorp, Inc. Following Charter One’s acquisition of St. Paul in October 1999, St. Paul’s accrual policy was conformed to Charter One’s policy. The change in the accrual policy did not have a material impact on interest income.

At December 31, 2000, there were $96.8 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 borrowers to comply fully with present loan repayment terms, and which may result in disclosure of such loans in the future.

   Although loans may be classified as nonaccruing, many continue to pay interest on an irregular basis or at levels less than the contractual amounts due. Income recorded on nonaccruing and restructured loans amounted to $238,000 and the potential income based upon full contractual yields was $6.4 million for the year ended December 31, 2000.

   The following table presents an analysis of our allowance for loan and lease losses. During the fourth quarter of 2000, we charged off a $7.5 million corporate banking loan after discovering suspected fraudulent activities. As a result of this charge-off, the ratio of net charge-offs to average loans increased to .21%, compared to .17% in 1999. Management has noted no significant, systemic deterioration in any area of its loan and lease portfolio. Additionally, the portfolio is well diversified and 97% of all loans and leases are collateralized, with 70% backed by single and multi-family real estate. Furthermore, the portfolio includes only negligible amounts of shared national credits and indirect auto leases.

Analysis of Allowance for Loan and Lease Losses

			Year Ended December 31,
(Dollars in thousands)			2000			1999			1998			1997			1996
Balance, beginning of year			$	186,400		$	184,989		$	181,554		$	158,211		$	148,619
Provision for loan and lease losses				54,205			35,237			31,325			48,653			25,389
Adjustment to convert RCSB Financial, Inc. to a calendar year end				—			—			—			650			—
Acquired through acquisition				—			3,603			—			4,963			11,310
Charge-offs:
	Mortgage			(6,064	)		(8,040	)		(7,052	)		(11,949	)		(18,485	)
	Retail consumer			(12,508	)		(3,952	)		(3,823	)		(5,626	)		(5,019	)
	Automobile			(27,827	)		(28,012	)		(25,670	)		(19,128	)		(11,161	)
	Consumer finance			(4,994	)		(1,340	)		(71	)		—			—
	Leases			—			(900	)		—			—			—
	Corporate banking			(8,938	)		(3,240	)		(1,440	)		(1,532	)		(704	)
		Total charge-offs		(60,331	)		(45,484	)		(38,056	)		(38,235	)		(35,369	)
Recoveries:
	Mortgage			1,396			868			3,767			2,063			2,905
	Retail consumer			1,610			789			1,051			1,188			1,409
	Automobile			5,810			6,172			4,953			3,846			3,826
	Consumer finance			17			19			—			—			—
	Leases			—			—			—			—			—
	Corporate banking			509			207			395			215			122
		Total recoveries		9,342			8,055			10,166			7,312			8,262
Net loan and lease charge-offs				(50,989	)		(37,429	)		(27,890	)		(30,923	)		(27,107	)
Balance, end of year			$	189,616		$	186,400		$	184,989		$	181,554		$	158,211
Net charge-offs to average loans and leases				.21	%		.17	%		.13	%		.17	%		.18	%

Allocation of Allowance for Loan and Lease Losses

		December 31,
(Dollars in thousands)		2000			1999			1998			1997			1996
Mortgage		$	103,989		$	107,576		$	110,635		$	107,564		$	118,829
Retail consumer			15,191			17,323			16,869			17,247			15,684
Automobile			42,206			38,301			39,585			40,734			11,975
Consumer finance			7,855			5,356			1,654			200			—
Leases			5,237			4,037			3,737			1,777			977
Corporate banking			15,138			13,807			12,509			14,032			10,746
	Total	$	189,616		$	186,400		$	184,989		$	181,554		$	158,211
Percent of loans and leases to total loans and leases:
Mortgage			53.1	%		60.8	%		70.1	%		76.2	%		79.2	%
Retail consumer			19.2			16.9			12.9			9.9			10.0
Automobile			12.9			11.0			9.2			8.4			6.7
Consumer finance			4.1			3.2			2.0			.7			—
Leases			7.4			5.1			3.3			2.5			1.9
Corporate banking			3.3			3.0			2.5			2.3			2.2
	Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The allowance for loan and lease losses is based on an ongoing, quarterly assessment of the probable estimated losses inherent in the loan and lease portfolio, and to a lesser extent, unused commitments to provide financing. This quarterly analysis provides a mechanism for ensuring that estimated losses reasonably approximate actual observed losses, as any differences between estimated and actual losses will be addressed in the assessment and resulting loan and lease loss provision. Although we believe we use the best information available to make these determinations and that the allowance for loan and lease losses was adequate at December 31, 2000, future adjustments to the allowance 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 determinations about the levels of the loan and lease allowance. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for losses. These agencies may require the recognition of additions to the allowance based upon their judgments of information available to them at the time of their examination.

Investments and Mortgage-Backed Securities–The securities portfolio is comprised primarily of mortgage-backed securities, including government agency and AAA and AA rated private issues. We held no investments or mortgage-backed securities of any single non-governmental issuer which were in excess of 10% of shareholders’ equity at December 31, 2000. See Notes 3 and 4 to the Notes to Consolidated Financial Statements for additional discussion regarding our investments and mortgage-backed securities.

Deposits, Borrowings and Other Sources of Funds–Deposits are generally the most important source of our funds for use in lending and for general business purposes. Deposit inflows and outflows are significantly influenced by general interest rates and competitive factors. Consumer and commercial deposits are attracted principally within our primary market areas. Deposits totaled $19.6 billion and $19.1 billion at December 31, 2000 and 1999, respectively. See Note 6 to the Notes to Consolidated Financial Statements for further discussion regarding our deposits.

   In addition to deposits, we obtain funds from different borrowing sources. The primary source of these borrowings is the Federal Home Loan Bank (“FHLB”) system. Those borrowings totaled $9.6 billion and $9.2 billion at December 31, 2000 and 1999, respectively. The FHLB functions as a central bank providing credit for member financial institutions. As a member of the FHLB of Cincinnati, the Bank is required to own capital stock in the FHLB and it is authorized to apply for advances on the security of this stock and certain home mortgages and other assets, provided certain standards related to creditworthiness have been met. Advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. See Note 7 to the Notes to Consolidated Financial Statements for further information as to the composition, maturities and cost associated with these advances at December 31, 2000.

   In addition to FHLB advances, we use federal funds purchased and reverse repurchase agreements and other borrowings to fund operations. Federal funds purchased and reverse repurchase agreements totaled $262.3 million at December 31, 2000, a decrease of $21.0 million from December 31, 1999. Other borrowings totaled $284.8 million and $232.3 million at December 31, 2000 and 1999, respectively. See Notes 8 and 9 to the Notes to Consolidated Financial Statements for further information concerning these borrowings.

   We use our portfolio of investment securities, mortgage-backed securities, and loans as collateral for our borrowings, public deposits and for other purposes required or permitted by law.

Liquidity–Our principal sources of funds are deposits, advances from the FHLB of Cincinnati, federal funds purchased and 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 flows and loan and mortgage-backed securities repayments are greatly influenced by economic conditions, the general level of interest rates and competition. We utilize particular sources of funds based on comparative costs and availability. We generally manage the pricing of deposits to maintain a steady deposit balance, but from time to time may decide not to pay rates on deposits as high as our competition and, when necessary, to supplement deposits with longer term and/or lower cost alternative sources of funds such as FHLB advances and federal funds purchased and reverse repurchase agreements.

   We are required by regulation to maintain specific minimum levels of liquid investments. Regulations currently in effect require us to maintain average liquid assets at least equal to 4.0% of the sum of the 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. Charter One Bank’s average regulatory liquidity ratio for the fourth quarter of 2000 was 6.76%. We anticipate that we will have sufficient funds available to meet our commitments. See Note 5 to the Notes to Consolidated Financial Statements for further information concerning our commitments.

26 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 27

Quantitative and Qualitative Disclosure About Market Risk

We realize income principally from the difference or spread between the interest earned on loans, investments and other interest-earnings assets and the interest paid on deposits and borrowings. Loan volume and yield, as well as the volume of and rates on investments, deposits and borrowings, are affected by market interest rates. Additionally, because of the terms and conditions of many of our loan documents and deposit accounts, a change in interest rates could also affect the projected maturities of the loan portfolio and/or the deposit base which could alter our sensitivity to future changes in interest rates. Accordingly, we consider interest rate risk to be our most significant market risk.

   Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits while taking into consideration, among other factors, our overall credit, operating income, operating cost, and capital profile. Our Asset/ Liability Management Committee, which includes senior management representatives and reports to the Board of Directors, together with the Investment Committee of the Board, monitors and manages interest rate risk to maintain an acceptable level of potential change to net interest income as a result of changes in interest rates.

   We use an internal earnings simulation model as our primary method to identify and manage our interest rate risk profile. The model is based on actual cash flows and repricing characteristics for all financial instruments and incorporates market-based assumptions regarding the impact of changing interest rates on future volumes and the prepayment rate of applicable financial instruments. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

   Using this internal simulation model, net earnings projections reflect continued growth in net income when applying the interest rate environment as of January 3, 2001. The use of the January 3, 2001 yield curve reflects the Federal Reserve Board’s decision to reduce the federal funds rate by 50 basis points to 6.00%. Our base case shows our present estimated net earnings sensitivity profile and assumes no changes in the operating environment or operating strategies, but assumes interest rates increase or decrease gradually, in parallel fashion, over the next year and then remain unchanged.

The table indicates the estimated impact on net income under the various interest rate scenarios as a percentage of base case earnings projections.

		Estimated Percentage Change
		in Future Net Income
Changes in Interest Rates (basis points)		12 Months			24 Months
Base Case
	+200 over one year		(4.62	)%		(6.43	)%
	+100 over one year		(2.61	)		(2.75	)
	-100 over one year		.76			(.52	)
	-200 over one year		.81			(3.01	)

A secondary method used to identify and manage our interest rate risk profile is the static gap analysis. Interest sensitivity gap analysis measures the difference between the assets and liabilities repricing or maturing within specific time periods. An asset-sensitive position indicates that there are more rate-sensitive assets than rate-sensitive liabilities repricing or maturing within specific time periods, which would generally imply a favorable impact on net interest income in periods of rising interest rates and a negative impact in periods of falling rates. A liability-sensitive position would generally imply a negative impact on net interest income in periods of rising rates and a positive impact in periods of falling rates.

   Gap analysis has limitations because it cannot measure precisely the effect of interest rate movements and competitive pressures on the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. In addition, a significant portion of our adjustable-rate assets have limits on their maximum yield, whereas most of our interest-bearing liabilities are not subject to these limitations. As a result, certain assets and liabilities indicated as repricing within a stated period may in fact reprice at different times and at different volumes, and certain adjustable-rate assets may reach their yield limits and not reprice.

   The following table presents an analysis of our interest-sensitivity gap position at December 31, 2000. All interest-earning assets and interest-bearing liabilities are shown based on the earlier of their contractual maturity or repricing date adjusted by forecasted prepayment and decay rates. Asset prepayment and liability decay rates are selected after considering the current rate environment, industry prepayment and decay rates, our historical experience, and the repricing and prepayment characteristics of portfolios acquired through merger.

Maturity/ Rate Sensitivity

				December 31, 2000
				0-6			7-12			1-3			3-5			5-10			Over
(Dollars in thousands)				Months			Months			Years			Years			Years			10 Years			Total
Interest-earning assets:
	Real estate mortgage loans and mortgage-backed securities:
	Adjustable rate			$	4,616,339		$	1,802,643		$	2,005,601		$	1,101,111		$	143,097		$	—		$	9,668,791
	Fixed rate				993,013			791,830			2,357,771			1,550,486			1,917,974			1,115,208			8,726,282
	Retail consumer loans				1,971,577			314,646			753,014			659,185			761,869			171,185			4,631,476
	Automobile loans				653,546			600,155			1,897,371			12			—			—			3,151,084
	Consumer finance				150,150			84,547			261,224			170,764			207,350			114,844			988,879
	Leases				83,435			73,776			384,659			283,860			365,619			586,672			1,778,021
	Corporate banking loans				411,314			95,661			164,660			102,106			18,119			7,082			798,942
	Investment securities, federal funds sold, interest-bearing deposits and other interest-earning assets				929,695			1,735			18,600			4,217			10,072			79,779			1,044,098
			Total		9,809,069			3,764,993			7,842,900			3,871,741			3,424,100			2,074,770		$	30,787,573
Interest-bearing liabilities:
	Deposits:
		Checking, money market and savings accounts and escrow accounts			763,079			693,906			3,989,959			3,989,959			—			—		$	9,436,903
		Certificates of deposit			4,586,644			3,929,883			1,011,950			557,464			74,581			17,079			10,177,601
	FHLB advances				3,226,112			811,429			981,140			2,107,061			2,508,520			2,015			9,636,277
	Federal funds purchased and reverse repurchase agreements				262,326			—			—			—			—			—			262,326
	Other borrowings				12,151			6,385			26,112			214,161			13,462			12,537			284,808
			Total		8,850,312			5,441,603			6,009,161			6,868,645			2,596,563			31,631		$	29,797,915
Excess (deficiency) of interest-earning assets over interest-bearing liabilities					958,757			(1,676,610	)		1,833,739			(2,996,904	)		827,537			2,043,139
Impact of hedging					(443,680	)		69,224			139,456			205,000			30,000			—
Adjusted interest-sensitivity gap				$	515,077		$	(1,607,386	)	$	1,973,195		$	(2,791,904	)	$	857,537		$	2,043,139
Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities				$	515,077		$	(1,092,309	)	$	880,886		$	(1,911,018	)	$	(1,053,481	)	$	989,658
Cumulative interest-sensitivity gap as a percentage of total assets at December 31, 2000					1.56	%		(3.31	)%		2.67	%		(5.80	)%		(3.20	)%		3.00	%

Capital and Dividends

Charter One, Charter One Bank, and Charter One Commercial are each subject to certain regulatory capital requirements. We believe that as of December 31, 2000, Charter One, Charter One Bank, and Charter One Commercial each individually met all capital requirements to which they were subject. See Note 12 to the Notes to Consolidated Financial Statements for an analysis of our regulatory capital.

   On April 26, 2000, our Board of Directors authorized management to repurchase up to 7.5 million shares of Charter One common stock in a program of open market purchases or privately negotiated transactions. This repurchase program was completed as of June 30, 2000, for a total cost of $170.7 million. The repurchased shares were later reissued in connection with the 5% stock dividend distributed September 30, 2000, as well as employee benefit plans.

   On July 18, 2000, the Board of Directors of Charter One authorized management to repurchase up to 10% of the Company’s outstanding common stock in a program of open market purchases or privately negotiated transactions. As of February 23, 2001, we had purchased 5.9 million shares authorized under this program for a total cost of $136.3 million. The repurchased shares will be reserved in treasury for later reissue in connection with employee benefit plans or subsequent acquisitions. See Note 1 to the Notes to Consolidated Financial Statements for a summary of stock dividend and stock split activity over the past three years.

   We continually review the amount of our cash dividend and our policy of paying quarterly dividends. This payment will depend upon a number of factors, including capital requirements, regulatory limitations, our financial condition, results of operations

28 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 29

and Charter One Bank’s ability to upstream funds. Charter One depends significantly upon dividends originating from Charter One Bank to accumulate earnings for payment of cash dividends to our shareholders. See Note 12 to the Notes to Consolidated Financial Statements for a discussion of restrictions on Charter One Bank’s ability to pay cash dividends.

   Quarterly high and low sales prices, closing prices and cash dividends declared for our common stock are shown in the following table. All prices have been restated to reflect prior stock dividends and stock splits. Our common stock commenced trading on the New York Stock Exchange under the symbol CF on December 6, 1999. Previously, our common stock was traded on the Nasdaq Stock Market under the symbol COFI. As of February 23, 2001, there were approximately 20,100 shareholders of record.

Market Price and Dividends

		First		Second		Third		Fourth		Total
		Quarter		Quarter		Quarter		Quarter		Year
2000
	High	$	20.00	$	25.71	$	25.13	$	30.00	$	30.00
	Low		14.52		17.27		21.06		19.88		14.52
	Close		20.00		21.90		24.38		28.88		28.88
	Dividends declared and paid		.15		.17		.17		.18		.67
1999
	High	$	29.08	$	29.14	$	25.63	$	25.18	$	29.14
	Low		22.85		23.98		20.08		16.67		16.67
	Close		26.18		25.23		22.03		18.22		18.22
	Dividends declared and paid		.13		.14		.15		.15		.57

Quarterly Results

The following table presents summarized quarterly data for each of the years indicated. Earnings per share have been restated to reflect prior stock dividends and stock splits.

Quarterly Financial Data (Unaudited)

	2000
	First		Second		Third		Fourth			Total
(Dollars in thousands, except per share data)	Quarter		Quarter		Quarter		Quarter			Year
Total interest income	$	534,070	$	545,598	$	577,518	$	589,902		$	2,247,088
Net interest income		233,003		232,033		223,169		214,830			903,035
Provision for loan and lease losses		8,598		11,509		13,178		20,920			54,205
Net gains (losses)		3,547		3,064		5,522		(2,862	)		9,271
Merger expenses		3,258		20,845		1,961		3,427			29,491
Net income		111,709		103,287		109,592		109,374			433,962
Basic earnings per share		.51		.47		.52		.53			2.03
Diluted earnings per share	$	.50	$	.47	$	.51	$	.52		$	2.00

	1999
	First		Second		Third			Fourth			Total
(Dollars in thousands, except per share data)	Quarter		Quarter		Quarter			Quarter			Year
Total interest income	$	525,393	$	522,825	$	538,838		$	541,399		$	2,128,455
Net interest income		235,549		233,173		233,109			232,273			934,104
Provision for loan and lease losses		6,770		7,843		7,366			13,258			35,237
Net gains (losses)		6,817		6,989		(1,856	)		(68,997	)		(57,047	)
Merger expenses		2,200		3,519		1,921			55,886			63,526
Income before extraordinary item		102,946		108,376		104,502			19,706			335,530
Net income		102,946		108,376		104,502			18,152			333,976
Basic earnings per share:
Income before extraordinary item		.46		.48		.47			.09			1.50
Extraordinary item		—		—		—			(.01	)		(.01	)
Net income		.46		.48		.47			.08			1.49
Diluted earnings per share:
Income before extraordinary item		.45		.47		.46			.09			1.47
Extraordinary item		—		—		—			(.01	)		(.01	)
Net income	$	.45	$	.47	$	.46		$	.08		$	1.46

New Accounting Standards

See Note 1 to the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Acquisition

On January 23, 2001, Charter One and Alliance Bancorp, the holding company of Liberty Federal Bank in Hinsdale, Illinois, announced that they executed a definitive agreement for Charter One to acquire Alliance. At December 31, 2000, Alliance had assets of $2.0 billion, deposits of $1.3 billion and operated 19 branch offices in the metropolitan Chicago area. The agreement provides for common shareholders of Alliance to receive $5.25 in cash and 0.72 shares of Charter One common stock for each Alliance share. It is expected that approximately 6.7 million shares of Charter One common stock will be issued in conjunction with the merger. It is also expected that all outstanding Alliance options will be exchanged for the equivalent Charter One options. This results in an initial transaction value of approximately $245 million. The merger, which will be treated as a tax-free reorganization under Section 368 of the Internal Revenue Code and accounted for as a purchase, is expected to close early in the third quarter of 2001. 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 Federal Reserve Board, and Alliance’s shareholders.

Discussion of Forward-looking Statements

This document, including information incorporated by reference, contains, and future filings by Charter One on Form 10-Q and Form 8-K and future oral and written statements by Charter One and its management may contain, forward-looking statements about Charter One and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, including revenue creation, lending origination, operating efficiencies, loan sales, charge-offs and loan loss provisions, growth opportunities, interest rates, acquisition and divestiture opportunities, and synergies, efficiencies, cost savings and funding advantages expected to be realized from prior acquisitions. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify these forward-looking statements.

   The important factors we discuss below and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this document, as well as other factors discussed elsewhere in this document and factors identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document.

   The following factors, many of which are subject to change based on various other factors beyond our control, could cause our operating and financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:

•  the strength of the United States economy in general and the strength of the local economies in which we conduct our operations; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in the credit quality of our loan assets;

•  the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

•  inflation, interest rate, market and monetary fluctuations;

•  the timely development of and acceptance of new products and services of Charter One and its subsidiaries and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

•  the willingness of users to substitute competitors’ products and services for our products and services;

•  our success in gaining regulatory approval of our products and services, when required;

•  the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); legislative or regulatory changes may adversely affect the business in which we are engaged;

•  the impact of technological changes;

•  acquisitions;

•  changes in consumer spending and saving habits; and

•  our success at managing the risks involved in the foregoing.

Forward-looking statements by Charter One and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management as of the date made and are not guarantees of future performance. Charter One disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

30 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 31

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION Charter One Financial, Inc.

			December 31,
(Dollars in thousands, except per share data)			2000			1999
Assets
Cash and deposits with banks			$	530,771		$	689,082
Federal funds sold and other				486			4,450
		Total cash and cash equivalents		531,257			693,532
Investment securities:
	Trading			—			13,380
	Available for sale			426,701			482,695
	Held to maturity (fair value of $22,671 and $44,410)			22,514			46,006
Mortgage-backed securities:
	Available for sale			4,087,196			4,193,134
	Held to maturity (fair value of $1,531,525 and $1,909,313)			1,506,175			1,907,246
Loans and leases, net				23,950,172			22,276,862
Loans held for sale				58,002			35,988
Bank owned life insurance				743,509			709,173
Federal Home Loan Bank stock				568,377			471,191
Premises and equipment				323,911			317,205
Accrued interest receivable				165,990			156,244
Real estate and other collateral owned				27,731			36,358
Loan servicing assets				121,735			118,792
Goodwill				172,411			188,826
Other assets				265,746			172,431
Total assets			$	32,971,427		$	31,819,063
Liabilities
Deposits			$	19,605,671		$	19,073,975
Federal Home Loan Bank advances				9,636,277			9,226,150
Federal funds purchased and reverse repurchase agreements				262,326			283,297
Other borrowings				284,808			232,277
Advance payments by borrowers for taxes and insurance				60,761			80,309
Accrued interest payable				54,499			95,323
Accrued expenses and other liabilities				610,881			430,032
		Total liabilities		30,515,223			29,421,363
Commitments and contingencies				—			—
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; 212,684,698 and 212,397,685 shares issued				2,127			2,124
Additional paid-in capital				1,745,232			1,736,726
Retained earnings				786,793			734,510
Less 4,456,293 and 3,140,000 shares of common stock held in treasury at cost				(100,545	)		(65,502	)
Borrowings of employee investment and stock ownership plan				(1,256	)		(3,138	)
Accumulated other comprehensive income				23,853			(7,020	)
		Total shareholders’ equity		2,456,204			2,397,700
Total liabilities and shareholders’ equity			$	32,971,427		$	31,819,063

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF INCOME Charter One Financial, Inc.

				Year Ended December 31,
(Dollars in thousands, except per share data)				2000		1999			1998
Interest income:
	Loans and leases			$	1,810,608	$	1,683,662		$	1,604,243
	Mortgage-backed securities:
		Available for sale			241,369		214,119			165,628
		Held to maturity			120,812		155,141			261,743
	Investment securities:
		Trading			38		363			—
		Available for sale			33,412		36,276			44,656
		Held to maturity			1,594		2,453			4,378
	Other interest-earning assets				39,255		36,441			49,684
			Total interest income		2,247,088		2,128,455			2,130,332
Interest expense:
	Deposits				766,109		718,047			766,102
	FHLB advances				532,583		432,043			341,211
	Other borrowings				45,361		44,261			136,795
			Total interest expense		1,344,053		1,194,351			1,244,108
Net interest income					903,035		934,104			886,224
Provision for loan and lease losses					54,205		35,237			31,325
Net interest income after provision for loan and lease losses					848,830		898,867			854,899
Other income:
	Retail banking				243,547		197,279			161,308
	Mortgage banking				77,914		48,570			62,190
	Leasing operations				14,919		10,480			8,189
	Net gains (losses)				9,271		(57,047	)		30,865
	Other				47,220		31,315			10,042
			Total other income		392,871		230,597			272,594
Administrative expenses:
	Compensation and employee benefits				270,642		275,454			272,137
	Net occupancy and equipment				101,893		95,547			93,286
	Federal deposit insurance premiums				4,011		8,256			8,315
	Merger expenses				29,491		63,526			64,682
	Amortization of goodwill				16,180		14,011			13,552
	Other administrative expenses				181,738		176,533			213,368
			Total administrative expenses		603,955		633,327			665,340
Income before income taxes and extraordinary item					637,746		496,137			462,153
Income taxes					203,784		160,607			156,429
Income before extraordinary item					433,962		335,530			305,724
Extraordinary item, net of tax benefit of $837 and $33,200					—		1,554			61,658
Net income				$	433,962	$	333,976		$	244,066
Basic earnings per share(1):
	Income before extraordinary item			$	2.03	$	1.50		$	1.36
	Extraordinary item				—		(.01	)		(.27	)
Net income				$	2.03	$	1.49		$	1.09
Diluted earnings per share(1):
	Income before extraordinary item			$	2.00	$	1.47		$	1.32
	Extraordinary item				—		(.01	)		(.27	)
Net income				$	2.00	$	1.46		$	1.05
Average common shares outstanding(1)					213,712,154		223,743,476			224,456,454
Average common and common equivalent shares outstanding(1)					217,591,679		228,738,159			231,488,049

(1)  Restated to reflect the 5% stock dividend issued September 30, 2000.

See Notes to Consolidated Financial Statements.

32 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 33

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Charter One Financial, Inc.

																Borrowings
																of Employee
													Accumulated			Investment
					Additional								Other			and Stock
		Common			Paid-In		Retained			Treasury			Comprehensive			Ownership
(Dollars in thousands, except per share data)		Stock			Capital		Earnings			Stock			Income			Plan
Balance, January 1, 1998		$	2,102		$	1,041,336	$	1,331,944		$	(142,566	)	$	25,868		$	(10,456	)
Comprehensive income:
	Net income		—			—		244,066			—			—			—
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		—			—		—			—			19,958			—
Comprehensive income			—			—		244,066			—			19,958			—
5% stock dividend			26			68,746		(163,122	)		94,263			—			—
Purchase of 2,052,433 shares of treasury stock			—			—		—			(60,693	)		—			—
EISOP loan repayment			—			3,772		—			—			—			5,168
Dividends paid ($.48 per share)(1)			—			—		(100,313	)		—			—			—
Issuance of common shares in connection with stock option plans, 2,584,445 shares			2			7,463		(13,699	)		30,011			—			—
Other			(63	)		167,847		(230,284	)		63,660			—			—
Balance, December 31, 1998			2,067			1,289,164		1,068,592			(15,325	)		45,826			(5,288	)
Comprehensive income:
	Net income		—			—		333,976			—			—			—
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		—			—		—			—			(52,846	)		—
Comprehensive income			—			—		333,976			—			(52,846	)		—
5% stock dividend			58			126,121		(189,659	)		63,254			—			—
Purchase of 6,799,102 shares of treasury stock			—			—		—			(160,381	)		—			—
EISOP loan repayment			—			—		—			—			—			2,150
Dividends paid ($.57 per share)(1)			—			—		(134,102	)		—			—			—
Issuance of common shares in connection with stock option plans, 2,101,123 shares			13			10,615		(4,384	)		17,923			—			—
Other			(14	)		310,826		(339,913	)		29,027			—			—
Balance, December 31, 1999			2,124			1,736,726		734,510			(65,502	)		(7,020	)		(3,138	)
Comprehensive income:
	Net income		—			—		433,962			—			—			—
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		—			—		—			—			30,873			—
Comprehensive income			—			—		433,962			—			30,873			—
5% stock dividend			—			—		(220,721	)		220,505			—			—
Purchase of 12,940,172 shares of treasury stock			—			—		—			(293,763	)		—			—
EISOP loan repayment			—			—		—			—			—			1,882
Dividends paid ($.67 per share)(1)			—			—		(144,443	)		—			—			—
Issuance of common shares in connection with stock option plans, 2,028,110 shares			3			8,506		(16,515	)		38,215			—			—
Balance, December 31, 2000		$	2,127		$	1,745,232	$	786,793		$	(100,545	)	$	23,853		$	(1,256	)

[Additional columns below]

[Continued from above table, first column(s) repeated]

(Dollars in thousands, except per share data)			Total
Balance, January 1, 1998		$	2,248,228
Comprehensive income:
	Net income		244,066
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		19,958
Comprehensive income			264,024
5% stock dividend			(87	)
Purchase of 2,052,433 shares of treasury stock			(60,693	)
EISOP loan repayment			8,940
Dividends paid ($.48 per share)(1)			(100,313	)
Issuance of common shares in connection with stock option plans, 2,584,445 shares			23,777
Other			1,160
Balance, December 31, 1998			2,385,036
Comprehensive income:
	Net income		333,976
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		(52,846	)
Comprehensive income			281,130
5% stock dividend			(226	)
Purchase of 6,799,102 shares of treasury stock			(160,381	)
EISOP loan repayment			2,150
Dividends paid ($.57 per share)(1)			(134,102	)
Issuance of common shares in connection with stock option plans, 2,101,123 shares			24,167
Other			(74	)
Balance, December 31, 1999			2,397,700
Comprehensive income:
	Net income		433,962
	Change in net unrealized gain (loss) on securities, net of tax and reclassification adjustment		30,873
Comprehensive income			464,835
5% stock dividend			(216	)
Purchase of 12,940,172 shares of treasury stock			(293,763	)
EISOP loan repayment			1,882
Dividends paid ($.67 per share)(1)			(144,443	)
Issuance of common shares in connection with stock option plans, 2,028,110 shares			30,209
Balance, December 31, 2000		$	2,456,204

(1)  Restated to reflect the 5% stock dividend issued September 30, 2000.

See Notes to Consolidated Financial Statements.

33

CONSOLIDATED STATEMENTS OF CASH FLOWS Charter One Financial, Inc.

		Year Ended December 31,
(Dollars in thousands)		2000			1999			1998
Cash Flows from Operating Activities
Net income		$	433,962		$	333,976		$	244,066
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan and lease losses		54,205			35,237			31,325
	Provision for deferred income taxes		170,321			98,449			67,219
	Net (gains) losses		(7,167	)		61,602			(11,012	)
	Accretion of discounts, amortization of premiums, amortization of goodwill and depreciation, net		95,360			59,716			89,588
	Origination of loans held for sale		(472,622	)		(989,571	)		(2,144,603	)
	Proceeds from sale of loans held for sale		470,584			985,403			1,855,819
	Proceeds from (purchases of) investment securities held for trading		13,418			(19,511	)		—
	Loss on extinguishment of debt		—			2,391			94,858
	Other		(195,470	)		139,247			(78,176	)
Net cash provided by operating activities			562,591			706,939			149,084
Cash Flows from Investing Activities
Net principal disbursed on loans and leases			(5,742,717	)		(3,283,758	)		(2,560,936	)
Proceeds from principal repayments and maturities of:
	Mortgage-backed securities held to maturity		400,738			1,026,772			1,739,018
	Mortgage-backed securities available for sale		277,562			485,434			590,676
	Investment securities held to maturity		9,298			23,423			350
	Investment securities available for sale		59,129			236,716			876,453
Proceeds from sale of:
	Mortgage-backed securities available for sale		4,020,135			1,641,810			829,774
	Investment securities available for sale		25,535			539,163			18,484
	Federal Home Loan Bank stock		20,300			26,810			126,806
	Loan servicing assets		36,576			—			13,937
Purchases of:
	Mortgage-backed securities available for sale		(149,429	)		(210,389	)		(155,870	)
	Investment securities available for sale		(10,696	)		(711,087	)		(382,358	)
	Loans		(18,809	)		(465,773	)		(1,714,529	)
	Federal Home Loan Bank stock		(80,838	)		(86,294	)		(63,916	)
	Loan servicing assets, including those originated		(42,857	)		(35,757	)		(36,767	)
	Bank owned life insurance		—			(630,000	)		(50,000	)
Net cash and cash equivalents received in connection with acquisitions			—			133,845			—
Other			(76,125	)		(73,737	)		(26,246	)
Net cash used in investing activities			(1,272,198	)		(1,382,822	)		(795,124	)
Cash Flows from Financing Activities
Net increase (decrease) in short-term borrowings			(1,936,001	)		1,347,712			(2,106,883	)
Proceeds from long-term borrowings			4,093,770			886,480			6,791,587
Repayments of long-term borrowings			(1,713,980	)		(1,014,893	)		(4,880,315	)
Increase (decrease) in, net of acquisitions:
	Deposits		531,304			(306,969	)		1,159,265
	Advance payments by borrowers for taxes and insurance		(19,548	)		5,441			(108,876	)
Payment of dividends on common stock			(144,659	)		(134,328	)		(100,400	)
Proceeds from issuance of common stock			30,209			24,093			24,937
Purchase of treasury stock			(293,763	)		(160,381	)		(60,693	)
Other			—			—			(560	)
Net cash provided by financing activities			547,332			647,155			718,062
Net increase (decrease) in cash and cash equivalents			(162,275	)		(28,728	)		72,022
Cash and cash equivalents, beginning of year			693,532			722,260			650,238
Cash and cash equivalents, end of year		$	531,257		$	693,532		$	722,260

See Notes to Consolidated Financial Statements.

34 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

The accounting policies of Charter One Financial, Inc. (“Charter One” or the “Company”), a financial holding company, and Charter One Commercial and Charter One Bank, F.S.B. (collectively, the “Bank”), conform to accounting principles generally accepted in the United States of America and prevailing practices within the banking and thrift industry. A summary of the more significant accounting policies follows:

Nature of Operations–Headquartered in Cleveland, Ohio, Charter One is a financial holding company. Charter One is a Delaware corporation and owns all of the outstanding capital stock of Charter Michigan Bancorp, Inc. and Charter One Commercial. Charter Michigan Bancorp, Inc. owns all of the outstanding capital stock of Charter One Bank, F.S.B, a federally chartered thrift. The Company’s principal line of business is consumer banking which includes retail banking, mortgage banking and other related financial services. Retail banking provides a full range of deposit products, consumer loans, business lending and commercial real estate.

Basis of Presentation–The Consolidated Financial Statements include the accounts of the Company, the Bank and its subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain items in the Consolidated Financial Statements for 1999 and 1998 have been reclassified to conform to the 2000 presentation.

   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Securities–Securities consist of mortgage-backed securities, U.S. Government and federal agency obligations, floating-rate notes, corporate bonds, commercial paper and state and local government obligations. Securities are classified as trading, available for sale or held to maturity upon their acquisition. Securities classified as trading are carried at estimated fair value with the unrealized holding gain or loss recorded in the Consolidated Statements of Income. Securities classified as available for sale are carried on the Consolidated Statements of Financial Condition at estimated fair value with the unrealized holding gain or loss reflected as a component of shareholders’ equity. Securities classified as held to maturity are carried on the Consolidated Statements of Financial Condition at amortized cost. Premiums and discounts are recognized in interest income over the period to maturity by the level yield method. Realized gains or losses on the sale of debt securities are recorded based on the amortized cost of the specific securities sold. Security sales are recorded on a trade date basis.

Loans–Loans intended for sale are carried at the lower of cost or estimated market value determined on an aggregate basis. Net unrealized losses are recognized through a valuation allowance by a charge to income. Gains or losses on the sale of loans are determined under the specific identification method.

   Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances, net of deferred fees or costs on originated loans or unamortized premiums or discounts on purchased loans. Discounts and premiums are accreted or amortized using the interest method over the remaining period to contractual maturity adjusted for anticipated prepayments. Unamortized net fees or costs are recognized upon early repayment of the loans. Unamortized net fees or costs on loans sold are included in the basis of the loans in calculating gains and losses.

   A loan is considered to be impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. In general, the Bank considers a loan on income-producing properties to be impaired when the debt service coverage ratio is less than 1.0 and principal recovery is in doubt. Loans on non-income producing properties are considered impaired whenever fair value is less than book value. The Bank performs a review of all loans over $1 million to determine if the impairment criteria have been met. If the impairment criteria have been met, a reserve is calculated according to the provisions of accounting principles generally accepted in the United States of America .

   Loans and leases considered to be nonperforming include nonaccrual loans and leases, accruing loans and leases delinquent more than 90 days, and restructured loans. A loan, including an impaired loan, is classified as nonaccrual when collectability is in doubt (this is generally when the borrower is 90 days past due on contractual principal or interest payments). A loan may be considered impaired but remain on accrual status when the borrower demonstrates (by continuing to make payments) a willingness to keep the loan current. When a loan is placed on nonaccrual status, unpaid interest is reversed and an allowance is established by a charge to interest income equal to all accrued interest. Income is subsequently recognized only to the extent that cash payments are received. Loans are returned to accrual status when, in management’s judgment, the borrower has the ability and intent to make periodic principal and interest payments (this generally requires that the loan be brought current in accordance with its original contractual terms). Loans and leases are classified as accruing loans or leases delinquent more than 90 days when the loan or lease is more than 90 days past due and, in management’s judgment, the borrower has the ability and intent to make periodic interest and principal payments. Loans are classified as restructured when concessions are made to borrowers with respect to the principal balance, interest rate or other terms due to the inability of the borrower to meet the obligation under the original terms. The Bank charges off principal at the earlier of (i) when a total loss of principal has been deemed to have occurred as a result of the book value exceeding the fair value or net realizable value, or (ii) when collection efforts have ceased.

NOTES (continued)

Lease Accounting–The Company classifies leases at the inception of the lease in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases.” Estimated residual values are reviewed periodically and reduced if necessary.

   Direct Financing Leases — At lease inception, the present values of future rentals and of the residual are recorded as net investment in direct financing leases. Unearned interest income is amortized to interest income over the lease term to produce a constant percentage return on the investment. Sales commissions and other direct costs incurred in direct financing leases are capitalized and recorded as part of the net investment in leases and are amortized over the lease term.

   Sales-Type Leases — At the inception of the lease, the present value of future rentals is recorded as an equipment sale. Equipment cost less the present value of the residual is recorded as cost of equipment sold. Accordingly, a dealer profit is recognized at lease inception. The present values of future rentals and of the residual are recorded as net investment in sales-type leases. Unearned income is amortized to interest income over the lease term to produce a constant percentage return on the investment.

   Leveraged Leases — Income on leveraged leases is recognized at a constant rate of return on the outstanding investment in the lease, net of the related deferred tax liability.

Allowance for Loan and Lease Losses–The allowance for loan and lease losses is maintained at a level management considers to be adequate to absorb probable loan and lease losses inherent in the portfolio. Loan and lease losses are charged and recoveries are credited to the allowance for loan and lease losses. Provisions for loan and lease losses are based on management’s review of the historical loan and lease loss experience, overall growth in the loan and lease portfolios, an analysis of individual credits, and such other factors which, in management’s judgment, deserve consideration under existing economic conditions in estimating potential credit losses.

   In determining the adequacy of the allowance for loan and lease losses, management reviews and evaluates on a quarterly basis the necessity of a reserve for individual loans classified by management. The specifically allocated reserve for a classified loan is determined based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow, and legal options available to the Bank. Once a review is completed, the need for a specific reserve is determined by senior management and allocated to the loan. Other loans not specifically reviewed by management are evaluated using the historical charge-off experience ratio calculated by type of loan. The historical charge-off experience ratio factors into account the homogeneous nature of the loans, the geographical lending areas involved, regulatory examination findings, specific grading systems applied and any other known factors which may impact the ratios used. Specific reserves on individual loans and historical ratios are reviewed quarterly and adjusted as necessary based on subsequent collections, loan upgrades or downgrades, nonperforming trends or actual principal charge-offs. When evaluating the adequacy of the allowance for loan and lease losses, consideration is given to geographic concentration and the closely-associated effect changing economic conditions have on the Bank’s customers.

Loan Fees–Loan origination fees received for loans, net of direct origination costs, are deferred and amortized to interest income over the contractual lives of the loans using the level yield method. Fees received for loan commitments that are expected to be drawn, based on the Bank’s experience with similar commitments, are deferred and amortized over the lives of the loans using the level yield method. Fees for other loan commitments are deferred and amortized over the loan commitment period on a straight-line basis. Unamortized deferred loan fees or costs related to loans paid off are included in income. Unamortized net fees or costs on loans sold are included in the basis of the loans in calculating gains and losses. Amortization of net deferred fees is discontinued for loans that are deemed to be nonperforming.

Loan Servicing Assets–The cost of mortgage loans sold, with servicing rights retained, is allocated between the loans and the servicing rights based on their estimated fair values at time of loan sale. The estimated fair value of loan servicing assets is determined by reference to recent trades of comparable servicing assets, or is determined based on expected future cash flows discounted at an interest rate commensurate with the servicing risks involved. In 2000 and 1999, virtually all such recorded assets related to residential mortgage loans. Loan servicing assets are presented in the Consolidated Statements of Financial Condition net of accumulated amortization, which is recorded in proportion to, and over the period of, net servicing income. Capitalized loan servicing assets are stratified based on predominant risk characteristics of underlying loans for the purpose of evaluating impairment. An allowance is then established in the event the recorded value of an individual stratum exceeds fair value.

Off-Balance-Sheet Financial Instruments–Interest rate risk management instruments used in asset/liability management activities are accounted for using the accrual method. Derivatives are utilized by the Company for hedging purposes and not for trading. The net interest received or paid on these instruments is recognized over the lives of the respective contracts as an adjustment to interest expense. Gains and losses on terminated agreements are deferred and amortized to interest expense over the remaining original term of the applicable agreement. If the assigned liability is eliminated, the gain or loss on the terminated agreement is recognized immediately.

   In the ordinary course of business, the Company enters into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, standby letters of credit and commitments to purchase or sell assets. Such financial instruments are recorded in the financial statements when they are funded or the related fees are incurred or received.

36 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 37

Premises and Equipment–Premises and equipment and real estate held for investment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the useful lives of the related assets.

Real Estate Owned–Real estate owned, including property acquired in settlement of foreclosed loans, is carried at the lower of cost or estimated fair value less estimated cost to sell at the date of foreclosure. Costs relating to the development and improvement of real estate owned are capitalized, whereas costs relating to holding and maintaining the property are charged to expense.

Goodwill–Goodwill represents the purchase price of acquired operations in excess of the fair value of their net identifiable assets at the date of acquisition and is being amortized using the straight-line method over 15 years or less. Management periodically reviews intangible assets for possible impairment if events or circumstances indicate the carrying value of such assets is not recoverable, in which case an impairment loss is recognized through a charge to earnings.

Income Taxes–Income taxes have been provided using the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” The Company files a consolidated federal income tax return.

Consolidated Statements of Cash Flows–For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments with a term of three months or less to be cash equivalents. Cash flows from interest rate risk management instruments are classified based on the assets or liabilities hedged.

Stock Split and Dividends–On July 18, 2000, the Board of Directors of the Company approved a 5% stock dividend which was distributed on September 30, 2000 to shareholders of record on September 14, 2000. On July 21, 1999, the Board of Directors of the Company approved a 5% stock dividend which was distributed on September 30, 1999 to shareholders of record on September 14, 1999. On July 22, 1998, the Board of Directors of the Company approved a 5% stock dividend which was distributed on September 30, 1998 to shareholders of record on September 14, 1998.

   On April 22, 1998, the Company declared a 2-for-1 stock split in the form of a stock dividend. The dividend was payable on May 20, 1998 to shareholders of record as of May 6, 1998.

Earnings Per Share–Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding during the year. Diluted EPS is based on the weighted average number of common shares and common share equivalents outstanding during the year. All shares and per share data have been restated to reflect all prior stock dividends and stock splits.

Comprehensive Income–In accordance with SFAS No. 130, “Reporting Comprehensive Income,” reclassification adjustments have been determined for all components of other comprehensive income reported in the Company’s Consolidated Statements of Shareholders’ Equity. Amounts presented within those statements are net of the following reclassification adjustments and related tax expense:

			Year Ended December 31,
(Dollars in thousands)			2000			1999			1998
Other comprehensive income (loss), before tax:
	Net unrealized holding gain (loss) on securities		$	54,580		$	(144,501	)	$	50,978
	Reclassification adjustment for (gains) losses included in net income			(7,083	)		63,200			(20,273	)
Other comprehensive income (loss), before tax				47,497			(81,301	)		30,705
Income tax expense (benefit) related to items of other comprehensive
	Income			16,624			(28,455	)		10,747
		Other comprehensive income (loss), net of tax	$	30,873		$	(52,846	)	$	19,958

Segments–SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” requires that public companies report certain information about operating segments in complete sets of financial statements of the company and in condensed financial statements of interim periods issued to shareholders. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. Charter One has one operating segment, consumer banking, which offers a wide array of products and services to its customers. Pursuant to its consumer banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, Charter One prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change.

New Accounting Standards–In June 1998, the Financial Accounting Standards Board (“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. The FASB delayed the effective date of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. The delay, published as SFAS No. 137, applies to quarterly and annual financial statements. In June 2000, the FASB issued SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133.” SFAS No. 138 amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. It also amends SFAS No. 133 for decisions made by the FASB relating to the Derivatives Implementation Group process. This statement was adopted January 1, 2001. The cumulative effect of adoption did not have a material impact on the Company’s financial condition or results of operations.

NOTES (continued)

   In September 2000, the FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125.” SFAS No. 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Those standards are based on consistent application of a financial-components approach that focuses on control. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. SFAS No. 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. In addition to replacing SFAS No. 125, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” SFAS No. 140 rescinds SFAS No. 127, “Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125.” SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. It is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Disclosures about securitization and collateral accepted need not be reported for periods ending on or before December 15, 2000, for which financial statements are presented for comparative purposes. SFAS No. 140 is to be applied prospectively with certain exceptions. Other than those exceptions, earlier or retroactive application of its accounting provisions is not permitted. Management has not completed the process of evaluating SFAS No. 140 and therefore has not determined the impact that adopting this statement will have on the Company’s financial position and results of operations.

2.  Business Combinations and Asset Acquisitions

The tables below set forth the Company’s business combinations and asset acquisitions during the past three years. There were no business combinations or asset acquisitions in 2000.

Business Combinations

		Assets at		Common		Method
	Date	Date of		Shares		of
(Dollars in thousands)	Completed	Merger		Issued		Accounting
St. Paul Bancorp, Inc.	October 1, 1999	$	6,200,000		39,892,023		Pooling
ALBANK Financial Corporation	November 30, 1998		4,200,000		30,479,758		Pooling
CS Financial Corporation	October 16, 1998		393,900		2,131,500		Pooling
Beverly Bancorporation, Inc.	July 1, 1998		705,000		6,144,090		Pooling

Branch Purchases

			Date	Deposits		Loans		Goodwill
(Dollars in thousands)	Branches		Completed	Assumed		Acquired		Recorded
Chittenden Corporation		14	November 5, 1999	$	357,500	$	84,700	$	43,600

The following tables reconcile merger-related charges in each of the last three years between cash, noncash and accrual activity.

				2000
				Period				Total		Accrual		Ending
(Dollars in thousands)				Cost		Accrual		Expense		Charges		Accrual
Cash:
	Direct severance and termination costs			$	256	$	20,454	$	20,710	$	29,227	$	10,186
	Premises and equipment				1,149		480		1,629		70		503
	Professional fees				5,472		—		5,472		34		19
	Conversion and other				1,680		—		1,680		971		324
		Total cash			8,557		20,934		29,491		30,302		11,032
Non-cash:
	Write-off of discontinued assets				—		—		—		—		—
	Conversion and other				—		—		—		—		—
		Total non-cash			—		—		—		—		—
			Total merger-related charges	$	8,557	$	20,934	$	29,491	$	30,032	$	11,032

				1999
				Period				Total		Accrual			Ending
(Dollars in thousands)				Cost		Accrual		Expense		Charges			Accrual
Cash:
	Direct severance and termination costs			$	23,293	$	16,403	$	39,696	$	(11,411	)	$	18,959
	Premises and equipment				3,757		65		3,822		(3,797	)		93
	Professional fees				14,872		75		14,947		(3,462	)		53
	Conversion and other				2,257		—		2,257		(6,504	)		1,295
		Total cash			44,179		16,543		60,722		(25,174	)		20,400
Non-cash:
	Write-off of discontinued assets				2,572		—		2,572		—			—
	Conversion and other				232		—		232		—			—
		Total non-cash			2,804		—		2,804		—			—
			Total merger-related charges	$	46,983	$	16,543	$	63,526	$	(25,174	)	$	20,400

				1998
				Period				Total		Accrual			Ending
(Dollars in thousands)				Cost		Accrual		Expense		Charges			Accrual
Cash:
	Direct severance and termination costs			$	4,592	$	12,812	$	17,404	$	(10,785	)	$	13,967
	Premises and equipment				842		3,825		4,667		(4,080	)		3,825
	Professional fees				11,161		3,440		14,601		—			3,440
	Conversion and other				1,157		5,950		7,107		(5,086	)		7,799
		Total cash			17,752		26,027		43,779		(19,951	)		29,031
Non-cash:
	Write-off of discontinued assets				18,196		—		18,196		—			—
	Conversion and other				2,707		—		2,707		—			—
		Total non-cash			20,903		—		20,903		—			—
			Total merger-related charges	$	38,655	$	26,027	$	64,682	$	(19,951	)	$	29,031

38 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 39

3.  Investment Securities

Investment securities at December 31, 2000, 1999 and 1998, are as follows:

			December 31, 2000
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Available for Sale
	U.S. Treasury and agency securities		$	334,065	$	252	$	417	$	333,900
	Corporate notes and commercial paper			75,436		1		9,905		65,532
	Other			26,607		709		47		27,269
		Total investment securities available for sale		436,108		962		10,369		426,701
Held to Maturity
	U.S. Treasury and agency securities			15,000		3		—		15,003
	Corporate notes and commercial paper			—		—		—		—
	Other			7,514		160		6		7,668
		Total investment securities held to maturity		22,514		163		6		22,671
Total			$	458,622	$	1,125	$	10,375	$	449,372

			December 31, 1999
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Trading
	Other		$	13,380	$	—	$	—	$	13,380
		Total investment securities held for trading		13,380		—		—		13,380
Available for Sale
	U.S. Treasury and agency securities			342,570		5,479		8,362		339,687
	Corporate notes and commercial paper			90,920		85		2,637		88,368
	Other			50,375		5,166		901		54,640
		Total investment securities available for sale		483,865		10,730		11,900		482,695
Held to Maturity
	U.S. Treasury and agency securities			17,058		—		292		16,766
	Corporate notes and commercial paper			15,659		—		1,324		14,335
	Other			13,289		75		55		13,309
		Total investment securities held to maturity		46,006		75		1,671		44,410
Total			$	543,251	$	10,805	$	13,571	$	540,485

			December 31, 1998
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Available for Sale
	U.S. Treasury and agency securities		$	309,323	$	8,505	$	34	$	317,794
	Corporate notes and commercial paper			136,186		2,378		11		138,553
	Other			109,978		11,013		481		120,510
		Total investment securities available for sale		555,487		21,896		526		576,857
Held to Maturity
	U.S. Treasury and agency securities			38,000		264		—		38,264
	Corporate notes and commercial paper			—		—		—		—
	Other			14,215		380		1		14,594
		Total investment securities held to maturity		52,215		644		1		52,858
Total			$	607,702	$	22,540	$	527	$	629,715

The Company did not have any investment securities held for trading at December 31, 2000. The weighted average interest rate on investment securities was 7.40%, 7.26%, and 5.80% at December 31, 2000, 1999, and 1998, respectively.

Investment securities by contractual maturity, repricing or expected call date are shown below:

	December 31, 2000
					Weighted
	Amortized		Fair		Average
(Dollars in thousands)	Cost		Value		Rate
Due in one year or less	$	333,879	$	333,533		7.25	%
Due after one year through five years		20,716		20,852		5.98
Due after five years through ten years		3,776		3,876		5.29
Due after ten years		100,251		91,111		8.31
Total	$	458,622	$	449,372		7.40	%

Gains on sales were $11.2 million, $5.3 million and $662,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Losses on sales were $9.8 million for the year ended December 31, 1999. No losses on sales were realized during the years ended December 31, 2000 and 1998, respectively.

NOTES (continued)

4.  Mortgage-Backed Securities

Mortgage-backed securities at December 31, 2000, 1999 and 1998 are as follows:

			December 31, 2000
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Available for Sale:
Participation certificates:
	Government agency issues:
		FNMA	$	2,951,192	$	38,500	$	3,840	$	2,985,852
		FHLMC		59,150		480		119		59,511
		GNMA		2,027		182		—		2,209
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		222,957		2,942		152		225,747
		FHLMC		290,741		2,028		537		292,232
		GNMA		6,048		—		33		6,015
	Private issues			507,395		9,840		1,605		515,630
		Total mortgage-backed securities available for sale		4,039,510		53,972		6,286		4,087,196
Held to Maturity
Participation certificates:
	Government agency issues:
		FNMA		433,533		7,361		261		440,633
		FHLMC		154,502		3,658		44		158,116
		GNMA		84,603		1,581		3		86,181
	Private issues			128,407		518		1,787		127,138
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		202,283		7,565		271		209,577
		FHLMC		66,292		1,574		168		67,698
	Private issues			436,555		7,351		1,724		442,182
		Total mortgage-backed securities held to maturity		1,506,175		29,608		4,258		1,531,525
Total			$	5,545,685	$	83,580	$	10,544	$	5,618,721

			December 31, 1999
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Available for Sale
Participation certificates:
	Government agency issues:
		FNMA	$	3,046,980	$	4,419	$	28,171	$	3,023,228
		FHLMC		95,736		182		884		95,034
		GNMA		2,412		196		—		2,608
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		225,961		7,062		117		232,906
		FHLMC		296,538		7,953		473		304,018
		GNMA		7,624		—		275		7,349
	Private issues			525,345		8,702		6,056		527,991
		Total mortgage-backed securities available for sale		4,200,596		28,514		35,976		4,193,134
Held to Maturity
Participation certificates:
	Government agency issues:
		FNMA		549,866		1,052		6,077		544,841
		FHLMC		196,704		2,305		686		198,323
		GNMA		101,468		1,502		365		102,605
	Private issues			162,485		545		4,315		158,715
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		221,934		9,453		1,251		230,136
		FHLMC		82,838		2,328		656		84,510
	Private issues			591,951		3,436		5,204		590,183
		Total mortgage-backed securities held to maturity		1,907,246		20,621		18,554		1,909,313
Total			$	6,107,842	$	49,135	$	54,530	$	6,102,447

			December 31, 1998
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)			Cost		Gains		Losses		Value
Available for Sale
Participation certificates:
	Government agency issues:
		FNMA	$	1,255,918	$	28,925	$	1,492	$	1,283,351
		FHLMC		188,003		2,255		769		189,489
		GNMA		3,047		280		—		3,327
	Private issues			33,115		163		968		32,310
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		250,039		6,757		3		256,793
		FHLMC		355,502		6,191		55		361,638
		GNMA		9,332		42		—		9,374
	Private issues			488,678		12,245		450		500,473
		Total mortgage-backed securities available for sale		2,583,634		56,858		3,737		2,636,755
Held to Maturity
Participation certificates:
	Government agency issues:
		FNMA		757,670		14,478		608		771,540
		FHLMC		285,131		8,719		20		293,830
		GNMA		132,066		2,887		1		134,952
	Private issues			431,769		6,419		4,000		434,188
Collateralized mortgage obligations:
	Government agency issues:
		FNMA		263,574		11,125		219		274,480
		FHLMC		128,444		3,886		61		132,269
	Private issues			934,877		11,098		2,592		943,383
		Total mortgage-backed securities held to maturity		2,933,531		58,612		7,501		2,984,642
Total			$	5,517,165	$	115,470	$	11,238	$	5,621,397

Sales of mortgage-backed securities resulted in gains of $19.7 million in 2000, $12.4 million in 1999 and $19.7 million in 1998. Losses on sales were $23.9 million in 2000, $71.1 million in 1999 and $89,000 in 1998.

40 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 41

5. Loans and Leases

Loans and leases consist of the following:

				December 31,
				2000						1999						1998
							% of						% of						% of
(Dollars in thousands)				Amount			Total			Amount			Total			Amount			Total
Real estate mortgage loans:
	Permanent:
		One-to-four family		$	10,413,005			43.5	%	$	11,365,545			51.1	%	$	13,311,870			60.6	%
		Multifamily			1,064,796			4.4			1,224,348			5.5			1,027,320			4.7
		Commercial			769,589			3.2			624,517			2.8			663,448			3.0
			Total permanent		12,247,390			51.1			13,214,410			59.4			15,002,638			68.3
	Construction:
		One-to-four family			611,317			2.6			486,512			2.2			453,762			2.1
		Multifamily			90,129			.4			75,171			.3			45,064			.2
		Commercial			163,544			.6			92,993			.4			73,641			.3
			Total construction		864,990			3.6			654,676			2.9			572,467			2.6
			Total real estate mortgage loans		13,112,380			54.7			13,869,086			62.3			15,575,105			70.9
Retail consumer loans					4,583,770			19.1			3,745,633			16.8			2,841,225			12.9
Automobile loans					3,046,038			12.7			2,413,531			10.8			2,011,968			9.2
Consumer finance					974,852			4.1			700,259			3.2			443,301			2.0
Leases					1,778,021			7.4			1,137,895			5.1			734,152			3.3
Corporate banking loans					802,379			3.4			679,397			3.0			575,042			2.6
			Total loans and leases held for investment		24,297,440			101.4			22,545,801			101.2			22,180,793			100.9
Less:
	Loans in process				345,341			1.4			259,680			1.2			163,277			.8
	Unamortized net premiums				(6,763	)		—			(7,430	)		—			(14,282	)		(.1	)
	Allowance for loan and lease losses				189,616			.8			186,400			.8			184,989			.8
	Net deferred loan costs				(83,388	)		(.4	)		(91,133	)		(.4	)		(66,927	)		(.3	)
	Dealer reserve				(97,538	)		(.4	)		(78,578	)		(.4	)		(65,214	)		(.3	)
			Total net items		347,268			1.4			268,939			1.2			201,843			.9
Loans and leases held for investment, net				$	23,950,172			100.0	%	$	22,276,862			100.0	%	$	21,978,950			100.0	%
Loans held for sale				$	58,002					$	35,988					$	240,461
Loan servicing portfolio				$	10,379,644					$	10,798,563					$	9,916,922

[Additional columns below]

[Continued from above table, first column(s) repeated]

				December 31,
				1997						1996
							% of						% of
(Dollars in thousands)				Amount			Total			Amount			Total
Real estate mortgage loans:
	Permanent:
		One-to-four family		$	12,471,500			65.1	%	$	10,527,582			65.9	%
		Multifamily			1,203,277			6.3			1,326,992			8.3
		Commercial			627,816			3.3			666,555			4.2
			Total permanent		14,302,593			74.7			12,521,129			78.4
	Construction:
		One-to-four family			342,915			1.7			284,274			1.8
		Multifamily			36,234			.2			14,517			.1
		Commercial			48,716			.3			46,982			.3
			Total construction		427,865			2.2			345,773			2.2
			Total real estate mortgage loans		14,730,458			76.9			12,866,902			80.6
Retail consumer loans					1,943,287			10.1			1,610,148			10.1
Automobile loans					1,624,612			8.5			1,098,099			6.9
Consumer finance					127,420			.7			—			—
Leases					439,004			2.3			251,133			1.6
Corporate banking loans					512,595			2.7			401,025			2.5
			Total loans and leases held for investment		19,377,376			101.2			16,227,307			101.7
Less:
	Loans in process				143,750			.8			154,132			1.0
	Unamortized net premiums				(5,292	)		—			(1,159	)		—
	Allowance for loan and lease losses				181,554			.9			158,211			1.0
	Net deferred loan costs				(35,368	)		(.2	)		(12,538	)		(.1	)
	Dealer reserve				(55,613	)		(.3	)		(36,079	)		(.2	)
			Total net items		229,031			1.2			262,567			1.7
Loans and leases held for investment, net				$	19,148,345			100.0	%	$	15,964,740			100.0	%
Loans held for sale				$	361,175					$	165,326
Loan servicing portfolio				$	10,140,387					$	11,901,443

As of December 31, 2000, there was no concentration of loans or leases in any type of industry which exceeded 10% of the Bank’s total loans and leases that is not included as a loan or lease category in the table above.

   The following table reflects the principal payments contractually due (assuming no prepayments) on the Bank’s construction portfolio, net of loans in process, and corporate banking loan portfolio at December 31, 2000. Management expects prepayments will cause actual maturities to be shorter.

	Principal Payments Contractually Due
	in the Year(s)
	Ended December 31,
					2006 and
(Dollars in thousands)	2001		2002-2005		Thereafter		Total
Construction loans	$	431,955	$	150,265	$	5,724	$	587,944
Corporate banking loans		261,299		320,934		220,146		802,379
Total(1)	$	693,254	$	471,199	$	225,870	$	1,390,323

(1)  Of the $697.1 million of loans due after December 31, 2001, 59% are fixed rate and 41% are adjustable rate.

The Company normally has outstanding a number of commitments to extend credit. At December 31, 2000, there were outstanding commitments to originate $1.4 billion of mortgage loans and other loans and leases, all at market rates. Terms of the commitments extend up to nine months, but are generally less than two months.

   At December 31, 2000, there were also outstanding unfunded consumer lines of credit of $3.1 billion and corporate banking lines of credit of $228.0 million. Substantially all of the consumer loans, including consumer lines of credit, are secured by equity in the borrowers’ residences. The Company does not expect all of these lines to be used by the borrowers. Outstanding letters of credit totaled $98.0 million as of December 31, 2000.

   The Bank is engaged in equipment leasing through a subsidiary, ICX Corporation (“ICX”). The equipment leased by ICX is for commercial and industrial use only, with primary lease concentrations to Fortune 1000 companies for large capital equipment acquisitions. A lessee is evaluated from a credit perspective using the same underwriting standards and procedures as for a borrower. A lessee is expected to be able to make the rental payments based on its business’ cash flow and the strength of its balance sheet. Leases are usually not evaluated as collateral-based transactions and, therefore, the lessee’s overall financial strength is the most important credit evaluation factor.

NOTES (continued)

A summary of the investment in leases, before the allowance for lease losses, is as follows:

	December 31,
(Dollars in thousands)	2000		1999
Direct financing leases	$	1,186,961	$	813,997
Sales-type leases		54,369		82,332
Leveraged leases		536,691		241,566
Total lease financings	$	1,778,021	$	1,137,895

The components of the investment in lease financings, before the allowance for lease losses, are as follows:

	December 31,
(Dollars in thousands)	2000		1999
Total future minimum lease rentals	$	1,400,651	$	890,612
Estimated residual value of leased equipment		972,822		590,226
Initial direct costs		10,768		8,068
Less unearned income on minimum lease rentals and estimated residual value of leased equipment		606,220		351,011
Total lease financings	$	1,778,021	$	1,137,895

At December 31, 2000, future minimum lease rentals on direct financing, sales type and leveraged leases are as follows: $227.5 million in 2001; $204.3 million in 2002; $169.3 million in 2003; $131.6 million in 2004; $100.9 million in 2005; and $567.1 million thereafter.

Allowance for Loan and Lease Losses

Changes in the allowance for loan and lease losses are as follows:

		Year Ended December 31,
(Dollars in thousands)		2000			1999			1998
Balance, beginning of year		$	186,400		$	184,989		$	181,554
	Provision		54,205			35,237			31,325
	Acquired through acquisition		—			3,603			—
	Amounts charged off		(60,331	)		(45,484	)		(38,056	)
	Recoveries		9,342			8,055			10,166
Balance, end of year		$	189,616		$	186,400		$	184,989

The total investment in impaired loans was $23.0 million and $18.3 million at December 31, 2000 and 1999, respectively. These loans were subject to allowances for loan and lease losses of $12.9 million and $1.2 million as of December 31, 2000 and 1999, respectively.

The average recorded investment in impaired loans was $21.3 million, $17.6 million, and $27.9 million for the years ended December 31, 2000, 1999, and 1998, respectively. Interest income recognized was $561,000, $1.4 million and $1.6 million for the years ended December 31, 2000, 1999, and 1998, respectively. The interest income potential based upon the original terms of the contracts for these impaired loans was $2.1 million, $1.8 million, and $2.2 million for 2000, 1999 and 1998, respectively.

6.  Deposits

Deposits consist of the following:

		December 31,
		2000					1999					1998
				Weighted					Weighted					Weighted
				Average					Average					Average
(Dollars in thousands)		Amount		Rate			Amount		Rate			Amount		Rate
Checking accounts:
	Interest-bearing	$	2,547,726		2.68	%	$	2,066,453		2.05	%	$	1,608,677		1.17	%
	Noninterest-bearing		1,394,186		—			1,263,290		—			1,258,959		—
Money market and savings accounts			5,486,158		3.30			5,235,562		2.70			5,400,019		2.80
Certificates of deposit			10,177,601		5.99			10,508,670		5.31			10,756,045		5.58
Total deposits, net		$	19,605,671		4.38		$	19,073,975		3.89		$	19,023,700		4.05
Including the effect of interest rate swaps					4.35	%				3.79	%				3.98	%

A summary of all certificates of deposit by maturity follows:

(Dollars in thousands)	December 31, 2000
Within 12 months	$	8,815,995
Over 12 months to 24 months		605,889
Over 24 months to 36 months		204,913
Over 36 months to 48 months		191,778
Over 48 months to 60 months		172,809
Over 60 months		186,217
Total	$	10,177,601

A summary of certificates of deposit and other deposits with balances of $100,000 or more by maturity is as follows:

(Dollars in thousands)	December 31, 2000
Three months or less	$	420,326
Over three months to six months		569,445
Over six months to twelve months		664,657
Over twelve months		157,835
Total	$	1,812,263

Investment securities and mortgage-backed securities with a book value of $592.1 million, $544.4 million and $338.4 million at December 31, 2000, 1999, and 1998, respectively, are pledged to secure public deposits and for other purposes required or permitted by law.

42 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 43

7.  Federal Home Loan Bank Advances

Federal Home Loan Bank (“FHLB”) advances at December 31, 2000, are secured by the Company’s investment in the stock of the FHLB, as well as certain real estate loans aggregating $13.1 billion and mortgage-backed securities aggregating $1.9 billion. FHLB advances are comprised of the following:

	December 31,
	2000					1999
			Weighted					Weighted
			Average					Average
(Dollars in thousands)	Amount		Rate			Amount		Rate
Fixed-rate advances	$	9,011,799		5.81	%	$	8,502,941		5.24	%
Variable-rate advances		624,478		6.59			723,209		6.24
Total advances, net	$	9,636,277		5.86	%	$	9,226,150		5.32	%

Scheduled repayments of FHLB advances are as follows:

		December 31, 2000
		Fixed-Rate Advances					Variable-Rate Advances
				Weighted					Weighted
				Average					Average
(Dollars in thousands)		Amount		Rate			Amount		Rate
Maturing in:
	2001	$	3,210,248		6.05	%	$	200,000		6.76	%
	2002		250,000		4.80			14,873		6.73
	2003		525,000		4.89			—		—
	2004		100,000		5.34			—		—
	2005		2,000,200		6.44			—		—
	Thereafter		2,926,351		5.40			409,605		6.51
Total FHLB advances, net		$	9,011,799		5.81	%	$	624,478		6.59	%

At December 31, 2000, certain fixed-rate agreements are convertible to LIBOR at the counterparty’s option beginning in 2001. If the counterparty exercises its option, the Company can prepay the advance in full or part on the effective conversion date or on the quarterly repricing date.

8.  Federal Funds Purchased and Reverse Repurchase Agreements

The Company enters into federal funds purchased and reverse repurchase agreements. The agreements to repurchase assets correspond with sales of the Company’s securities which are treated as financings for financial statement purposes. The securities subject to repurchase agreements were delivered to the FHLB or brokers arranging the transactions who hold the collateral until maturity of the agreements.

Federal funds purchased and reverse repurchase agreements consist of the following:

	December 31,
	2000					1999
			Weighted					Weighted
			Average					Average
(Dollars in thousands)	Amount		Rate			Amount		Rate
Due within 30 days	$	262,326		5.64	%	$	43,297		4.66	%
30 days to within 90 days		—		—			240,000		5.75
Total	$	262,326		5.64	%	$	283,297		5.58	%

At December 31, 2000, there were no amounts at risk with any counterparties exceeding 10% of shareholders’ equity. The amount at risk is equal to the excess of the carrying value (or market value if greater) of the securities sold under agreements to repurchase over the amount of the repurchase liability.

9.  Other Borrowings

Other borrowings consist of the following:

	December 31,
(Dollars in thousands)	2000		1999
Senior notes, due February 15, 2004, interest payable at 7.125% (net of unamortized discount of $.8 million in 2000 and $1.1 million in 1999)	$	94,284	$	94,322
Zero coupon bonds of $156 million at December 31, 2000 and 1999, due February 2005, with yield to maturity of 11.37%		98,028		87,624
Installment obligations without recourse		73,660		30,868
Variable-rate bonds, due December 1, 2015 interest payable semi-annually at 4.75% with a ceiling of 9.50%		10,000		10,000
Mortgage loan sale agreement		5,381		5,790
Other		3,455		3,673
Total	$	284,808	$	232,277

The zero coupon bonds are collateralized by mortgage-backed securities with a book value of $186.9 million and $176.1 million at December 31, 2000 and 1999, respectively.

10.  Interest Rate Risk Management Instruments

The Company utilizes various types of interest rate contracts in managing its interest rate risk profile. The Company utilizes fixed receipt swaps to convert certain longer term callable certificates of deposit into short-term variable instruments. Under these agreements Charter One 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.

   The Company has utilized fixed payment swaps to convert certain floating-rate or short-term, fixed-rate liabilities into longer term, fixed-rate instruments. Under these agreements, Charter One 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.

NOTES (continued)

Information on the swaps, by maturity date, is as follows:

	December 31, 2000
	Notional		Receiving			Paying
	Principal		Interest			Interest
(Dollars in thousands)	Amount		Rate			Rate
Fixed Payment and Variable Receipt
2002	$	25,000		6.94	%(1)		6.44	%
Variable Payment and Fixed Receipt
2001	$	420,000		6.38	%		6.73	%
2002		155,000		7.03			6.73
2003		120,000		6.14			6.68
2004		478,000		6.84			6.75
2005		445,000		7.89			6.68
2006		70,000		7.07			6.59
2007		10,000		7.25			6.71
2009		65,000		7.32			6.53
2010		10,000		7.50			6.65
Total	$	1,773,000		7.00	%		6.71	%(1)

	December 31, 1999
	Notional		Receiving			Paying
	Principal		Interest			Interest
(Dollars in thousands)	Amount		Rate			Rate
Fixed Payment and Variable Receipt
2002	$	25,000		5.58	%(1)		6.44	%
Variable Payment and Fixed Receipt
2000	$	40,000		5.55	%		6.16	%
2001		420,000		6.38			6.14
2002		—		—			—
2003		120,000		6.14			6.14
2004		580,000		7.01			6.15
2005		25,000		7.00			5.87
2006		40,000		7.00			6.37
2007		—		—			—
2009		65,000		7.32			6.16
2010		—		—			—
Total	$	1,290,000		6.69	%		6.15	%(1)

(1)  Rates are based on LIBOR.

The Company is exposed to credit loss in the event of nonperformance by the swap counterparties; however, the Company does not currently anticipate nonperformance by the counterparties.

   The net benefit of interest rate risk management instruments included in interest expense is as follows:

		Year Ended December 31,
(Dollars in thousands)		2000			1999			1998
Interest (income) expense:
	Deposits	$	(8,879	)	$	(9,886	)	$	(7,699	)
	FHLB advances		—			86			214
	Federal funds purchased and reverse repurchase agreements		—			(236	)		(274	)
	Mortgage loans		—			273			59
Total		$	(8,879	)	$	(9,763	)	$	(7,700	)

11.  Income Taxes

The provision for income taxes consists of the following components:

	Year Ended December 31,
(Dollars in thousands)	2000		1999		1998
Current	$	33,463	$	62,158	$	89,210
Deferred		170,321		98,449		67,219
Total	$	203,784	$	160,607	$	156,429

A reconciliation from tax at the statutory rate to the income tax provision is as follows:

		Year Ended December 31,
		2000						1999						1998
(Dollars in thousands)		Dollars			Rate			Dollars			Rate			Dollars			Rate
Tax at statutory rate		$	223,211			35.0	%	$	173,648			35.0	%	$	161,754			35.0	%
Decrease due to:
	Bank owned life insurance		(13,429	)		(2.1	)		(9,191	)		(1.9	)		(831	)		(0.2	)
	Change in valuation allowance for deferred tax assets		—			—			—			—			(1,558	)		(0.4	)
	Other		(5,998	)		(0.9	)		(3,850	)		(0.7	)		(2,936	)		(0.6	)
	Income tax provision	$	203,784			32.0	%	$	160,607			32.4	%	$	156,429			33.8	%

Significant components of the deferred tax assets and liabilities are as follows:

			Year Ended December 31,
(Dollars in thousands)			2000			1999			1998
Deferred tax assets:
	Book allowance for loan losses		$	62,581		$	61,847		$	64,390
	Accrued and deferred compensation			3,267			3,176			11,984
	Net unrealized loss on securities			—			3,774			—
	Alternative minimum tax credit			53,728			22,850			12,360
	Other			53,170			51,317			30,085
		Total deferred tax assets		172,746			142,964			118,819
Deferred tax liabilities:
	Leasing activities, net			386,053			225,459			128,840
	FHLB stock dividends			45,307			32,709			24,221
	Deferred loan costs			29,136			33,656			17,742
	Tax allowance for loan losses			3,640			5,081			6,610
	Net unrealized gain on securities			12,825			—			21,524
	Other			44,346			7,700			8,372
		Total deferred tax liabilities		521,307			304,605			207,309
		Net deferred tax liability	$	(348,561	)	$	(161,641	)	$	(88,490	)

In 2000 and 1999, Charter One recaptured excess bad debt reserves of $4.1 million and $4.3 million, respectively, resulting in payments of $1.4 million and $1.5 million which were previously accrued. The pre-1988 reserve provisions are subject only to recapture requirements in the case of certain excess distributions to, and redemptions of, shareholders or if the Bank no longer qualifies as a “bank”. Tax bad debt deductions accumulated prior to 1988 by the Bank are approximately $297 million. No deferred income taxes have been provided on these bad debt deductions and no recapture of these amounts is anticipated.

12.  Regulatory Matters

Federal Reserve Board (“FRB”) regulations require depository institutions to maintain certain minimum reserve balances. These reserves, which consisted of vault cash and deposits at the Federal Reserve Bank, totaled $54.9 million and $92.2 million at December 31, 2000 and 1999, respectively.

  The Bank may not declare or pay cash dividends on its shares of common stock if the payment would cause shareholders’ equity to be reduced below applicable regulatory capital maintenance requirements, or if such declaration and payment would otherwise violate regulatory requirements. At December 31, 2000, approximately $68.4 million of the Company’s retained earnings was available to pay dividends to shareholders or to be used for other corporate purposes.

44 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 45

   As a financial holding company, Charter One is subject to regulation by the FRB under the Bank Holding Company Act of 1956 as amended, and the regulations of the FRB, including various capital requirements. Charter One 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 our 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. The institution’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 Charter One and Charter One 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. The actual regulatory capital ratios calculated for Charter One, Charter One 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:

	December 31, 2000
											To Be “Well
											Capitalized”
											Under Prompt
						For Capital					Corrective
	Actual					Adequacy Purposes					Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Charter One:
Total capital to risk-weighted assets	$	2,448,962		10.29	%	$	1,904,468		*8.00	%	$	2,380,585		*10.00	%
Tier 1 capital to risk-weighted assets		2,259,030		9.49			952,234		*4.00			1,428,351		*6.00
Tier 1 capital to average assets		2,259,030		6.89			1,310,915		*4.00			1,638,643		*5.00
Charter One Commercial:
Total capital to risk-weighted assets		30,213		30.56			7,910		*8.00			9,887		*10.00
Tier 1 capital to risk-weighted assets		30,213		30.56			3,955		*4.00			5,932		*6.00
Tier 1 capital to average assets		30,213		8.67			13,941		*4.00			17,427		*5.00
Charter One Bank, F.S.B.:
Total capital to risk-weighted assets		2,376,443		10.23			1,858,583		*8.00			2,323,229		*10.00
Tier 1 capital to risk-weighted assets		1,673,360		7.20			N/A		N/A			1,393,938		*6.00
Core capital to adjusted tangible assets		1,687,568		5.15			1,310,207		*4.00			1,637,759		*5.00
Tangible capital to tangible assets		1,687,300		5.15			491,324		*1.50			N/A		N/A

	December 31, 1999
											To Be “Well
											Capitalized”
											Under Prompt
						For Capital					Corrective
	Actual					Adequacy Purposes					Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Charter One:
Total capital to risk-weighted assets	$	2,404,336		11.16	%	$	1,722,825		*8.00	%	$	2,153,532		*10.00	%
Tier 1 capital to risk-weighted assets		2,213,534		10.28			861,413		*4.00			1,292,119		*6.00
Tier 1 capital to average assets		2,213,534		7.05			1,255,645		*4.00			1,569,567		*5.00
Charter One Commercial:
Total capital to risk-weighted assets		41,337		40.92			8,081		*8.00			10,101		*10.00
Tier 1 capital to risk-weighted assets		41,337		40.92			4,040		*4.00			6,061		*6.00
Tier 1 capital to average assets		41,337		13.66			12,104		*4.00			15,129		*5.00
Charter One Bank, F.S.B.:
Total capital to risk-weighted assets		2,115,163		10.00			1,691,462		*8.00			2,114,327		*10.00
Tier 1 capital to risk-weighted assets		1,605,506		7.59			N/A		N/A			1,268,596		*6.00
Core capital to adjusted tangible assets		1,619,927		5.10			1,270,858		*4.00			1,588,572		*5.00
Tangible capital to tangible assets		1,618,856		5.10			476,566		*1.50			N/A		N/A

* Greater than or equal to

As of December 31, 1999, 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. As of December 31, 1999, the most recent notification from the FRB categorized Charter One as “well capitalized” under the regulatory framework for Prompt Corrective Action. To be categorized as well capitalized, Charter One and Charter One Bank, F.S.B. 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 Charter One’s or Charter One Bank, F.S.B.’s respective category. Charter One Commercial’s capital ratios exceed the minimum required to be well-capitalized. Management does not know of any reasons why Charter One Commercial would not be considered well capitalized; however, as of December 31, 2000, Charter One Commercial had not received a classification from its respective regulator.

   Management believes that, as of December 31, 2000, Charter One, Charter One 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.

NOTES (continued)

13.  Stock Purchase Rights

On October 20, 1999, the Board of Directors of the Company approved an amendment and restatement of the Company’s stockholder rights plan, extending the plan that was adopted in 1989 and scheduled to expire on November 20, 1999. Under the Amended and Restated Stockholder Protection Rights Agreement, each share of the Company’s common stock outstanding entitles the shareholder to one stock purchase right. Each right will entitle its holder to purchase one one-hundredth of a share of a new series of preferred stock (Series A Preferred Stock), at a price of $100.00 (subject to adjustment) (the “Exercise Price”) and will generally become exercisable if any person or group (1) acquires 20% or more of the Company’s common stock or (2) commences a tender or exchange offer to acquire 20% or more of the Company’s common stock. Upon announcement that any person or group has acquired 20% or more of the Company’s common stock (“Acquiring Person”), rights owned by the Acquiring Person will become void and each other right will “flip-in,” entitling its holder to purchase for the Exercise Price either Series A Preferred Stock or, at the option of the Company, common stock, having a market value of twice the Exercise Price. In addition, after any person has become an Acquiring Person, the Company may not consolidate or merge with any person or sell 50% or more of its assets or earning power to any person if at the time of such merger or sale the Acquiring Person controls the Company’s Board of Directors and, in the case of a merger, will receive different treatment than the other shareholders, unless provision is made such that each right would thereafter entitle its holder to buy, for the Exercise Price, the number of shares of common stock of such other person having a market value of twice the Exercise Price.

   The rights may be redeemed by the Company for $.01 per right at any time prior to an acquisition of 20% or more of the common stock of the Company. The rights will expire on October 20, 2009 or before that date under certain circumstances, including in connection with the acquisition of the Company in a merger before any person has acquired more than 20% of the Company’s common stock.

14.  Stock Option Plans

At December 31, 2000, the Company has several stock option plans under which 16.1 million shares of common stock are reserved for grant to officers, key employees and directors. The plans provide that option prices will not be less than the fair market value of the stock at the grant date. The date on which the options are first exercisable is determined by the Stock Option Committee of the Board of Directors (the “Committee”). The options expire no later than 10 years from the grant date. The Company applies Accounting Principles Board Opinion No. 25, “Accounting For Stock Issued to Employees,” and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost of the Company’s stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

		Year Ended December 31,
(Dollars in thousands,
except per share data)		2000		1999		1998
Net income:
	As reported	$	433,962	$	333,976	$	244,066
	Pro forma		409,818		310,549		224,738
Basic earnings per share:
	As reported		2.03		1.49		1.09
	Pro forma		1.92		1.39		1.00
Diluted earnings per share:
	As reported		2.00		1.46		1.05
	Pro forma		1.88		1.36		.97

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2000, 1999 and 1998:

	Year Ended December 31,
	2000			1999			1998
Dividend yield		2.00	%		2.00	%		2.00	%
Volatility		43.00- 45.41	%		32.66- 33.65	%		30.91- 33.31	%
Risk-free interest rate		5.20-6.78	%		4.91-6.49	%		4.63-5.73	%
Life of grant		7 years			7 years			7 years

The estimated weighted-average grant-date fair value (based on the above option-pricing model and assumptions) for options granted in 2000, 1999, and 1998 was $8.45, $9.84, and $10.05, respectively.

   The following is an analysis of the stock option activity for each of the years in the three-year period ended December 31, 2000 and the stock options outstanding at the end of the respective periods. Amounts have been restated to reflect all prior stock dividends and stock splits.

				Exercise Price
	Number
	of Shares			Per Share		Total
Outstanding at January 1, 1998		16,033,733		$	1.23-$27.10	$	160,893,595
Granted		4,693,348			22.07-29.21		112,374,487
Exercised		(2,713,667	)		1.23-19.59		(15,204,727	)
Forfeited		(306,447	)		1.39-24.50		(5,498,453	)
Outstanding at December 31, 1998		17,706,967			2.24-29.21		252,564,902
Granted		3,665,733			17.89-28.89		92,334,802
Exercised		(2,206,179	)		2.67-19.59		(20,484,591	)
Forfeited		(350,221	)		17.28-28.03		(8,524,325	)
Outstanding at December 31, 1999		18,816,300			2.24-29.21		315,890,788
Granted		3,993,579			17.83-26.72		72,624,920
Exercised		(2,139,497	)		2.24-24.48		(24,237,215	)
Forfeited		(769,471	)		3.24-25.45		(16,841,781	)
Outstanding at December 31, 2000		19,900,911		$	2.66-$29.21	$	347,436,712
Exercisable at December 31, 2000		9,869,561		$	2.66-$28.34	$	122,563,723
Shares available for future grants at December 31, 2000		16,131,050

46 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 47

As of December 31, 2000, the weighted-average exercise price for options outstanding was $17.46 with a weighted average remaining contractual life of 6.4 years. Options exercisable at December 31, 2000 have a weighted-average exercise price of $12.34.

   The Committee may also award restricted shares of common stock and performance units to officers and key employees. The terms of the grants are determined by the Committee at the date of the award. As of December 31, 2000, no awards of restricted shares of common stock or performance units had been made.

15.  Fair Value of Financial Instruments

The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash, Cash Equivalents, Accrued Interest Receivable and Payable and Advance Payments by Borrowers for Taxes and Insurance–The carrying amount as reported in the Consolidated Statements of Financial Condition is a reasonable estimate of fair value.

Mortgage-Backed and Investment Securities–Fair values are based on quoted market prices, dealer quotes and prices obtained from independent pricing services.

Loans and Leases–The fair value is estimated by discounting the future cash flows using the current market rates for loans and leases of similar maturities with adjustments for market and credit risks.

Federal Home Loan Bank Stock–The fair value is estimated to be the carrying value which is par. All transactions in the capital stock of the FHLB are executed at par.

Loan Servicing Assets–The fair value is estimated by discounting the future cash flows using current market rates for mortgage loan servicing with adjustments for market and credit risks.

Deposits–The fair value of demand deposits, savings accounts and money market deposit accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using rates currently offered for advances of similar remaining maturities.

Federal Home Loan Bank Advances, Federal Funds Purchased and Reverse Repurchase Agreements and Other Borrowings– Rates currently available to the Bank for borrowings with similar terms and remaining maturities are used to estimate fair value of existing borrowings and capital securities.

Interest Rate Risk Management Instruments–The fair value is estimated as the difference in the present value of future cash flows between the Company’s existing agreements and current market rate agreements of the same duration.

Forward Commitments–Quoted market prices are utilized to determine fair value disclosures when such prices are available.

   The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2000 and 1999. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

	December 31, 2000				December 31, 1999
	Carrying		Fair		Carrying		Fair
(Dollars in thousands)	Value		Value		Value		Value
Assets:
Cash and cash equivalents	$	531,257	$	531,257	$	693,532	$	693,532
Investment securities		449,215		449,372		542,081		540,485
Mortgage-backed securities		5,593,371		5,618,721		6,100,380		6,102,447
Loans and leases		24,008,174		23,953,841		22,312,850		21,941,497
Federal Home Loan Bank stock		568,377		568,377		471,191		471,191
Accrued interest receivable		165,990		165,990		156,244		156,244
Loan servicing assets		121,735		138,327		118,792		146,649
Liabilities:
Deposits:
Checking, money market and savings accounts		9,428,070		9,428,070		8,565,305		8,565,305
Certificates of deposit		10,177,601		10,213,966		10,508,670		10,430,126
Federal Home Loan Bank advances		9,636,277		9,582,491		9,226,150		9,096,550
Federal funds purchased and reverse repurchase agreements		262,326		262,326		283,297		283,370
Other borrowings		284,808		322,212		232,277		241,798
Advance payments by borrowers for taxes and insurance		60,761		60,761		80,309		80,309
Accrued interest payable		54,499		54,499		95,323		95,323
Off-Balance-Sheet Items:
Interest rate risk management instruments				21,851				(2,925	)
Forward commitments to purchase/sell/originate loans or mortgage-backed securities				843				(17,521	)

NOTES (continued)

16.  Statements of Cash Flows Supplemental Disclosure

Supplemental disclosures of cash flow information are summarized below:

			Year Ended December 31,
(Dollars in thousands)			2000		1999		1998
Supplemental disclosures of cash flow information:
	Cash paid during the year for:
		Interest on deposits and borrowings	$	1,384,485	$	1,170,144	$	1,238,938
		Income taxes		31,296		65,445		59,712
Supplemental schedule of noncash activities:
	Loans exchanged for mortgage-backed securities			3,991,087		3,606,946		1,875,449

17.  Parent Company Financial Information

The summarized financial statements of Charter One (parent company only) as of December 31, 2000 and 1999 and for the three years ended December 31, 2000 are as follows:

Statements of Financial Condition

		December 31,
(Dollars in thousands)		2000			1999
Assets:
Deposits with subsidiary		$	81,655		$	10
Cash equivalents			131			102
Investment in subsidiary, at equity			1,941,579			2,500,241
Securities and other			530,770			53
	Total assets	$	2,554,135		$	2,500,406
Liabilities:
Other borrowings		$	94,284		$	94,322
Accrued expenses and other liabilities			3,647			8,384
	Total liabilities		97,931			102,706
Shareholders’ equity:
Common stock and additional paid-in capital			1,747,359			1,738,850
Retained earnings			786,793			734,510
Treasury stock, at cost			(100,545	)		(65,502	)
Borrowings of employee investment and stock ownership plan			(1,256	)		(3,138	)
Accumulated other comprehensive income			23,853			(7,020	)
	Total shareholders’ equity		2,456,204			2,397,700
	Total liabilities and shareholders’ equity	$	2,554,135		$	2,500,406

Statements of Income

		Year Ended December 31,
(Dollars in thousands)		2000			1999		1998
Income:
Dividends from subsidiary		$	1,022,400		$	145,000	$	180,000
Interest and dividends on securities			17,914			1,347		2,028
Other income			1,238			982		—
	Total income		1,041,552			147,329		182,028
Expenses:
Interest expense			7,022			1,766		—
Administrative expenses			5,663			7,787		4,708
	Total expenses		12,685			9,553		4,708
Income before undistributed net earnings of subsidiary			1,028,867			137,776		177,320
Equity in undistributed net earnings (loss) of subsidiary			(594,905	)		196,200		71,679
Income before extraordinary item			433,962			333,976		248,999
Extraordinary item, net of tax benefit			—			—		4,933
Net income		$	433,962		$	333,976	$	244,066

Statements of Cash Flows

	Year Ended December 31,
(Dollars in thousands)	2000			1999			1998
Cash flows from operating activities:
Net income	$	433,962		$	333,976		$	244,066
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net (earnings) loss of subsidiary		594,905			(196,200	)		(71,679	)
Other		(35,980	)		54,621			(86,189	)
Net cash provided by operating activities		992,887			192,397			86,198
Cash flows from investing activities:
Payments for investments in and advances to subsidiaries		(530,000	)		—			—
Repayment of investments in and advances to subsidiaries		27,000			—			—
Maturity of securities		—			1,000			—
Net cash provided by (used in) investing activities		(503,000	)		1,000			—
Cash flows from financing activities:
Proceeds from long-term borrowings		—			95,104			50,000
Proceeds from issuance of common stock		30,209			24,093			24,937
Payment of dividends on common stock		(144,659	)		(134,328	)		(100,400	)
Net purchases of treasury stock		(293,763	)		(160,381	)		(60,693	)
Net cash used in financing activities		(408,213	)		(175,512	)		(86,156	)
Increase in deposits with subsidiary and cash equivalents	$	81,674		$	17,885		$	42

48 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 49

18.  Earnings Per Share

	Year Ended December 31,
(Dollars in thousands,
except per share data)	2000		1999		1998
Basic earnings per share:
Income before extraordinary item	$	433,962	$	335,530	$	305,724
Average common shares outstanding		213,712,154		223,743,476		224,456,454
Basic earnings per share before extraordinary item	$	2.03	$	1.50	$	1.36
Diluted earnings per share:
Income before extraordinary item	$	433,962	$	335,530	$	305,724
Average common shares outstanding		213,712,154		223,743,476		224,456,454
Add common stock equivalents for shares issuable under
stock option plans		3,879,525		4,994,683		7,031,595
Average common and common equivalent shares outstanding		217,591,679		228,738,159		231,488,049
Diluted earnings per share before extraordinary item	$	2.00	$	1.47	$	1.32

19.  Subsequent Event

On January 23, 2001, Charter One and Alliance Bancorp (“Alliance”), the holding company of Liberty Federal Bank in Hinsdale, Illinois, announced that they executed a definitive agreement for Charter One to acquire Alliance. At December 31, 2000, Alliance had assets of $2.0 billion, deposits of $1.3 billion and operated 19 branch offices in the metropolitan Chicago area. The agreement provides for common shareholders of Alliance to receive $5.25 in cash and 0.72 shares of Charter One common stock for each Alliance share. It is expected that approximately 6.7 million shares of Charter One common stock will be issued in conjunction with the merger. It is also expected that all outstanding Alliance options will be exchanged for the equivalent Charter One options. This results in an initial transaction value of approximately $245 million. The merger, which will be treated as a tax-free reorganization under Section 368 of the Internal Revenue Code and accounted for as a purchase, is expected to close early in the third quarter of 2001. The transaction has been approved by the Boards of Directors of both companies and is subject to approval by the OTS, the FRB, and Alliance’s shareholders.

INDEPENDENT AUDITORS’ REPORT

[Deloitte & Touche Logo]

To the Shareholders
and Board of Directors
Charter One Financial, Inc.

We have audited the accompanying consolidated statements of financial condition of Charter One Financial, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of Charter One Financial, Inc. and St. Paul Bancorp, Inc., which has been accounted for as a pooling of interests as described in Note 2 to the consolidated financial statements. We did not audit the statements of income, shareholders’ equity, and cash flows of St. Paul Bancorp, Inc. for the year ended December 31, 1998, which statements reflect net income of $28.7 million for the year ended December 31, 1998. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for St. Paul Bancorp, Inc. for 1998, is based solely on the report of such other auditors.

  We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

  In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Charter One Financial, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Cleveland, Ohio
January 23, 2001

FORM 10-K

This Annual Report includes the materials required in our Form 10-K filed with the SEC. The integration of the two documents gives our shareholders and other interested parties timely, efficient and comprehensive information on our financial condition and results of operations for the year ended December 31, 2000. Portions of this Annual Report are not required by the Form 10-K report and are not filed as part of the Company’s Form 10-K filed with the SEC. Only those portions of this Annual Report referenced in the cross-reference index are incorporated in the Form 10-K filed with the SEC. The report has not been approved or disapproved by the SEC, nor has the SEC passed upon its accuracy or adequacy.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

  Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2000.

OR

  Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from          to         .

Commission file number 001-15495

CHARTER ONE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	34-1567092 (I.R.S. Employer Identification No.)
1215 Superior Avenue, Cleveland, Ohio (Address of principal executive offices)	44114 (Zip Code)

(Registrant’s telephone number, including area code): (216) 566-5300

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock ($0.01 par value), including related preferred stock purchase rights
(Title of Each Class) New York Stock Exchange
(Name of Each Exchange on which Registered)

Securities Registered Pursuant to Section 12(g) of the Act:

None

(Title of Class)

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         NO     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

The aggregate market value of the common stock held by non-affiliates of the registrant as of February 23, 2001 was $5,577,885,934. For this purpose, the following holders are considered affiliates: directors and executive officers of Charter One Financial, Inc. The number of shares outstanding of the registrant’s sole class of common stock as of February 23, 2001 was 208,533,867.

Portions of the registrant’s proxy statement for the April 18, 2001 Annual Meeting of Shareholders are incorporated by reference in Part III.

50 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 51

Form 10-K Cross Reference Index

Item
Number			Pages
Part I
	Item  1  —	Business	51-52
	Item  2  —	Properties	52-53
	Item  3  —	Legal Proceedings	53
	Item  4  —	Submission of Matters to a Vote of Security Holders — Not Applicable
Part II
	Item  5  —	Market for Registrant’s Common Equity and Related Shareholder Matters	28-29
	Item  6  —	Selected Financial Data	18-19
	Item  7  —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-30
	Item  7A —	Quantitative and Qualitative Disclosure About Market Risk	27-28
	Item  8  —	Financial Statements and Supplementary Data	31-49
	Item  9  —	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures — Not Applicable
Part III
	Item  10  —	Directors and Executive Officers of the Registrant — Note  (1)
	Item  11  —	Executive Compensation — Note (1)
	Item  12  —	Security Ownership of Certain Beneficial Owners and Management — Note (1)
	Item  13  —	Certain Relationships and Related Transactions — Note (1)
Part IV
	Item  14  —	Exhibits, Financial Statement Schedules and Reports on Form  8-K	31-49
	Signatures		54
Exhibits — The index of exhibits has been filed as separate pages of the 2000 Form 10-K and is available to shareholders on request from the Registrant’s Investor Relations Department. Copies of the exhibits may be obtained at a cost of 30 cents per page.
Financial Statement Schedules — All financial statement schedules are omitted because the required information is not applicable or is included in the Consolidated Financial Statements or related notes.
Reports on Form 8-K — None

Note(1) — Incorporated by reference from the Registrant’s Proxy Statement for the April  18, 2001 Annual Meeting of Shareholders. None of the foregoing incorporation by reference shall include the information referred to in Item 306 or Item 402(a)(8) of Regulation S-K.

Item 1. Business

Headquartered in Cleveland, Ohio, Charter One Financial, Inc., hereafter referred to as “Charter One” or the “Registrant,” is a financial holding company. Charter One’s principal line of business is consumer banking which is primarily conducted through the operations of Charter One Bank, F.S.B. and its subsidiaries. The executive offices of Charter One are located at 1215 Superior Avenue, Cleveland, Ohio 44114, and the telephone number is (216) 566-5300. See Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) – “Holding Company Business” and “Acquisitions” set forth in Item 7 of this Form 10-K and Note 1 to the Consolidated Financial Statements set forth in Item 8 of this Form 10-K for additional discussion of Charter One’s business.

   Charter One has a long history of completing mergers and acquisitions, which have had a significant effect on its business. See Note 2 to the Notes to Consolidated Financial Statements set forth in Item 8 of this Form 10-K for a discussion of the impact of recent business combinations and asset acquisitions.

Market Area and Competition

As of December 31, 2000, Charter One was ranked among the 30 largest bank holding companies in the country and operated through numerous banking offices: 112 in Ohio (under the name Charter One Bank), 91 in Michigan (under the name First Federal of Michigan), 124 in New York (under the name Charter One Bank or Charter One Commercial), 57 in Illinois (under the name St. Paul Federal Bank for Savings) and 26 in Vermont and 9 in Massachusetts (under the name of Charter One Bank). Based on 2000 data, the counties served by the Bank include approximately 36% of the population of Ohio, 55% of Michigan, 50% of New York (excluding New York City), 65% of Illinois, 80% of Vermont and 10% of Massachusetts.

   The consumer banking business is highly competitive. Charter One competes actively with consumer and commercial banks, savings and loans, mortgage bankers and other financial service entities.

Regulation

As a financial holding company, Charter One is subject to regulation by the Federal Reserve Board. Charter One is required to file reports with the Federal Reserve Board and is subject to regular inspections by that agency. Financial holding companies may engage in a broad array of banking, insurance and securities activities. The insurance activities include both underwriting and agency activities, as well as title insurance activities, and are generally subject to state law licensing requirements. However, state anti-affiliation laws have been generally preempted. The securities activities include both underwriting and agency activities. Aside from activities expressly permitted under the Gramm-Leach-Bliley Act, financial holding companies may engage in activities which the Federal Reserve Board in consultation with, and with the non-objection of, the U.S. Treasury Department, determines to be (i) financial in nature or (ii) incidental to a financial activity, or activities which the Federal Reserve Board determines on its own to be “complementary” to a financial activity without posing a substantial risk to the safety and soundness of the depository institution or the financial system generally. With the exception of our minor real estate development activities, the list of permissible activities includes all current operations of Charter One.

We intend to comply with the Federal Reserve Board’s divestiture orders with respect to these real estate development activities, the time period for which may be extended under the law.

   As a federally chartered savings bank and a member of the Federal Home Loan Bank System, Charter One Bank remains subject to supervision, regulation and examination by its primary regulator, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.

   As a New York chartered commercial bank, Charter One Commercial is subject to supervision, regulation and examination by the Federal Deposit Insurance Corporation and the New York State Banking Department.

   See MD&A — “Capital and Dividends” set forth in Item 7 of this Form 10-K, and Note 12 to the Notes to Consolidated Financial Statements set forth in Item 8 of this Form 10-K, for a discussion of the regulatory capital calculations and compliance with regulatory capital requirements as well as regulatory restrictions on cash dividends.

Executive Officers

Executive Officers of the Registrant. The executive officers of Charter One, each of whom is currently an executive officer of Charter One Bank, are identified below. The executive officers of Charter One are appointed annually by its Board of Directors to serve until the next annual election of officers following the annual meeting of shareholders.

	Age at
	December 31,			Officer
Name	2000		Position	Since
Charles John Koch		54	Chairman of the Board, President and Chief Executive Officer		1987
Mark D. Grossi		47	Executive Vice President		1992
John David Koch		48	Executive Vice President		1987
Richard W. Neu		44	Executive Vice President and Chief Financial Officer		1995
Robert J. Vana		50	Senior Vice President, Chief Corporate Counsel and Corporate Secretary		1987

   Charles John Koch has been President of Charter One Bank since 1980 and was Chief Operating Officer of Charter One from 1980 to 1988, when he was appointed Chief Executive Officer of Charter One. In February 1995, he was appointed Chairman of the Board of Charter One and of Charter One Bank. Mr. Koch is the brother of John David Koch.

   Mark D. Grossi is an Executive Vice President of Charter One and of Charter One Bank, and has been responsible for retail banking and branch administration since Charter One’s merger with First American Savings Bank in 1992.

   John David Koch joined Charter One Bank in 1982 and is Executive Vice President of Charter One and of Charter One Bank. Mr. Koch is responsible for the credit and lending functions of Charter One Bank and has management responsibility for numerous subsidiary corporations. Mr. Koch is the brother of Charles John Koch.

   Richard W. Neu is Executive Vice President and Chief Financial Officer of Charter One and Charter One Bank. He joined Charter One in 1995 following Charter One’s merger with FirstFed Michigan Corporation. Prior to the merger he had served as FirstFed’s Executive Vice President and Chief Financial Officer.

   Robert J. Vana has been Chief Corporate Counsel and Corporate Secretary of Charter One since 1988 and joined Charter One Bank as Senior Vice President and Corporate Secretary in 1982.

Item 2. Properties

The executive offices of Charter One and Charter One Bank are located at 1215 Superior Avenue, Cleveland, Ohio in a seven-story office building owned by Charter One. Charter One Bank also maintains an operations center in a single-story building owned by the Bank and located in Cleveland, Ohio. The Bank owns various other office buildings including a 15-story office building in Cleveland, Ohio, two four-story office buildings in Rochester, New York, a two-story and three-story building in Albany, New York, a nine-story office building in Toledo, Ohio, a four-story office building in downtown Canton, Ohio, two two-story buildings in Michigan and two two-story office buildings, a three-story office building and a four-story office building in metropolitan Chicago, Illinois. Most buildings include space for a branch office and various divisional administrative functions, with any remaining space leased to tenants.

52 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE 53

   As of December 31, 2000, in addition to the Bank’s 419 banking locations, Charter One Bank and its subsidiaries operated 32 loan production offices in 11 states. At December 31, 2000, Charter One Bank owned 234 of these banking facilities and leased the remainder. We operate 913 ATMs at various banking offices and are a member of the Money Access Center System (“MAC”), which provides our customers access to ATMs nationwide. The lease terms for branch offices are not individually material. Terms range from monthly to seven years.

Item 3. Legal Proceedings

Charter One and its subsidiaries are involved as plaintiff or defendant in various actions incident to their business, none of which is believed to be material to the financial condition of Charter One, except as discussed below.

   Prior to the merger with FirstFed Michigan Corporation in 1995, Charter One and FirstFed each filed a lawsuit against the United States based upon the breach of certain agreements between Charter One and First Federal, respectively, and the government involving supervisory goodwill and capital credits in the aggregate amount of approximately $126 million. First Federal of Michigan v. United States, No. 95-464C was filed in the United States Court of Federal Claims on July 20, 1995. Charter One Bank, F.S.B. v. United States, No. 95-528C was filed in the same court on August 8, 1995. These actions, claiming damages for the government’s breach of four separate contractual agreements, have been consolidated and the case is proceeding under docket number 95-464C pursuant to the terms of a case management order entered by the court to govern all similar goodwill contract cases. Pursuant to that order, Charter One filed motions for summary judgment on liability as to the four contractual agreements at issue. These motions are currently pending. As of January 2001, the court had granted summary judgment on liability in favor of ten thrifts.

   The status of the litigation is dependent to some degree upon factors which are out of the control of Charter One, including, but not limited to, the outcome of the appeals in Glendale Federal Bank v. U.S. (see below) and other cases in the Court of Appeals for the Federal Circuit. On July 1, 1996, the United States Supreme Court affirmed the Court of Federal Claims’ finding that the government had breached contractual agreements with Glendale and with Statesman (in Statesman Savings Bank v. U.S.) by reversing its prior agreements to recognize supervisory goodwill and capital credits as assets includible in regulatory capital. Glendale and Statesman were remanded to the Court of Federal Claims for trials on damages. The Glendale damages trial concluded in 1998 before Chief Judge Smith. The Statesman case settled during trial.

By 2001, the Court of Federal Claims had issued damages decisions in seven cases. In these seven cases, the court accepted and rejected various damages claims by the respective thrift plaintiffs. The Court of Federal Claims’ damages awards were: Glendale case, $909 million; CalFed case, $23 million; LaSalle Talman case, $5 million; Landmark case, $21.5 million to the shareholder plaintiff and $17.7 million to the FDIC as receiver; Glass case, $3.9 million to the shareholder plaintiffs and $2.1 million to the FDIC; Castle case, $15 million to the shareholder plaintiffs and no award to the FDIC; Bluebonnet case, no award (based on the failure of proof). The MACO Bancorp case settled before trial. All of the damages decisions have been appealed to the Court of Appeals for the Federal Circuit, and, except for Glendale (as noted below), are still pending. The United States appealed the Court of Federal Claims liability ruling in the California Federal Bank case to the Federal Circuit.

   On February 16, 2001, the Federal Circuit issued its damages decision in Glendale, reversing the award of restitution to Glendale and remanding the case back to the Court of Federal Claims for an award of damages under a reliance theory. The Federal Circuit stated that reliance damages are losses actually sustained as a result of a breach of contract, and are “available for injuries resulting from activities that occurred either before or after the breach.” The Court noted that the Court of Federal Claims’ $909 million award to Glendale had included $380 million of post-breach “wounded bank” reliance damages. The Court declined to conduct a “piecemeal review” of the specific items of such reliance damages, stating that it would review that issue in any future appeal of the lower court’s overall reliance damages award after remand. In its cross-appeal, Glendale had asked the Federal Circuit to award it $863 million in total reliance damages in the event that the restitution award was reversed. The Federal Circuit also declined to address the issues presented by the cross-appeal at this time.

   Pursuant to the case management order, damages trials in two other pending cases have been completed and are awaiting decision. Due to the number of pending cases, the order provides for a sequencing process whereby 30 cases proceed to pretrial discovery in a given calendar year and thereafter to trial. Pretrial discovery in Charter One’s case will begin at the earliest in the spring of 2001. Given the pendency of the other related cases, and the uncertainty inherent in the litigation, Charter One is not able to estimate either the time frame for resolution of its claims, or the final outcome of its litigation against the government, including the damages, if any, which could be awarded if Charter One ultimately prevails on liability issues.

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Cleveland, State of Ohio, as of March 12, 2001.

CHARTER ONE FINANCIAL, INC.

By: Charles John Koch

Director, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and as of the date indicated above.

Charles John Koch

(Principal Executive Officer)

Director, President and Chief Executive Officer

Richard W. Neu

(Principal Financial and Accounting Officer)

Director, Executive Vice President and Chief

Financial Officer

Patrick J. Agnew, Director

Herbert G. Chorbajian, Director

Phillip Wm. Fisher, Director

Denise Marie Fugo, Director

Mark D. Grossi, Director, Executive Vice President

Charles M. Heidel, Director

Karen R. Hitchcock, Director

John D. Koch, Director, Executive Vice President

Michael P. Morley, Director

Henry R. Nolte, Jr., Director

Ronald F. Poe, Director

Victor A. Ptak, Director

Melvin J. Rachal, Director

Jerome L. Schostak, Director

Joseph C. Scully, Director

Mark Shaevsky, Director

Leonard S. Simon, Director

John P. Tierney, Director

Eresteen R. Williams, Director

54 CHARTER ONE FINANCIAL, INC.

WE’RE THE ONE

CHARTER ONE FINANCIAL, INC., CORPORATE DIRECTORY

DIRECTORS AND
EXECUTIVE OFFICERS

CHARLES JOHN KOCH⁽²⁾
Chairman, President and
Chief Executive Officer,
Charter One Financial, Inc.
and Charter One Bank, F.S.B.

PATRICK J. AGNEW
Former President and
Chief Operating Officer,
St. Paul Bancorp, Inc.
Chicago, Illinois

HERBERT G. CHORBAJIAN⁽¹⁾
Vice Chairman,
Charter One Financial, Inc.
and former Chairman, President
and Chief Executive Officer,
ALBANK Financial Corporation
Albany, New York

PHILLIP WM. FISHER
Principal of The Fisher Group
Detroit, Michigan

DENISE MARIE FUGO
President of City Life, Inc.
Cleveland, Ohio

MARK D. GROSSI⁽²⁾
Executive Vice President,
Charter One Financial, Inc.
and Charter One Bank, F.S.B.

CHARLES M. HEIDEL
Retired President and
Chief Operating Officer,
The Detroit Edison Company
Detroit, Michigan

KAREN R. HITCHCOCK, PH.D.⁽²⁾
President, University at Albany
Albany, New York

JOHN D. KOCH⁽²⁾
Executive Vice President,
Charter One Financial, Inc.
and Charter One Bank, F.S.B.

MICHAEL P. MORLEY
Executive Vice President and
Chief Administrative Officer,
Eastman Kodak Company
Rochester, New York

RICHARD W. NEU^(2,3)
Executive Vice President
and Chief Financial Officer,
Charter One Financial, Inc.
and Charter One Bank, F.S.B.

HENRY R. NOLTE, JR.
Of Counsel to Miller,
Canfield, Paddock and Stone
Detroit, Michigan, and
Retired Vice President
and General Counsel,
Ford Motor Company
Dearborn, Michigan

RONALD F. POE
President,
Ronald F. Poe & Associates
White Plains, New York

VICTOR A. PTAK
Vice President/
Investment Officer,
First Union Securities,
and formerly General Partner
of J.C. Bradford
Cleveland, Ohio

MELVIN J. RACHAL
President and
Chief Operating Officer,
Midwest Stamping, Inc.
Maumee, Ohio

JEROME L. SCHOSTAK
Vice Chairman,
Charter One Financial, Inc.
and Chairman of the Board
and Chief Executive Officer,
Schostak Brothers &
Company, Inc.
Southfield, Michigan

JOSEPH C. SCULLY
Former Chairman and
Chief Executive Officer,
St. Paul Bancorp, Inc.
Chicago, Illinois

MARK SHAEVSKY
Partner,
Honigman Miller
Schwartz and Cohn
Detroit, Michigan

LEONARD S. SIMON
Vice Chairman,
Charter One Financial, Inc.
and former Chairman and
Chief Executive Officer,
RCSB Financial, Inc.
Rochester, New York

JOHN P. TIERNEY
Retired Chairman and
Chief Executive Officer,
Chrysler Financial Corporation
Detroit, Michigan

ERESTEEN R. WILLIAMS
Retired Medical Office Manager
Detroit, Michigan

SHAREHOLDER
INFORMATION

ANNUAL MEETING
The annual meeting of shareholders
of Charter One Financial, Inc. will be
held at 11 a.m. local time, Wednesday,
April 18, 2001 at The Forum Conference
Center in Cleveland, Ohio.

DIRECT MAILING OF ANNUAL REPORT
Shareholders whose common stock is
held in a brokerage account or otherwise not
in their own name may wish to
receive copies of Charter One’s
shareholder reports directly. Requests
may be made through the corporate
website, www.charterone.com, or mailed to the
Investor Relations Department.

DIVIDEND POLICY AND
DIVIDEND REINVESTMENT PLAN
A corporate objective of Charter One
is to allow shareholders to benefit from the growth of Charter One through
the payment of quarterly cash dividends. Dividends have been paid each quarter
since October 1988. Charter One has established a Dividend Reinvestment
Plan to enable shareholders to purchase additional shares. Information on the
plan may be obtained from the corporate website, www.charterone.com, or from
the Transfer Agent.

STOCK TRADING INFORMATION
Common stock of Charter One
Financial, Inc. is traded on the
New York Stock Exchange under
the trading symbol “CF.”

TRANSFER AGENT
EquiServe
Shareholder Services Department
P. O. Box 43010
Providence, RI 02940
(800) 733-5001
www.equiserve.com

DIRECTORS EMERITI

Charles Joseph Koch
  Chairman Emeritus
Eugene B. Carroll, Sr.
Dr. Norman P. Auburn
Otty J. Cerny
Charles F. Ipavec
George M. Jones
Philip J. Meathe
Fred C. Reynolds
Charles A. Shirk

CORPORATE
INFORMATION

CORPORATE WEBSITE
www.charterone.com

INVESTOR RELATIONS
(800) 262-6301
Ellen L. Batkie
Senior Vice President
(734) 453-7334

CORPORATE MARKETING
AND COMMUNICATIONS
Cindy Schulze
Senior Vice President
(216) 298-7155

INDEPENDENT AUDITORS
Deloitte & Touche LLP
127 Public Square
Suite 2500
Cleveland, Ohio 44114-1303
(216) 589-1300

LEGAL COUNSEL: INTERNAL
Robert J. Vana
Chief Corporate Counsel
and Secretary

LEGAL COUNSEL: EXTERNAL
LaPorte & Ipavec, L.P.A.
1215 Superior Avenue
Cleveland, Ohio 44114

HEADQUARTERS
1215 Superior Avenue
Cleveland, Ohio 44114
(216) 566-5300

(1)	Chairman and President, Charter One Commercial
(2)	Director, Charter One Commercial
(3)	Executive Vice President and Chief Financial Officer, Charter One Commercial

Design: Edward Howard & Co.

Online Banking [LOGO]

www.charterone.com
Charter One Financial, Inc. 1215 Superior Avenue Cleveland, Ohio 44114

338-AR-01

INDEX TO EXHIBITS

EXHIBIT
NUMBER	DESCRIPTION
3.1	Registrant’s Second Restated Certificate of Incorporation, as amended and currently in effect.
3.2	Registrant’s Bylaws, as amended and restated and currently in effect, filed as Exhibit 3.2 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 0-16311), is incorporated herein by reference.
4.1	Form of Certificate of Common Stock, as currently in effect.
4.2	Amended and Restated Stockholder Protection Rights Agreement, dated October 20, 1999, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.), as rights agent, filed as Exhibit 2 to the Company’s Registration Statement on Form 8-A/A filed on October 28, 1999 (File No. 0-16311), is incorporated herein by reference.
10.1	Registrant’s Long-Term Stock Incentive Plan, filed on January 22, 1988 as Exhibit 10.1 to Registrant’s Registration Statement on Form S-1 (File No. 33-16207), is incorporated herein by reference.
10.2	Registrant’s Directors’ Stock Option Plan, filed on January 22, 1988 as Exhibit 10.2 to Registrant’s Registration Statement on Form S-1 (File No. 33-16207), is incorporated herein by reference.
10.3	Charter One Bank, F.S.B. Executive Incentive Goal Achievement Plan, filed as Exhibit 10.8 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-16311), is incorporated herein by reference.
10.4	First American Savings Bank, F.S.B. Nonqualified Retirement Plan and First Amendment thereto, filed as Exhibit 10.17 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-16311), are incorporated herein by reference.
10.5	FirstFed Michigan Corporation 1983 Stock Option Plan, filed on November 1, 1995 as an exhibit to Registrant’s Registration Statement on Form S-8 (File No. 33-61273), is incorporated herein by reference.
10.6	FirstFed Michigan Corporation 1991 Stock Option Plan, filed on November 1, 1995 as an exhibit to Registrant’s Registration Statement on Form S-8 (File No. 33-61273), is incorporated herein by reference.
10.7	Amendment 1, dated May 3, 1996, to Forms of Supplemental Retirement Agreements, dated October 31, 1995, between Charter One and Charles John Koch, Richard W. Neu, John David Koch, Mark D. Grossi, and Robert J. Vana are filed herein. The Agreements, originally filed on July 25, 1995 as Exhibits 10.4 and 10.5 to Registrant’s Registration Statement on Form S-4 (File No. 33-61273), are incorporated herein by reference.
10.8	Amended and Restated Employment Agreements, effective August 1, 1999, between Charter One Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and Robert J. Vana filed as Exhibit 10.8 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 0-16311), is incorporated herein by reference.
10.9	Form of Employment Agreement between Charter One and Leonard S. Simon, filed on August 8, 1997 as Exhibit 10.14 to Registrant’s Registration Statement on Form S-4 (File No. 333-33259), is incorporated herein by reference.
10.10	Charter One Financial, Inc. 1997 Stock Option and Incentive Plan, filed on December 19, 1997, as an exhibit to Registrant’s Registration Statement on Form S-8 (File No. 333-42823), is incorporated herein by reference.
10.11	1986 Stock Option Plan of RCSB Financial, Inc., filed on October 8, 1997, as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33259), is incorporated herein by reference.

EXHIBIT
NUMBER	DESCRIPTION
10.12	1992 Stock-Based Compensation Plan of RCSB Financial, Inc., filed on October 8, 1997, as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33259), is incorporated herein by reference.
10.13	Home Federal Savings Bank Stock Compensation Program, filed on September 29, 1997 as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33169), is incorporated herein by reference.
10.14	Haverfield 1995 Stock Option Plan, filed on September 29, 1997 as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33169), is incorporated herein by reference.
10.15	The RCSB Financial, Inc. Non-Employee Director Deferred Compensation Plan, as amended and restated on December 1, 1998, filed as Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 0-16311), is incorporated herein by reference.
10.16	ALBANK Financial Corporation 1992 Stock Incentive Plan for Key Employees, as amended and restated as of December 18, 1995, filed as Exhibit 10.11 to ALBANK’s Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-19843), is incorporated herein by reference.
10.17	ALBANK Financial Corporation 1995 Stock Incentive Plan for Outside Directors, filed as Exhibit 10.12.1 to ALBANK’s Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-19843), is incorporated herein by reference.
10.18	ALBANK Financial Corporation 1992 Stock Incentive Plan for Outside Directors, filed as an appendix to the Proxy Statement for the 1992 Annual Meeting of the Stockholders of ALBANK held on October 26, 1992, is incorporated herein by reference.
10.19	Employment Agreement, dated November 30, 1998, between Charter One Financial, Inc. and Herbert G. Chorbajian, filed as Exhibit 10.20 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 0-16311), is incorporated herein by reference.
10.20	Charter One Financial, Inc. Top Executive Incentive Goal Achievement Plan, filed on October 1, 1998 as Annex E to the Prospectus contained in the Registrant’s Registration Statement on Form S-4 (File No. 333-65137), is incorporated herein by reference.
11	Statement Regarding Computation of Per Share Earnings
21	Subsidiaries of the Registrant
23.1	Consent of Deloitte & Touche LLP (as auditors for the Registrant)
23.2	Consent of Ernst & Young LLP (as auditors for St. Paul Bancorp, Inc.)
99.1	Independent Auditors’ Report from Ernst & Young LLP (as auditors for St. Paul Bancorp, Inc.)

EX-3.1

   1
EXHIBIT 3.1


                  SECOND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                           CHARTER ONE FINANCIAL, INC.


         CHARTER ONE FINANCIAL, INC. (the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware,
hereby certifies as follows:

         1. The name of the Corporation is CHARTER ONE FINANCIAL, INC. The date
of filing of its original Certificate of Incorporation with the Secretary of
State was July 21, 1987. The date of filing of its first Restated Certificate of
Incorporation with the Secretary of State was October 1, 1987.

         2. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended to read as herein set forth in full:

                  FIRST: Corporate Title. The name of the Corporation is Charter
         One Financial, Inc. (the "Corporation").

                  SECOND: Registered Office. The address of the Corporation's
         registered office in the State of Delaware is Corporation Trust Center,
         No. 1209 Orange Street, City of Wilmington, County of New Castle. The
         name of its registered agent at that address is The Corporation Trust
         Company.

                  THIRD: Purpose. The purpose of the Corporation is to engage in
         any lawful act or activity for which corporations may be organized
         under the General Corporation Law of the State of Delaware (the
         "Delaware Corporation Law").

                  FOURTH: A. Authorized Shares. The total number of shares of
         all classes of stock which the Corporation shall have authority to
         issue is two hundred million (200,000,000), of which one hundred eighty
         million (180,000,000) shall be common stock, par value $.01 per share,
         and twenty million (20,000,000) shall be preferred stock, par value
         $.01 per share. The number of authorized shares of preferred stock may
         be increased or decreased (but not below the number of shares thereof
         then outstanding) by the affirmative vote of a majority of the stock of
         the Corporation entitled to vote generally in the election of directors
         without a vote of holders of preferred stock as a class, except to the
         extent that any such vote may be required by any resolution providing
         for the issuance of series of preferred stock.
   2



                  B. Common Stock. Except as provided in this Article FOURTH (or
         in any resolution adopted by the Board of Directors pursuant hereto),
         the holders of the common stock shall exclusively possess all voting
         power. Except as provided in Article FIFTH and Article SIXTH, each
         holder of shares of common stock shall be entitled to one vote for each
         share held by such holder on all matters submitted to a vote of the
         common stockholders, including the election of directors. There shall
         be no cumulative voting rights in the election of directors.

                  C. Preferred Stock. The shares of preferred stock may be
         issued from time to time in one or more series. The Board of Directors
         is hereby expressly authorized to fix and determine by resolution or
         resolutions adopted by a majority of the Board, including a majority of
         the Continuing Directors, the number of shares of each series of
         preferred stock and the designation thereof; any voting and other
         powers, preferences, and relative, participating, optional or other
         special rights, including the number of votes, if any, per share, and
         such qualifications, limitations or restrictions on any such powers,
         preferences and rights as shall be stated in the resolution or
         resolutions providing for the issue of the series. The authority of the
         Board of Directors with respect to each series of preferred stock
         shall, without limitation, include the determination, in accordance
         with the Delaware Corporation Law and to the full extent permitted
         thereby, of all aspects of any dividend rights, dividend rates,
         conversion rights and terms, voting rights including the number of
         votes, if any, per share under various conditions, redemption rights
         and terms including any sinking fund provisions, redemption price(s)
         and terms, and rights in the event of liquidation, dissolution or
         distribution of assets. Subject to any limitations or restrictions
         stated in the resolution or resolutions of the Board of Directors
         originally fixing the number of shares constituting a series, the Board
         of Directors may by resolution or resolutions likewise adopted by a
         majority of the Board, including a majority of the Continuing
         Directors, increase or decrease (but not below the number of shares of
         the series then outstanding) the number of shares of the series
         subsequent to the issue of shares of that series; and in case the
         number of shares of any series shall be so decreased, the shares
         constituting the decrease shall resume that status which they had prior
         to the adoption of the resolution originally fixing the number of
         shares.

                  FIFTH: A. Certain Definitions. For purposes of this
         Certificate of Incorporation:

                                       2
   3

                           (i) "Affiliate" and "Associate" shall have the
                  respective meanings ascribed to such terms under Rule 12b-2 of
                  the General Rules and Regulations under the Securities
                  Exchange Act of 1934, as amended (the "Exchange Act") as in
                  effect on the date of the original filing of this Certificate
                  of Incorporation; provided, however, that the Continuing
                  Directors of the Corporation, the officers and employees of
                  the Corporation and its Subsidiaries, the directors of
                  Subsidiaries of the Corporation, the Corporation and its
                  Subsidiaries, the employee benefit plans of the Corporation
                  and its Subsidiaries, entities organized or established by the
                  Corporation or any Subsidiary thereof pursuant to the terms of
                  such plans, and trustees and fiduciaries with respect to such
                  plans acting in such capacity shall not be deemed to be
                  Affiliates or Associates of each other solely by virtue of
                  their being directors, officers, employees or Beneficial
                  Owners of securities of the Corporation or any Subsidiary
                  thereof or by virtue of such Continuing Directors of the
                  Corporation, such officers and employees of the Corporation
                  and its Subsidiaries and such directors of Subsidiaries of the
                  Corporation being fiduciaries or beneficiaries of an employee
                  benefit plan of the Corporation or a Subsidiary of the
                  Corporation.

                           (ii) A Person shall be considered the "Beneficial
                  Owner" of any security (whether or not owned of record):

                                    (a) with respect to which such Person or any
                  Affiliate or Associate of such Person directly or indirectly
                  has or shares (i) voting power, including the power to vote or
                  to direct the voting of such securities and/or (ii) investment
                  power, including the power to dispose of or to direct the
                  disposition of such security;

                                    (b) which such Person or any Affiliate or
                  Associate of such Person has (i) the right or obligation to
                  acquire (whether such right or obligation is exercisable
                  immediately or only after the passage of time) pursuant to any
                  agreement, arrangement or understanding (whether or not in
                  writing) or upon the exercise of conversion rights, exchange
                  rights, warrants or options, or otherwise, and/or (ii) the
                  right to vote pursuant to any agreement, arrangement or
                  understanding (whether or not in writing and whether or not
                  such right is exercisable immediately or only after the
                  passage of time); or

                                    (c) which is Beneficially Owned within the
                  meaning of (a) or (b) of this paragraph by any other

                                       3
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                  Person with which such first-mentioned Person or any of its
                  Affiliates or Associates has any agreement, arrangement or
                  understanding (whether or not in writing), with respect to (x)
                  acquiring, holding, voting or disposing of such security or
                  any security convertible into or exchangeable or exercisable
                  for such security, or (y) acquiring, holding or disposing of
                  all or substantially all of the assets or businesses of the
                  Corporation or a Subsidiary of the Corporation.

                  For the purpose only of determining whether a Person is the
                  Beneficial Owner of a percentage specified in this Certificate
                  of Incorporation of the outstanding shares of a class of
                  security, such shares shall be deemed to include any shares of
                  such class of security which may be issuable pursuant to any
                  agreement, arrangement or understanding or upon the exercise
                  of conversion rights, exchange rights, warrants, options or
                  otherwise and which are deemed to be Beneficially Owned by
                  such Person pursuant to the foregoing provisions of this
                  paragraph.

                           (iii) "Beneficially Owned" or "Beneficial Ownership"
                  with reference to any security shall mean any security as to
                  which a Person is the Beneficial Owner.

                           (iv) "Continuing Director" shall mean any member of
                  the Board of Directors of the Corporation who is not a Related
                  Person or an Affiliate or Associate of a Related Person and
                  who was a member of the Board of Directors prior to the first
                  time that a Person became a Related Person, and any successor
                  to a director if such successor is designated (before his or
                  her initial election as a director) as a Continuing Director
                  by a majority of Continuing Directors who are then members of
                  the Board of Directors. If the total number of Continuing
                  Directors, as defined in the preceding sentence, constitutes
                  less than one-third (1/3) of the members of the Board of
                  Directors then in office, "Continuing Director" shall mean any
                  member of the Board of Directors.

                                       4
   5

                           (v) "Person" means any individual, corporation,
                  partnership, bank, association, joint stock company, trust,
                  syndicate, unincorporated organization or similar company, or
                  a group of "persons" acting or agreeing to act together for
                  the purpose of acquiring, holding, voting or disposing of
                  securities of the Corporation, including any group of
                  "persons" seeking to combine or pool their voting or other
                  interests in the securities of the Corporation for a common
                  purpose, pursuant to any contract, understanding,
                  relationship, agreement or other arrangement, whether written
                  or otherwise. Notwithstanding the foregoing, no one or more
                  Continuing Directors shall be deemed to be a group of persons
                  acting or agreeing to act together for the purpose of voting
                  securities of the Corporation by virtue of proxies granted to
                  them by a stockholder of the Corporation. In addition, the
                  Continuing Directors of the Corporation, the officers and
                  employees of the Corporation and its Subsidiaries, the
                  directors of Subsidiaries of the Corporation, the employee
                  benefit plans of the Corporation and its Subsidiaries,
                  entities organized or established by the Corporation or any
                  Subsidiary thereof pursuant to the terms of such plans, and
                  trustees and fiduciaries with respect to such plans acting in
                  such capacities shall not be deemed to be a group with respect
                  to their Beneficial Ownership of Voting Stock of the
                  Corporation solely by virtue of their being such directors,
                  officers or employees of the Corporation and its Subsidiaries
                  or by virtue of such Continuing Directors of the Corporation,
                  such officers and employees of the Corporation and its
                  Subsidiaries and such directors of Subsidiaries of the
                  Corporation being fiduciaries or beneficiaries of any employee
                  benefit plan of the Corporation or a Subsidiary of the
                  Corporation.

                           (vi) "Related Person" shall mean any Person (other
                  than the Corporation, Subsidiaries of the Corporation,
                  pension, profit sharing, employee stock ownership or other
                  employee benefit plans of the Corporation and its
                  Subsidiaries, entities organized or established by the
                  Corporation or any Subsidiary of the Corporation pursuant to
                  the terms of such plans and trustees of or fiduciaries with
                  respect to such plans acting in such capacity) that purports,
                  or is deemed, to be the Beneficial Owner of twenty percent
                  (20%) (but for purposes of Article TENTH such percentage shall
                  be ten percent (10%)) or more of the issued and outstanding
                  shares of Voting Stock of the Corporation without giving
                  effect to the provisions of paragraph A of this Article SIXTH.
                  Notwithstanding the foregoing, except as used in Article
                  TENTH, the term "Related Person" shall not include any Person
                  acquiring

                                       5
   6

                  Beneficial Ownership of shares of Voting Stock of the
                  Corporation in excess of twenty percent (20%) of the issued
                  and outstanding shares of Voting Stock of the Corporation if
                  (i) the acquisition of Beneficial Ownership of such shares in
                  excess of twenty percent (20%) of the issued and outstanding
                  shares of Voting Stock of the Corporation was approved in
                  advance by a majority of the Continuing Directors, or (ii)
                  Beneficial Ownership of such excess shares was acquired at any
                  time directly from the Corporation or a Subsidiary of the
                  Corporation pursuant to an agreement with the Corporation or a
                  Subsidiary of the Corporation.

                           (vii) "Savings Bank" means Charter One Bank, F.S.B.,
                  Cleveland, Ohio.

                           (viii) "Subsidiary" means any Person a majority of
                  the Voting Stock (after giving effect to any securities
                  convertible into or exchangeable or exercisable for any Voting
                  Stock) of which is owned by the Corporation or by one or more
                  Subsidiaries of the Corporation.

                           (ix) "Voting Stock" of any entity means the then
                  outstanding shares of the entity entitled to vote generally in
                  the election of directors, partners or trustees.

                  B. Determinations by the Continuing Directors. A majority of
         the Continuing Directors shall have the power to make all
         determinations, which shall be conclusive and binding, with respect to
         this Article FIFTH, including, without limitation, (i) the amount of
         securities Beneficially Owned by any Person, (ii) whether a Person is
         an Affiliate or Associate of another, (iii) whether a Person has an
         agreement, arrangement or understanding with another as to the matters
         referred to in the definition of Beneficial Ownership, (iv) the
         application of any other definition or operative provision of this
         Article FIFTH to the given facts, or (v) any other matter relating to
         the applicability or effect of this Article FIFTH. The Corporation may,
         by bylaw or by resolution approved by the affirmative vote of a
         majority of the Continuing Directors, adopt such provisions or
         resolutions as are necessary to provide for the enforcement of this
         Article FIFTH which shall be final and conclusive. Any construction,
         application, or determination made by the Continuing Directors in good
         faith pursuant to this Article FIFTH shall be conclusive and binding
         upon the Corporation and its stockholders, including any Related
         Person. Nothing contained in this Article FIFTH shall be construed to
         relieve any Related Person from any fiduciary obligation imposed by
         law.

                                       6
   7

                  SIXTH: A. Restrictions on Voting Rights. If at anytime there
         exists a Related Person, the record holders of Voting Stock of the
         Corporation Beneficially Owned by such Related Person shall have only
         the voting rights set forth in this Article SIXTH on any matter
         requiring their vote or consent. With respect to each vote in excess of
         twenty percent (20%) of the voting power of the outstanding shares of
         Voting Stock of the Corporation which such record holders would
         otherwise be entitled to cast without giving effect to this Article
         SIXTH, the record holders in the aggregate shall be entitled to cast
         only one hundredth (1/100) of a vote and the aggregate voting power of
         such record holders, so limited, for all shares of Voting Stock of the
         Corporation Beneficially Owned by the Related Person shall be allocated
         proportionately among such record holders. For each such record holder,
         this allocation shall be accomplished by multiplying the aggregate
         voting power, as so limited, of the outstanding shares of Voting Stock
         of the Corporation Beneficially Owned by the Related Person by a
         fraction whose numerator is the number of votes represented by the
         shares of Voting Stock of the Corporation owned of record by such
         record holder (and which are Beneficially Owned by the Related Person)
         and whose denominator is the total number of votes represented by the
         shares of Voting Stock of the Corporation Beneficially Owned by the
         Related Person. A Person who is a record owner of shares of Voting
         Stock of the Corporation that are Beneficially Owned simultaneously by
         more than one person shall have, with respect to such shares, the right
         to cast the least number of votes that such Person would be entitled to
         cast under this Article SIXTH by virtue of such shares being so
         Beneficially Owned by any of such Persons.

                  B. Exclusion for Employee Benefit Plans, Directors, Officers,
         Employees and Certain Proxies. The restriction contained in this
         Article SIXTH shall not apply to (i) any underwriter or member of an
         underwriting or selling group involving a public sale or resale of
         securities of the Corporation or a Subsidiary thereof; provided,
         however, that upon completion of the sale or resale of such securities,
         no such underwriter or member of such selling group is a Related
         Person, or (ii) any proxy granted to one or more Continuing Directors
         by a stockholder of the Corporation. In addition, the Continuing
         Directors of the Corporation, the officers and employees of the
         Corporation and its Subsidiaries, the directors of Subsidiaries of the
         Corporation, the employee benefit plans of the Corporation and its
         Subsidiaries, entities organized or established by the Corporation or
         any Subsidiary thereof pursuant to the terms of such plans and trustees
         and fiduciaries with respect to such plans acting in such capacity
         shall not be deemed to be a group with respect

                                       7
   8


         to their Beneficial Ownership of Voting Stock of the Corporation solely
         by virtue of their being directors, officers or employees of the
         Corporation or a Subsidiary thereof or by virtue of the Continuing
         Directors of the Corporation, the officers and employees of the
         Corporation and its Subsidiaries and the directors of Subsidiaries of
         the Corporation being fiduciaries or beneficiaries of an employee
         benefit plan of the Corporation or a Subsidiary of the Corporation.
         Notwithstanding the foregoing, no director, officer or employee of the
         Corporation or any of its Subsidiaries or group of any of them shall be
         exempt from the provisions of this Article SIXTH should any such Person
         or group become a Related Person.

                  C.       Determinations by the Continuing Directors.  A
         majority of the Continuing Directors shall have the power to make all
         determinations, which shall be conclusive and binding, with respect to
         this Article SIXTH, including, without limitation, (i) the amount of
         securities Beneficially Owned by any Person, (ii) whether a Person is
         an Affiliate or Associate of another, (iii) whether a Person has an
         agreement, arrangement or understanding with another as to the matters
         referred to in the definition of Beneficial Ownership, (iv) the
         application of any other definition or operative provisions of this
         Article SIXTH to the given facts, or (v) any other matter relating to
         the applicability or effect of this Article SIXTH. The Corporation may,
         by bylaw or by resolution approved by the affirmative vote of a
         majority of the Continuing Directors, adopt such provisions or
         resolutions as are necessary to provide for the enforcement of this
         Article SIXTH which shall be final and conclusive. Any construction,
         application, or determination made by the Continuing Directors in good
         faith pursuant to this Article SIXTH shall be conclusive and binding
         upon the Corporation and its stockholders, including any Related
         Person. Nothing contained in this Article SIXTH shall be construed to
         relieve any Related Person from any fiduciary obligation imposed by
         law.

                  D. Right of Continuing Directors to Demand Certain Information
         From Related Person. A majority of the Continuing Directors shall have
         the right to demand that any Person who after reasonable inquiry is
         believed to be a Related Person or a holder of record of shares of
         Voting Stock of the Corporation or securities convertible into, or
         exchangeable or exercisable for, Voting Stock of the Corporation which
         is believed to be Beneficially Owned by a Related Person, furnish the
         Corporation with accurate and complete information as to (i) the record
         owner(s) of all shares or securities Beneficially Owned by such Person
         who is so believed to be a Related Person, (ii) the number of, and
         class or series of,


                                       8
   9

         shares or securities Beneficially Owned by such Person who is so
         believed to be a Related Person and held of record by each such record
         owner and the number(s) of the stock certificate(s) or instrument(s)
         evidencing such shares or securities, and (iii) any other factual
         matter relating to the applicability or effect of this Article SIXTH,
         as may reasonably be requested of such Person, and such Person shall
         furnish such information within ten days after the receipt of such
         demand.

                  E. Quorum. Except as otherwise provided by law or expressly
         provided in this Certificate of Incorporation, the presence, in person
         or by proxy, of the holders of record of shares of capital stock of the
         Corporation entitling the holders thereof to cast a majority of the
         votes (after giving effect, if applicable, to the provisions of Article
         FIFTH and this Article SIXTH) entitled to be cast by the holders of
         shares of capital stock of the Corporation entitled to vote shall
         constitute a quorum at all meetings of the stockholders, and every
         reference in this Certificate of Incorporation to a majority or other
         proportion of capital stock (or the holders thereof) for purposes of
         determining any quorum requirement or any requirement for stockholder
         consent or approval shall be deemed to refer to such majority or other
         proportion of the votes (or the holders thereof) then entitled to be
         cast in respect of such capital stock.

                  SEVENTH: A. Board of Directors. The business and affairs of
         the Corporation shall be under the direction of a board of directors
         (the "Board of Directors"), except as provided in this Certificate of
         Incorporation or in the Bylaws as in effect at the time of the
         consummation of the conversion of the Savings Bank to a capital stock
         savings bank and the Savings Bank concurrently becoming a subsidiary of
         the Corporation. The authorized number of directors shall consist of
         not less than seven directors nor more than 16 directors. The exact
         number of directors shall be fixed from time to time pursuant to a
         resolution adopted by the affirmative vote of a majority of the
         Continuing Directors, in the manner provided by the Bylaws of the
         Corporation.

                  B. Election of Directors. The directors of the Corporation
         shall be divided into three classes: the first class, the second class
         and the third class. Each director shall serve for a term ending on the
         third annual meeting following the annual meeting at which such
         director was elected; provided, however, that the directors first
         elected to the first class shall serve for a term ending upon the
         election of directors at the first annual meeting next following the
         end of the fiscal year 1987, and the directors first elected to the
         second class shall serve for a term

                                       9
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         ending upon the election of directors at the second annual meeting next
         following the end of the fiscal year 1988, and the directors first
         elected to the third class shall serve for a term ending upon the
         election of the directors at the third annual meeting next following
         the end of the fiscal year 1989. At each annual election, commencing at
         the first annual meeting of stockholders, the successors to the class
         of directors whose term expires at that time shall be elected by the
         stockholders to hold office for a term of three years to succeed those
         directors whose term expires, so that the term of one class of
         directors shall expire each year. In the event of any change in the
         authorized number of directors, each director then continuing to serve
         as such shall nevertheless continue as director of the class of which
         he is a member until the expiration of his current term, or his prior
         resignation, disqualification, disability or removal.

                  C. Newly Created Directorships and Vacancies. Any vacancies on
         the Board of Directors resulting from death, resignation, retirement,
         disqualification, removal from office, an increase in the number of
         authorized directors or other cause shall be filled only by the
         affirmative vote of a majority of the Board of Directors, including a
         majority of the Continuing Directors, although less than a quorum, or
         by the sole remaining director, or, in the event of the failure of the
         Board of Directors, or the Continuing Directors or sole remaining
         director so to act, or if the Continuing Directors so determine, by the
         stockholders at the next election of directors; provided, however, that
         if the holders of any class or classes of stock or series thereof of
         the Corporation, voting separately, are entitled to elect one or more
         directors, vacancies and newly created directorships of such class or
         classes or series may be filled by a majority of the directors elected
         by such class or classes or series thereof then in office, or by a sole
         remaining director so elected. Directors so chosen shall hold office
         for a term expiring at the annual meeting of stockholders at which the
         term of the class to which they have been elected expires. Any increase
         or decrease in the number of authorized directors may be allocated to
         any such class as the majority of the Continuing Directors selects in
         its discretion. No decrease in the number of directors constituting the
         Board of Directors shall shorten the term of any incumbent director.

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                  D. Removal. A director may be removed only for cause as
         determined by the affirmative vote of the holders of at least a
         majority of the shares entitled to vote generally in the election of
         directors, which vote may only be taken at the annual meeting or at a
         meeting of stockholders called expressly for that purpose. Cause for
         removal shall be deemed to exist only if the director whose removal is
         proposed has been convicted of a felony by a court of competent
         jurisdiction or has been adjudged by a court of competent jurisdiction
         to be liable for gross negligence or misconduct in the performance of
         such director's duty to the Corporation. At least thirty (30) days
         prior to such meeting of stockholders, written notice shall be sent to
         the director or directors whose removal will be considered at such
         meeting.

                  EIGHTH: Action by Written Consent. After the consummation of
         the conversion of the Savings Bank to a capital stock savings bank and
         the Savings Bank concurrently becoming a Subsidiary of the Corporation,
         the stockholders of the Corporation shall not be entitled to take
         action by written consent in lieu of taking such action at an annual or
         special meeting of stockholders.

                  NINTH: Special Meetings. Special meetings of the stockholders
         may only be called by a majority of the Board of Directors, including a
         majority of the Continuing Directors.

                  TENTH: A. Approval of Continuing Directors Required for
         Certain Business Combinations. Notwithstanding anything to the contrary
         contained in this Certificate of Incorporation, a Business Combination
         with or upon a proposal by a Related Person within five years after the
         date the Related Person became a Related Person (the "Determination
         Date") shall require the approval of ninety percent (90%) of the
         holders of the Voting Stock of the Corporation unless such Business
         Combination or the acquisition of Beneficial Ownership of ten percent
         (10%) or more of the issued and outstanding Voting Stock of the
         Corporation was approved prior to the Determination Date by a vote of a
         majority of the Continuing Directors or such Business Combination meets
         the conditions of subparagraph B(ii) of this Article TENTH. Certain
         defined terms used in this Article TENTH are as set forth in paragraph
         C below.

                  B. Requirements for All Business Combinations with Related
         Persons. Notwithstanding anything to the contrary contained in this
         Certificate of Incorporation, a Business Combination with or upon a
         proposal by a Related Person that does not require the approval of
         ninety percent (90%) of the holders of the Voting Stock of the
         Corporation pursuant to paragraph A of this Article TENTH shall be
         approved only upon

                                       11
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         the affirmative vote of the holders of at least seventy-five percent
         (75%) of the Voting Stock of the Corporation that is not Beneficially
         Owned by the Related Person, voting together as a single class at a
         meeting called for such purpose no earlier than five (5) years after
         the Determination Date (in addition to any affirmative vote of holders
         of a class or series of capital stock of the Corporation required by
         law or by the provisions of this Certificate of Incorporation) unless
         all of the conditions specified in any one of the following
         subparagraphs (i), (ii) or (iii) are met:

                           (i)      Approval by directors.  The Business
                  Combination has been approved by a vote of a majority of
                  the Continuing Directors; or

                           (ii) Combination with Subsidiary. The Business
                  Combination is solely between the Corporation and a Subsidiary
                  of the Corporation and such Business Combination does not have
                  the direct or indirect effect set forth in subparagraph
                  C(i)(e) of this Article TENTH; or

                           (iii) Price and procedural conditions. All of the
                  following conditions have been met:

                                    (a) The aggregate amount of cash and fair
                           market value (as of the date of the consummation of
                           the Business Combination) of consideration other than
                           cash to be received per share of common stock in such
                           Business Combination by holders thereof shall be at
                           least equal to the higher of (x) the highest per
                           share price, including any brokerage commissions,
                           transfer taxes and soliciting dealers' fees (with
                           appropriate adjustments for recapitalizations, stock
                           splits, reverse stock splits and stock dividends)
                           paid by the Related Person for any shares of common
                           stock acquired by it, including those shares acquired
                           by the Related Person before the Determination Date,
                           plus interest at the Treasury Rate, compounded
                           quarterly, from the earliest date on which such
                           highest per share price was paid through the
                           consummation date of the Business Combination, less
                           the aggregate amount of any cash dividends paid and
                           the market value of any dividends paid other than in
                           cash per share of common stock since such earliest
                           date, up to the amount of such interest, or (y) the
                           fair market value of the common stock of the
                           Corporation (as determined by the Continuing
                           Directors) on the date the Business Combination is
                           first proposed (the "Announcement Date").

                                       12
   13

                                    (b) The aggregate amount of cash and fair
                           market value (as of the date of the consummation of
                           the Business Combination) of consideration other than
                           cash to be received per share of any class or series
                           of preferred stock in such Business Combination by
                           holders thereof shall be at least equal to the
                           highest of (x) the highest per share price, including
                           any brokerage commissions, transfer taxes and
                           soliciting dealers' fees (with appropriate
                           adjustments for recapitalizations, reclassifications,
                           stock splits, reverse stock splits and stock
                           dividends) paid by the Related Person for any shares
                           of such class or series of preferred stock acquired
                           by it, including those shares acquired by the Related
                           Person before the Determination Date, plus interest
                           at the Treasury Rate, compounded quarterly, from the
                           earliest date on which such highest per share price
                           was paid through the consummation date of the
                           Business Combination, less the aggregate amount of
                           any cash dividends paid and the market value of any
                           dividends paid other than in cash per share of such
                           class or series of stock since such earliest date, up
                           to the amount of such interest, (y) the fair market
                           value of such class or series of preferred stock of
                           the Corporation (as determined by the Continuing
                           Directors) on the Announcement Date or the
                           Determination Date, whichever is higher, and (z) the
                           highest preferential amount per share of such class
                           or series of preferred stock to which the holders
                           thereof would be entitled in the event such shares
                           were redeemed by the Corporation on the Announcement
                           Date, or, if such redemption is not authorized by
                           this Certificate of Incorporation or any resolution
                           authorizing the issuance of such class or series of
                           Preferred Stock, in the event of voluntary or
                           involuntary liquidation, dissolution or winding up of
                           the affairs of the Corporation (regardless of whether
                           the Business Combination to be consummated
                           constitutes such an event), plus the aggregate amount
                           of any dividends declared or due as to which such
                           holders are entitled prior to payment of dividends on
                           some other class or series of stock (unless the
                           aggregate amount of such dividends is included in
                           such preferential amount).

                                    (c) The consideration to be received by
                           holders of a particular class or series of
                           outstanding common or preferred stock shall be in
                           cash or in the same form as, and upon no less

                                       13
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                           favorable terms than, the Related Person has
                           previously paid for shares of such class or series of
                           stock. If the Related Person has paid for shares of
                           any class or series of stock with varying forms of
                           consideration, the form of consideration given for
                           such series of stock in the Business Combination
                           shall be either cash or the form of consideration
                           used to acquire the largest number of shares of such
                           class or series of stock previously acquired by it.

                                    (d) No Extraordinary Event occurs after the
                           Related Person has become a Related Person and prior
                           to the consummation of the Business Combination, or
                           will occur as a result of or in connection with the
                           Business Combination.

                                    (e) After the Determination Date and prior
                           to the consummation date of the Business Combination,
                           such Related Person has not become the Beneficial
                           Owner of any additional shares of Voting Stock of the
                           Corporation except: (i) as part of the transaction
                           which resulted in such Related Person becoming a
                           Related Person, (ii) as part of a transaction
                           approved in advance by a majority of the Continuing
                           Directors, (iii) by virtue of proportionate stock
                           splits, stock dividends or other distributions of
                           stock in respect of stock not constituting a Business
                           Combination under subparagraph C(i)(e) of this
                           Article TENTH, or (iv) through purchase by such
                           Related Person at any price which, if such price had
                           been paid in an otherwise permissible Business
                           Combination the Announcement Date and consummation
                           date of which were the date of such purchase, would
                           have satisfied the requirements of subparagraphs
                           B(iii)(a), (b) and (c) of this Article TENTH.

                                    (f) A proxy or information statement
                           describing the proposed Business Combination and
                           complying with the requirements of the Exchange Act
                           and the General Rules and Regulations thereunder (or
                           any subsequent provisions replacing such Act, rules
                           or regulations) is mailed to public stockholders of
                           the Corporation not less than thirty (30) days prior
                           to the consummation of such Business Combination
                           (whether or not such proxy or information statement
                           is required pursuant to the Exchange Act or
                           subsequent provisions) and shall contain at the front
                           thereof in a prominent place the recommendation, if
                           any, of the Continuing

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                           Directors as to the advisability or inadvisability of
                           the Business Combination and of any investment
                           banking firm selected by a majority of the Continuing
                           Directors as to the fairness of the Business
                           Combination from the point of view of the
                           stockholders of the Corporation other than the
                           Related Person.

         C.       Certain Definitions.  For purposes of this Certificate of
Incorporation:

                           (i) "Business Combination" shall mean any of the
                  following transactions, when entered into by the Corporation
                  or a Subsidiary of the Corporation with, or upon a proposal
                  by, a Related Person or any Affiliate or Associate thereof:

                                    (a) the acquisition, merger or consolidation
                           of the Corporation or any Subsidiary of the
                           Corporation; or

                                    (b) the sale, lease, exchange, mortgage,
                           pledge, transfer or other disposition (in one or a
                           series of transactions) of any assets of the
                           Corporation or any Subsidiary of the Corporation
                           having an aggregate fair market value of five million
                           dollars ($5,000,000) or more; or

                                    (c) the issuance or transfer by the
                           Corporation or any Subsidiary of the Corporation (in
                           one or a series of transactions) of securities of the
                           Corporation or that Subsidiary having an aggregate
                           fair market value of five million dollars
                           ($5,000,000) or more; or

                                    (d) the adoption of a plan or proposal for
                           the liquidation or dissolution of the Corporation or
                           any Subsidiary of the Corporation; or

                                    (e) the reclassification of securities
                           (including a reverse stock split), recapitalization,
                           consolidation or any other transaction (whether or
                           not involving a Related Person) which has the direct
                           or indirect effect of increasing the voting power,
                           whether or not then exercisable, of a Related Person
                           in any class or series of capital stock of the
                           Corporation or any Subsidiary of the Corporation; or

                                       15
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                                    (f) any agreement, contract or other
                           arrangement providing directly or indirectly for any
                           of the foregoing or any amendment or repeal of this
                           Article TENTH.

                           (ii) "Extraordinary Event" shall mean, as to any
                  Business Combination and Related Person, any of the following
                  events that is not approved by a majority of the Board of
                  Directors, including a majority of the Continuing Directors:

                                    (a) any failure to declare and pay at the
                           regular date thereof any full quarterly dividend
                           (whether or not cumulative) on outstanding preferred
                           stock; or

                                    (b) any reduction in the annual rate of
                           dividends paid on the common stock (except as
                           necessary to reflect any subdivision of the common
                           stock); or

                                    (c) any failure to increase the annual rate
                           of dividends paid on the common stock as necessary to
                           reflect any reclassification (including any reverse
                           stock split), recapitalization, reorganization or any
                           similar transaction that has the effect of reducing
                           the number of outstanding shares of the common stock;
                           or

                                    (d) the receipt by the Related Person, after
                           the Determination Date, of a direct or indirect
                           benefit (except proportionately as a stockholder)
                           from any loans, advances, guarantees, pledges or
                           other financial assistance or any tax credits or
                           other tax advantages provided by the Corporation or
                           any Subsidiary of the Corporation whether in
                           anticipation of or in connection with the Business
                           Combination or otherwise.

                           (iii) "Treasury Rate" shall mean the per annum
                  average yield to maturity for actively traded marketable
                  United States Treasury fixed interest rate securities
                  (adjusted to constant maturities of five years), as last
                  published by the Board of Governors of the Federal Reserve
                  System prior to the date from which such rate is to be paid
                  or, if not so published, as last published prior to such date
                  by any Federal Reserve Bank or United States Government
                  department or agency selected by a majority of the Continuing
                  Directors.

                           (iv) In the event of any Business Combination in
                  which the Corporation survives, the phrase "consideration

                                       16
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                  other than cash" as used in paragraphs B(iii)(a) and B(iii)(b)
                  of this Article TENTH shall include the shares of common stock
                  and/or the shares of any other class of preferred stock
                  retained by the holders of such shares.

                  D. Determinations by Continuing Directors. A majority of the
         Continuing Directors shall have the power to make all determinations,
         which shall be conclusive and binding, with respect to this Article
         TENTH, including, without limitation, the transactions that are
         Business Combinations or Extraordinary Events, the persons who are
         Related Persons, the time at which a Related Person became a Related
         Person, and the fair market value of any assets, securities or other
         property, and any other matter relating to the applicability
         or effect of this Article TENTH.

                  E.       Related Persons Not Relieved of Fiduciary
         Obligations.  Nothing contained in this Article TENTH shall be
         construed to relieve any Related Person from any fiduciary
         obligation imposed by law.

                  ELEVENTH: Criteria for Evaluating Certain Offers. The Board of
         Directors of the Corporation, when evaluating any offer to (i) make a
         tender or exchange offer for the common stock of the Corporation, (ii)
         merge or consolidate the Corporation or any Subsidiary of the
         Corporation with another institution, or (iii) purchase or otherwise
         acquire all or substantially all of the properties and assets of the
         Corporation, may, in connection with the exercise of its judgment in
         determining what is in the best interests of the Corporation and its
         stockholders, give due consideration to all relevant factors,
         including, without limitation, (u) the social, legal and economic
         effects of acceptance of such offer on depositors, borrowers and
         employees of the insured institution Subsidiary or Subsidiaries of the
         Corporation, and on the communities in which such Subsidiary or
         Subsidiaries operate or are located, (x) the effects of acceptance of
         such offer on the ability of such Subsidiary or Subsidiaries to fulfill
         the objectives of an insured institution under applicable federal
         statutes and regulations, (y) the consideration being offered in
         relation to (a) the then current market price for the Corporation's
         outstanding shares of capital stock, (b) the then current value of the
         Corporation in a freely negotiated transaction and (c) the Board of
         Directors' estimate of the future value of the Corporation (including
         the unrealized value of its properties and assets) as an independent
         going concern; and (z) such other factors as the directors deem
         relevant.

                  TWELFTH:  Indemnification.

                                       17
   18

                  A. Actions, Suits or Proceedings Other than by or in the Right
         of the Corporation. The Corporation shall indemnify any person who was
         or is a party or is threatened to be made a party to or is involved in
         any threatened, pending or completed action, suit or proceeding,
         whether civil, criminal, administrative or investigative (other than an
         action by or in the right of the Corporation) by reason of the fact
         that he or she, or a person of whom he or she is the legal
         representative, is or was or has agreed to become a director or officer
         of the Corporation, or is or was serving or has agreed to serve at the
         request of the Corporation as a director, officer, partner, member or
         trustee of another corporation, including, without limitation, any
         Subsidiary of the Corporation, partnership, joint venture, trust or
         other enterprise, including service with respect to employee benefit
         plans, or by reason of any action alleged to have been taken or omitted
         in such capacity, against costs, charges, expenses (including
         attorneys' fees and related disbursements), judgments, fines
         (including, without limitation, ERISA excise taxes and penalties) and
         amounts paid in settlement actually and reasonably incurred by such
         person or on such person's behalf in connection with such action, suit
         or proceeding and any appeal therefrom, if such person acted in good
         faith and in a manner he or she reasonably believed to be in or not
         opposed to the best interests of the Corporation, and with respect to
         any criminal action or proceeding, had no reasonable cause to believe
         his or her conduct was unlawful; provided, however, that, except as
         provided in paragraph F hereof with respect to proceedings seeking to
         enforce rights of indemnification, the Corporation shall indemnify such
         person seeking indemnification with respect to a proceeding (or part
         thereof) initiated by such person only if such proceeding or part
         thereof was authorized by a majority of the Continuing Directors. The
         termination of any action, suit or proceeding by judgment, order,
         settlement, conviction, or upon a plea of nolo contendere or its
         equivalent, shall not, of itself, create a presumption that the person
         did not act in good faith and in a manner which he or she reasonably
         believed to be in or not opposed to the best interests of the
         Corporation, and, with respect to any criminal action or proceeding,
         had reasonable cause to believe that his or her conduct was unlawful.

                  B. Actions or Suits by or in the Right of the Corporation. The
         Corporation shall indemnify any person who was or is a party or is
         threatened to be made a party to or is involved in any threatened,
         pending or completed action or suit by or in the right of the
         Corporation to procure a judgment in its favor by reason of the fact
         that he or she, or a person of whom he or she is the legal
         representative, is or was or has agreed to become a director or officer
         of the

                                       18
   19

         Corporation, or is or was serving or has agreed to serve at the request
         of the Corporation as a director, officer, partner, member or trustee
         of another corporation, including, without limitation, any Subsidiary
         of the Corporation, partnership, joint venture, trust or other
         enterprise, including service with respect to employee benefit plans,
         or by reason of any action alleged to have been taken or omitted in
         such capacity, against costs, charges and expenses (including
         attorneys' fees and related disbursements) actually and reasonably
         incurred by such person or on such person's behalf in connection with
         the defense or settlement of such action or suit and any appeal
         therefrom, if such person acted in good faith and in a manner he or she
         reasonably believed to be in or not opposed to the best interests of
         the Corporation, except that no indemnification shall be made in
         respect of any claim, issue or matter as to which such person shall
         have been adjudged to be liable to the Corporation unless and only to
         the extent that the Court of Chancery of Delaware or the court in which
         such action or suit was brought shall determine upon application that,
         despite the adjudication of such liability but in view of all the
         circumstances of the case, such person is fairly and reasonably
         entitled to indemnity for such costs, charges and expenses which the
         Court of Chancery or such other court shall deem proper.
         Notwithstanding the provisions of this paragraph B, the Corporation
         shall indemnify any such person seeking indemnification in connection
         with a proceeding (or part thereof) initiated by such person (except
         with respect to proceedings seeking to enforce rights to
         indemnification pursuant to paragraph F), only if such proceeding (or
         part thereof) was authorized by a majority of the Continuing Directors.

                  C. Indemnification for Costs, Charges and Expenses of
         Successful Party. Notwithstanding the other provisions of this Article
         TWELFTH, to the extent that a director, officer, employee or agent of
         the Corporation has been successful on the merits or otherwise,
         including, without limitation, the dismissal of an action without
         prejudice, in defense of any action, suit or proceeding referred to in
         paragraphs A and B of this Article TWELFTH, or in defense of any claim,
         issue or matter therein, such person shall be indemnified against all
         costs, charges and expenses (including attorneys' fees) actually and
         reasonably incurred by such person or on such person's behalf in
         connection therewith.

                  D. Determination of Right to Indemnification. Any
         indemnification under paragraphs A and B of this Article TWELFTH shall
         be made by the Corporation as authorized in the specific case upon a
         determination (i) by the Board of Directors by a majority vote of a
         quorum of the directors who were not parties to such action, suit or
         proceeding, or (ii)

                                       19
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         if such a quorum is not obtainable, or, even if obtainable, if a
         majority of a quorum of disinterested directors so directs, by
         independent legal counsel in a written opinion that indemnification of
         the person seeking indemnification is proper in the circumstances
         because he or she has met the applicable standard of conduct set forth
         in paragraphs A and B of this Article TWELFTH. Should a determination
         be made by the Corporation hereunder that indemnification is not proper
         under the circumstances, a court may order the Corporation to make
         indemnification pursuant to paragraphs A or B of this Article TWELFTH.

                  E. Advance of Costs, Charges and Expenses. Costs, charges and
         expenses (including attorneys' fees and related disbursements) incurred
         by a person referred to in paragraphs A or B of this Article TWELFTH in
         defending a civil or criminal action, suit or proceeding shall be paid
         by the Corporation in advance of the final disposition of such action,
         suit or proceeding; provided, however, that, if the Delaware
         Corporation Law so requires, the payment of such expenses incurred by
         an officer or director of the Corporation in his or her capacity as a
         director or officer (and not in any other capacity in which service was
         or is rendered by such person while a director or officer, including
         without limitation, service to an employee benefit plan) in advance of
         the final disposition of such action, suit or proceeding shall be made
         only upon receipt of an undertaking by or on behalf of the director or
         officer to repay all amounts so advanced if it shall ultimately be
         determined that such director or officer is not entitled to be
         indemnified by the Corporation as authorized in this Article TWELFTH. A
         majority of the Continuing Directors may, upon approval of an
         indemnified person, authorize the Corporation's counsel to represent
         such person, in any action, suit or proceeding, whether or not the
         Corporation is a party to such action, suit or proceeding.

                  F. Procedure for Indemnification: Right of Claimant to Bring
         Suit. Any indemnification under paragraphs A, B and C, or advance of
         costs, charges and expenses under paragraph E of this Article TWELFTH,
         shall be made promptly, and in any event within 60 days (or in the case
         of any advance of costs, charges and expenses under paragraph E, within
         20 days), upon the written request of the person referred to in such
         paragraphs. The right to indemnification or advances as granted by this
         Article TWELFTH shall be enforceable by the persons referred to in
         paragraphs A, B, C and E in any court of competent jurisdiction, if the
         Corporation denies such request, in whole or in part, or if no
         disposition thereof is made within the applicable time period specified
         in the preceding sentence hereof. The costs, charges and expenses
         incurred by a person referred to in paragraph A or B of this

                                       20
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         Article TWELFTH in connection with successfully establishing his or her
         right to indemnification, in whole or in part, in any such action shall
         also be indemnified by the Corporation. It shall be a defense to any
         such action (other than an action brought to enforce a claim for the
         advance of costs, charges and expenses under paragraph E of this
         Article TWELFTH where the required undertaking, if any, has been
         received by the Corporation) that the claimant has not met the standard
         of conduct set forth in paragraphs A or B of this Article TWELFTH, but
         the burden of proving such defense shall be on the Corporation. Neither
         the failure of the Corporation (including its Board of Directors, its
         independent legal counsel, and its stockholders) to have made a
         determination prior to the commencement of such action that
         indemnification of the claimant is proper in the circumstances because
         the claimant has met the applicable standard of conduct set forth in
         paragraphs A or B of this Article TWELFTH, nor the fact that there has
         been an actual determination by the Corporation (including its Board of
         Directors or its independent legal counsel) that the claimant has not
         met such applicable standard of conduct, shall be a defense to the
         action or create a presumption that the claimant has not met the
         applicable standard of conduct.

                  G. Other Rights; Continuation of Right to Indemnification. The
         indemnification and advancement of expenses provided by this Article
         TWELFTH shall not be deemed exclusive of any other rights to which a
         person seeking indemnification or advancement of expenses may be
         entitled under any law (common or statutory), bylaw, agreement, vote of
         stockholder or disinterested directors or otherwise, both as to action
         in such person's official capacity and as to action in another capacity
         while holding office or while employed by or acting as agent for the
         Corporation, and the indemnification and advancement of expenses
         provided by this Article TWELFTH shall continue as to a person who has
         ceased to serve in a capacity referred to in paragraph A or B and shall
         inure to the benefit of the estate, heirs, executors and administrators
         of such person. Nothing contained in this Article TWELFTH shall be
         deemed to prohibit, and the Corporation is specifically authorized to
         enter into, agreements between the Corporation and directors, officers,
         employees or agents providing indemnification rights and procedures
         different from those set forth herein. All rights to indemnification
         and advancement of expenses under this Article TWELFTH shall be deemed
         to be a contract between the Corporation and each person referred to in
         paragraph A or B of this Article TWELFTH who serves or served in such
         capacity at any time while this Article TWELFTH is in effect. Any
         repeal or modification of this Article TWELFTH or any repeal or
         modification of relevant provisions of the Delaware


                                       21
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         Corporation Law or any other applicable laws shall not in any way
         diminish any rights to indemnification of any person referred to in
         paragraph A or B of this Article TWELFTH or the obligations of the
         Corporation arising hereunder with respect to any action, suit or
         proceeding arising out of, or relating to, any actions, transactions or
         facts occurring prior to the final adoption of such modification or
         repeal.

                  H. Indemnification of Employees and Agents of the Corporation.
         The Corporation may, to the extent authorized from time to time by a
         majority vote of the disinterested directors, indemnify any employee or
         agent of the Corporation or any person who is or was serving or has
         agreed to serve at the request of the Corporation as an employee or
         agent of any corporation, including, without limitation, any Subsidiary
         of the Corporation, partnership, joint venture, trust or other
         enterprise and pay the expenses incurred by any such person in
         defending any proceeding in advance of its final disposition, to the
         fullest extent of the provisions of this Article TWELFTH.

                  I. Insurance. The Corporation may purchase and maintain
         insurance on behalf of any person who is or was or has agreed to become
         a director, officer, employee or agent of the Corporation, or is or was
         serving or has agreed to serve at the request of the Corporation as a
         director, officer, partner, member, trustee, employee or agent of
         another corporation, including, without limitation, any Subsidiary of
         the Corporation, partnership, joint venture, trust or other enterprise,
         including service with respect to employee benefit plans, against any
         liability asserted against such person and incurred by such person or
         on his or her behalf in any such capacity, or arising out of such
         person's status as such, whether or not the Corporation would have the
         power to indemnify such person against such liability under the
         provisions of this Article TWELFTH.

                  J. Savings Clause. If this Article TWELFTH or any portion
         hereof shall be invalidated on any ground by any court of competent
         jurisdiction, then the Corporation shall nevertheless indemnify each
         person referred to paragraph A or B of this Article TWELFTH as to any
         cost, charge and expense (including attorneys' fees and related
         disbursements), judgment, fine (including, without limitation, ERISA
         excise taxes and penalties) and amount paid in settlement with respect
         to any action, suit or proceeding, whether civil, criminal,
         administrative or investigative, including an action by or in the right
         of the Corporation, to the full extent permitted by any applicable
         portion of this Article TWELFTH that shall not have been invalidated
         and to the full extent permitted by applicable law.

                                       22
   23

                  K. Subsequent Legislation. If the Delaware Corporation Law is
         hereafter amended to further expand the indemnification permitted to
         persons referred to in paragraphs A and B of this Article TWELFTH, then
         the Corporation shall indemnify such persons to the fullest extent
         permitted by the Delaware Corporation Law, as so amended.

                  THIRTEENTH: A. Prevention of Greenmail. Except as set forth in
         paragraph B of this Article THIRTEENTH, in addition to any affirmative
         vote of stockholders required by law or this Certificate, any direct or
         indirect purchase or other acquisition by the Corporation of any Equity
         Security of any class from any Interested Person shall require the
         affirmative vote of the holders of at least seventy-five percent (75%)
         of the Voting Stock of the Corporation that is not Beneficially Owned
         by such Interested Person, voting together as a single class. Such
         affirmative vote shall be required notwithstanding the fact that no
         vote may be required, or that a lesser percentage may be specified, by
         law or any agreement with any national securities exchange or quotation
         system, or otherwise. Certain defined terms used in this Article
         THIRTEENTH are as set forth in paragraph C below.

                  B.       When a Vote is Not Required.  The provisions of
         paragraph A of this Article THIRTEENTH shall not be applicable
         with respect to:

                           (i) any purchase or other acquisition of securities
                  made as part of a tender or exchange offer by the
                  Corporation or a Subsidiary of the Corporation to purchase
                  securities of the same class made on the same terms to all
                  holders of such securities and complying with the applicable
                  requirements of the Exchange Act and the rules and regulations
                  thereunder (or any subsequent provisions replacing such Act,
                  rules or regulations);

                           (ii) any purchase or acquisition made pursuant to an
                  open market purchase program approved by a majority of the
                  Board of Directors, including a majority of the Continuing
                  Directors; or

                           (iii) any purchase or acquisition which is approved
                  by a majority of the Board of Directors, including a majority
                  of the Continuing Directors, and which is made at no more than
                  the Market Price, on the date that the understanding between
                  the Corporation and the Interested Person is reached with
                  respect to such purchase (whether or not such purchase is made
                  or a written agreement relating to such purchase is executed

                                       23
   24

                  on such date), of shares of the class of Equity Security to be
                  purchased.

                  C.       Certain Definitions.  For the purposes of this
                  Article THIRTEENTH:

                           (i) The term Interested Person shall mean any Person
                  (other than the Corporation, Subsidiaries of the Corporation,
                  pension, profit sharing, employee stock ownership or other
                  employee benefit plans of the Corporation and its
                  Subsidiaries, entities organized or established by the
                  Corporation or any of its Subsidiaries pursuant to the terms
                  of such plans and trustees and fiduciaries with respect to any
                  such plan acting in such capacity) that is the direct or
                  indirect Beneficial Owner of five percent (5%) or more of the
                  Voting Stock of the Corporation, and any Affiliate or
                  Associate of any such person.

                           (ii) The Market Price of shares of a class of Equity
                  Security on any day shall mean the highest sale price of
                  shares of such class of Equity Security on such day, or, if
                  that day is not a trading day, on the trading day immediately
                  preceding such day, on the national securities exchange or the
                  Nasdaq National Market System on which such class of Equity
                  Security is traded.

                           (iii) The term Equity Security shall mean any
                  security described in Section 3(a)(11) of the Exchange Act, as
                  in effect on the date hereof, which is traded on a national
                  securities exchange or the Nasdaq National Market System.

                           (iv) For purposes of this Article THIRTEENTH, all
                  references to the term Related Person in the definition of
                  Continuing Director shall be deemed to refer to the term
                  Interested Person.

                  FOURTEENTH: Limitation of Directors' Liability. A director of
         this Corporation shall not be personally liable to the Corporation or
         its stockholders for monetary damages for breach of fiduciary duty as a
         director, except: (i) for any breach of the director's duty of loyalty
         to the Corporation or its stockholders, (ii) for acts or omissions not
         in good faith or which involve intentional misconduct or a knowing
         violation of law, (iii) under Section 174 of the Delaware Corporation
         Law, or (iv) for any transaction from which the director derived any
         improper personal benefit. If the Delaware Corporation Law is hereafter
         amended to further eliminate or limit the personal liability of
         directors, then the liability of a director of the Corporation shall be
         eliminated or

                                       24
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         limited to the fullest extent permitted by the Delaware Corporation
         Law, as so amended.

                  Any repeal or modification of the foregoing paragraph by the
         stockholders of the Corporation shall not adversely affect any right or
         protection of a director of the Corporation existing at the time of
         such repeal or modification.

                  FIFTEENTH: Amendment of Bylaws. The Bylaws of the Corporation
         may be adopted, amended or repealed by the affirmative vote of the
         holders of shares entitling such holders to cast at least seventy-five
         percent (75%) of the total votes eligible to be cast at a meeting duly
         called and held, or by a resolution adopted by the Board of Directors,
         including a majority of the Continuing Directors.

                  SIXTEENTH: Amendment of Certificate. The Corporation reserves
         the right to amend, alter, change, or repeal any provision contained in
         this Certificate of Incorporation in the manner now or hereafter
         prescribed by statute. Notwithstanding the foregoing, (i) the vote of
         holders of ninety percent (90%) of the shares eligible to be cast at a
         meeting duly called and held shall be required to amend or repeal
         paragraph A of Article TENTH or adopt provisions inconsistent
         therewith; (ii) the vote of holders of at least seventy-five percent
         (75%) of the Voting Stock of the Corporation that is not Beneficially
         Owned by a Related Person shall be required to amend, repeal, or adopt
         any provision inconsistent with any other paragraph of Article TENTH of
         this Certificate of Incorporation; (iii) the affirmative vote of the
         holders of shares entitling such holders to cast at least seventy-five
         percent (75%) (or such greater proportion as may otherwise be required
         pursuant to any specific provision of this Certificate of
         Incorporation) of the total votes eligible to be cast at a meeting duly
         called and held shall be required to amend, repeal, or adopt Articles
         or any provisions inconsistent with Articles FIFTH through SIXTEENTH of
         this Certificate of Incorporation and (iv) the vote of holders of at
         least seventy-five percent (75%) of the Voting Stock of the Corporation
         that is not Beneficially Owned by an Interested Person shall also be
         required to amend, repeal, or adopt any provision inconsistent with
         Article THIRTEENTH of this Certificate of Incorporation.

                  SEVENTEENTH: A. Savings Clause. In the event any provision (or
         portion thereof) of this Certificate of Incorporation shall be found to
         be invalid, prohibited or unenforceable for any reason, the remaining
         provisions (or portions thereof) of this Certificate of Incorporation
         shall remain in full force and effect, and shall be construed as if
         such invalid, prohibited or unenforceable provision had been

                                       25


   26

         stricken herefrom or otherwise rendered inapplicable, it being the
         intent of this Corporation and its stockholders that each such
         remaining provision (or portion thereof) of this Certificate of
         Incorporation remain, to the fullest extent permitted by law,
         applicable and enforceable as to all stockholders notwithstanding any
         such finding.

                  B. Non-enforceability of Provisions if Would Cause Delisting.
         No provision (or portion thereof) of this Certificate of Incorporation
         shall be enforceable in a manner which would have the effect of
         nullifying, restricting or disparately reducing the per share voting
         rights of holders of an outstanding class or series of common stock of
         the Corporation if (i) the Board of Directors receives a written
         opinion of counsel, who shall be selected by a majority of the
         Continuing Directors, that the manner of enforcing such provision (or
         portion thereof), in the particular case, would prevent the continuance
         of (A) listing of the common stock of the Corporation on each national
         securities exchange on which the common stock is then listed and (B)
         quotation and/or transaction reporting of the common stock of the
         Corporation through each interdealer quotation system of a national
         securities association on which the common stock is then authorized for
         quotation or transaction reporting, (ii) a majority of the Continuing
         Directors determines that the delisting of the common stock from each
         such exchange and the removal of the common stock from eligibility for
         inclusion on each such interdealer quotation system is likely to have a
         material adverse effect on the market for the common stock, and (iii) a
         certificate, signed by a majority of the Continuing Directors,
         certifying that the conditions of clauses (i) and (ii) have been
         satisfied is filed with the Secretary of the Corporation. If such a
         certificate has been so filed, a copy thereof shall be made available
         to each stockholder of record of the Corporation who delivers a written
         request therefor to the Secretary of the Corporation. The first
         sentence of this paragraph notwithstanding, the provisions of this
         Certificate of Incorporation shall remain applicable and enforceable as
         to all stockholders in any manner which, in the written opinion of
         counsel selected by a majority of the Continuing Directors, would not
         prevent the continued listing of common stock of the Corporation on any
         national securities exchange on which the common stock is then listed
         or quotation and/or transaction reporting of the common stock of the
         Corporation through any interdealer quotation system of a national
         securities association on which the common stock is then authorized for
         quotation or transaction reporting.

         4. This Second Restated Certificate of Incorporation was duly adopted
by a vote of the stockholders in accordance with

                                       26
   27

Sections 242 and 245 of the General Corporation Law of the State of Delaware.

         IN WITNESS WHEREOF, Charter One Financial, Inc. has caused this Second
Restated Certificate of Incorporation to be signed by Charles John Koch, its
Chairman of the Board, President and Chief Executive Officer, and attested by
Robert J. Vana, its Chief Corporate Counsel and Corporate Secretary, this 30th
day of October, 1995.

                                            CHARTER ONE FINANCIAL, INC.



                                            By: /S/CHARLES JOHN KOCH
                                              -------------------------------
                                              Charles John Koch
                                              Chairman of the Board,
                                              President and Chief
                                              Executive Officer

ATTEST:

By: /S/ROBERT J. VANA
  ----------------------------
  Robert J. Vana
  Chief Corporate Counsel and
  Corporate Secretary

                                       27



   28
                            CERTIFICATE OF AMENDMENT

                                       OF

                  SECOND RESTATED CERTIFICATE OF INCORPORATION

         Charter One Financial, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,

         DOES HEREBY CERTIFY:

         FIRST: That the Board of Directors of said corporation, at a meeting
duly held, adopted resolutions proposing and declaring advisable the following
amendment to the Second Restated Certificate of Incorporation of said
corporation:

                  SEVENTH: A. Board of Directors. The business and affairs of
         the Corporation shall be under the direction of a board of directors
         (the "Board of Directors"), except as provided in this Second Restated
         Certificate of Incorporation or in the Bylaws. The number of directors
         shall be determined pursuant to the Corporation's Bylaws, as may be
         amended from time to time.

         SECOND: That the stockholders approved said amendment at the Special
Meeting of Stockholders of Charter One Financial, Inc., held on October 3, 1997,
by the requisite votes of the outstanding shares of common stock, pursuant to
notice given in accordance with the provisions of Section 222 of the General
Corporation Law of the State of Delaware.

         THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 222 and 242 of the General Corporation Law
of the State of Delaware.

                                        1


   29
\
         IN WITNESS WHEREOF, Charter One Financial, Inc. has caused this
certificate to be signed by Charles J. Koch, its Chairman of the Board,
President and Chief Executive Officer, and attested by Robert J. Vana, its Chief
Corporate Counsel and Corporate Secretary, this 30th day of September, 1997.

                                     CHARTER ONE FINANCIAL, INC.




                                      By: /S/CHARLES J. KOCH
                                          ------------------
                                          Charles J. Koch
                                          Chairman of the Board, President and
                                          Chief Executive Officer

ATTEST:

By: /S/ROBERT J. VANA
    -----------------
    Robert J. Vana
    Chief Corporate Counsel and
     Corporate Secretary

                                       2


   30
                            CERTIFICATE OF AMENDMENT

                                       OF

                  SECOND RESTATED CERTIFICATE OF INCORPORATION

         Charter One Financial, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,

         DOES HEREBY CERTIFY:

         FIRST: That the Board of Directors of said corporation, at a meeting
duly held, adopted resolutions proposing and declaring advisable the following
amendment to the Second Restated Certificate of Incorporation of said
corporation:

                  FOURTH: A. Authorized Shares. The total number of shares of
         all classes of stock which the Corporation shall have authority to
         issue is three hundred eighty million (380,000,000), of which three
         hundred sixty million (360,000,000) shall be common stock, par value
         $.01 per share, and twenty million (20,000,000) shall be preferred
         stock, par value $.01 per share. The number of authorized shares of
         preferred stock may be increased or decreased (but not below the number
         of shares thereof then outstanding) by the affirmative vote of a
         majority of the stock of the Corporation entitled to vote generally in
         the election of directors without a vote of holders of preferred stock
         as a class, except to the extent that any such vote may be required by
         any resolution providing for the issuance of series of preferred stock.

         SECOND: That the stockholders approved said amendment at the Special
Meeting of Stockholders of Charter One Financial, Inc., held on November 13,
1998, by the requisite votes of the outstanding shares of common stock, pursuant
to notice given in accordance with the provisions of Section 222 of the General
Corporation Law of the State of Delaware.

         THIRD: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Sections 222 and 242 of the General
Corporation Law of the State of Delaware.



   31

         IN WITNESS WHEREOF, Charter One Financial, Inc. has caused this
certificate to be signed by Charles J. Koch, its Chairman of the Board,
President and Chief Executive Officer, and attested to by Robert J. Vana, its
Chief Corporate Counsel and Corporate Secretary, this 24th day of November,
1998.

                                     CHARTER ONE FINANCIAL, INC.

                                     By: /S/ CHARLES J. KOCH
                                         ------------------------------------
                                         Charles J. Koch
                                         Chairman of the Board, President and
                                          Chief Executive Officer

ATTEST:

By: /S/ ROBERT J. VANA
    ----------------------------------------
    Robert J. Vana, Senior Vice President,
    Chief Corporate Counsel and
     Corporate Secretary
   32

                                     AMENDED

              CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
                     SERIES A PARTICIPATING PREFERRED STOCK

                                       OF

                           CHARTER ONE FINANCIAL, INC.

             PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
                            OF THE STATE OF DELAWARE

         We, Charles John Koch, Chairman, President and Chief Executive Officer,
and Robert J. Vana, Chief Corporate Counsel and Secretary, of Charter One
Financial, Inc., a corporation organized and existing under the Delaware General
Corporation Law (the "Corporation"), in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:

         That pursuant to the authority conferred upon the Board of Directors of
the Corporation in accordance with the Corporation's Certificate of
Incorporation, as amended to date (the "Certificate of Incorporation"), the
Board of Directors on November 20, 1989 adopted a resolution creating a series
of shares of preferred stock, par value $0.01 per share, designated as the
Series A Participating Preferred Stock (no shares of which have been issued as
of October 20, 1999); that the Corporation filed such designation with the
Secretary of State of the State of Delaware on February 7, 1990; and that the
Board of Directors on October 20, 1999 adopted the following resolutions to
amend and restate the terms of such Preferred Stock:

         RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation and the Delaware General Corporation Law, the
Series A Participating Preferred Stock heretofore created be, and that the
designation and amount thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof hereby are amended
and restated as follows:

         Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Participating Preferred Stock," which shall have par
value $0.01 per share, and the number of shares constituting such series shall
be 3,400,000. Such number of shares may be increased or decreased by resolution
of the Board of Directors; provided, that no decrease shall reduce the number of
shares of Series A Participating Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation convertible into Series A
Participating Preferred Stock.
   33



         Section 2.  DIVIDENDS AND DISTRIBUTIONS.

         (A) Subject to the prior and superior rights of the holders of any
shares of any series of preferred stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock in preference to the holders
of shares of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Corporation and any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first business day of
January, April, July and October in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Participating Preferred Stock in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00, or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock. In the event the Corporation
shall at any time after October 20, 1999 (i) declare any dividend on the Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         (B) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

         (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Participating Preferred Stock unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Participating Preferred Stock entitled to receive a

                                       -2-


   34



quarterly dividend and before such Quarterly Dividend Payment Date in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Participating Preferred Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

         Section 3. VOTING RIGHTS. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:

         (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Participating Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time after October 20,
1999 declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         (B) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of shareholders of the Corporation.

         (C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.

         Section 4.  CERTAIN RESTRICTIONS.

         (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:

                                       -3-


   35



         (i) declare or pay dividends on, make any other distributions on, or
         redeem or purchase or otherwise acquire for consideration any shares of
         stock ranking junior (either as to dividends or upon liquidation,
         dissolution or winding up) to the Series A Participating Preferred
         Stock;

         (ii) declare or pay dividends on or make any other distributions on any
         shares of stock ranking on a parity (either as to dividends or upon
         liquidation, dissolution or winding up) with the Series A Participating
         Preferred Stock, except dividends paid ratably on the Series A
         Participating Preferred Stock and all such parity stock on which
         dividends are payable or in arrears in proportion to the total amounts
         to which the holders of all such shares are then entitled;

         (iii) redeem or purchase or otherwise acquire for consideration shares
         of any stock ranking on a parity (either as to dividends or upon
         liquidation, dissolution or winding up) with the Series A Participating
         Preferred Stock, provided that the Corporation may at any time redeem,
         purchase or otherwise acquire shares of any such parity stock in
         exchange for shares of any stock of the Corporation ranking junior
         (either as to dividends or upon dissolution, liquidation or winding up)
         to the Series A Participating Preferred Stock; or

         (iv) purchase or otherwise acquire for consideration any shares of
         Series A Participating Preferred Stock or any shares of stock ranking
         on a parity with the Series A Participating Preferred Stock (either as
         to dividends or upon liquidation, dissolution or winding up) except in
         accordance with a purchase offer made in writing or by publication (as
         determined by the Board of Directors) to all holders of such shares
         upon such terms as the Board of Directors, after consideration of the
         respective annual dividend rates and other relative rights and
         preferences of the respective series and classes, shall determine in
         good faith will result in fair and equitable treatment among the
         respective series or classes.

         (B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

         Section 5. REACQUIRED SHARES. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of preferred stock and may be reissued as part of a new series
of preferred stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.

         Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or

                                       -4-


   36



winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the holders of shares of Series A Participating Preferred Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment
(the "Series A Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph C below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series A Liquidation Preference and the Common Adjustment
in respect of all outstanding shares of Series A Participating Preferred Stock
and Common Stock, respectively, holders of Series A Participating Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.

         (B) In the event there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of preferred stock, if any, which rank on a
parity with the Series A Participating Preferred Stock then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.

         (C) In the event the Corporation shall at any time after October 20,
1999 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

         Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after October 20, 1999
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number

                                       -5-


   37



of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event.

         Section 8. REDEMPTION. The shares of Series A Participating Preferred
Stock shall not be redeemable. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares of stock
to the extent permitted by law.

         Section 9. RANKING. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's preferred stock as to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, unless the terms of any such
series shall provide otherwise.

         Section 10. AMENDMENT. The Certificate of Incorporation shall not be
further amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Participating Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Participating Preferred
Stock voting separately as a class.

         Section 11. FRACTIONAL SHARES. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.

         RESOLVED FURTHER, that the proper officers of the Corporation be, and
each of them hereby is, authorized to execute an Amended Certificate of
Designation, Preferences and Rights with respect to the Series A Participating
Preferred Stock pursuant to Section 151 of the Delaware General Corporation Law
and to take all appropriate action to cause such Certificate to become
effective, including, but not limited to, the filing and recording of such
Certificate with and/or by the Secretary of State of the State of Delaware.

                                       -6-


   38

         IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 26th day
of October, 1999.
                                        /s/ Charles John Koch
                                        ------------------------------
                                        Charles John Koch
                                        Chairman, President and Chief
                                         Executive Officer

Attest:

/s/ Robert J. Vana
- --------------------------------
Robert J. Vana
Chief Corporate Counsel and
 Secretary

                                      -7-

EX-4.1

   1

EXHIBIT 4.1




067436                                                            COMMON STOCK
     NUMBER                                                        SHARES
    FBU                 [LOGO-FIRST IN THE U.S.]
                                      CHARTER ONE
                                      FINANCIAL, INC.(R)

                                                        $.01 PAR VALUE PER SHARE
INCORPORATED UNDER THE LAWS                             CUSIP 160903 10 0
  OF THE STATE OF DELAWARE                              SEE REVERSE FOR CERTAIN
                                                        DEFINITIONS

THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF BOSTON, MA OR NEW YORK, NY

This Certifies that





is the record holder of


FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, OF

Charter One Financial, Inc. transferable on the books of the Corporation in
person or by duly authorized attorney on surrender of this certificate properly
endorsed. This certificate shall not be valid until countersigned and registered
by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.

Dated:
                                             /s/ Charles John Koch

                                                   President


                                             /s/ Robert J. Vana

                                                   Secretary


[SEAL]
CHARTER ONE FINANCIAL, INC.    COUNTERSIGNED AND REGISTERED:           [GRAPHIC]
   CORPORATE SEAL                FLEET NATIONAL BANK
    DELAWARE                       (f/k/a BankBoston, N.A.)
                                     TRANSFER AGENT AND REGISTRAR


AMERICAN BANK NOTE COMPANY      BY
                                /s/ Timothy D. Ryan
                                      AUTHORIZED SIGNATURE


   2

         The shares represented by this certificate are issued subject to all
the provisions of the certificate of incorporation and bylaws of Charter One
Financial, Inc. (the "Corporation") as from time to time amended (copies of
which are on file at the principal executive offices of the Corporation), to all
of which the holder by acceptance hereof assents.

         The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.

         Until the earlier of the Separation Time and the Expiration Time (as
such terms are defined in the Rights Agreement referred to below) this
certificate shall also evidence and entitle the holder hereof to certain Rights
as set forth in the Amended and Restated Stockholder Protection Rights
Agreement, dated as of October 20, 1999 (as such may be amended from time to
time, the "Rights Agreement"), between Charter One Financial, Inc. (the
"Company") and Fleet National Bank (f/k/a BankBoston, N.A.), as Rights Agent,
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may be exchanged for shares of Common Stock, Preferred Stock or other
securities or assets of the Company, may expire, may become void (if they are
"Beneficially Owned" by an "Acquiring Person" or an "Affiliate" or "Associate"
thereof, as such terms are defined in the Rights Agreement, or by any transferee
of any of the foregoing) or may be evidenced by separate certificates and may no
longer be evidenced by this certificate. The Company will mail or arrange for
the mailing of a copy of the Rights Agreement to the holder of this certificate
without charge promptly after the receipt of a written request therefor.

         The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
                                           

TEN COM - as tenants in common                UNIF GIFT MIN ACT-           Custodian
TEN ENT - as tenants by the entireties                          --------------------------------
JT TEN  - as joint tenants with right                             (Cust)             (Minor)
          of survivorship and not as                            under Uniform Gifts to Minors
          tenants in common                                     Act_____________________________
                                                                            (State)
                                              UNIF TRF MIN ACT-_______Custodian (until age_____)

                                                               to Minors Act __________________
                                                                                   (State)




        Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ___________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------

- --------------------------------------


- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)


- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------

- ------------------------------------------------------------------------ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

- ---------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated __________________

                             X___________________________________________

                             X___________________________________________
                              THE SIGNATURES(S) TO THIS ASSIGNMENT MUST
                     NOTICE:  CORRESPOND WITH THE NAME(S) AS WRITTEN UPON
                              THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
                              WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
                              WHATEVER.

Signature(s) Guaranteed

By_____________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C.
RULE 17Ad-15.

EX-11

   1

EXHIBIT 11



                           CHARTER ONE FINANCIAL, INC.
                        COMPUTATION OF PER SHARE EARNINGS

                                              FOR THE 3          FOR THE 3         FOR THE 12          FOR THE 12
                                             MOS. ENDED         MOS. ENDED         MOS. ENDED          MOS. ENDED
                                            DECEMBER 31,       DECEMBER 31,       DECEMBER 31,        DECEMBER 31,
                                                2000               1999               2000                1999
                                            --------------     --------------     --------------      -------------
                                                         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                         
Basic earnings per share:
  Income before extraordinary item......   $      109,374     $       19,706     $      433,962      $     335,530
                                            ==============     ==============     ==============      =============

  Average common shares
   outstanding..........................      207,969,291        222,028,146        213,712,154        223,743,476
                                            ==============     ==============     ==============      =============

  Basic earnings per common share
   before extraordinary item............   $          .53     $          .09     $         2.03      $        1.50
                                            ==============     ==============     ==============      =============

Diluted earnings per share:
  Income before extraordinary item......   $      109,374     $       19,706     $      433,962      $     335,530
                                            ==============     ==============     ==============      =============

  Average common shares
   outstanding..........................      207,969,291        222,028,146        213,712,154        223,743,476
  Add:
   Common stock equivalents for shares
    issuable under Stock Option Plan....        4,299,060          3,814,572          3,879,525          4,994,683
                                            --------------     --------------     --------------      -------------
  Average common and common
   equivalent shares outstanding........      212,268,351        225,842,718        217,591,679        228,738,159
                                            ==============     ==============     ==============      =============
   Diluted earnings per common and
    common equivalent share before
    extraordinary item..................   $          .52     $          .09     $         2.00      $        1.47
                                            ==============     ==============     ==============      =============

EX-21

   1

EXHIBIT 21


                           CHARTER ONE FINANCIAL, INC.
                         SUBSIDIARIES OF THE REGISTRANT
                              AT DECEMBER 31, 2000

                                                                             JURISDICTION OF          PERCENT OF
                                                                              INCORPORATION           OWNERSHIP
                                                                          ----------------------      -----------
                                                                       
CHARTER ONE COMMERCIAL..........................................                New York                 100%

CHARTER ONE REINSURANCE.........................................                 Vermont                 100%

CHARTER MICHIGAN BANCORP, INC...................................                Michigan                 100%

SUBSIDIARY OF CHARTER ONE COMMERCIAL

  ALVEST Financial Services, Inc................................                New York                 100%

SUBSIDIARIES OF CHARTER MICHIGAN BANCORP, INC.

  Charter One Bank, F.S.B.......................................              United States              100%
  FirstFed of Michigan International N.V........................           Netherland Antilles           100%
  St. Paul Financial Development Corp...........................                Illinois                 100%

SUBSIDIARIES OF CHARTER ONE BANK, F.S.B.

  Aplan Holding Company, Inc....................................                New York                 100%
  CDC - Asbany Corp.............................................                New York                 100%
  Charter One Credit Corp.......................................                  Ohio                   100%
  Charter One Securities, Inc...................................                  Ohio                   100%
  First Financial Services and Development Corporation..........                  Ohio                   100%
  Gable CVF, Inc................................................                New York                 100%
  GCCC, Inc. dba CTS............................................                  Ohio                   100%
  Investment Network, Inc.......................................                Illinois                 100%
  Servco, Inc...................................................                  Ohio                   100%
  Shore Holdings, Inc...........................................                New York                 100%
  SPF Insurance Agency, Inc.....................................                Illinois                 100%
  Superior West, Inc............................................                 Nevada                  100%
  1215 Financial Center Associates Ltd..........................                  Ohio                   99%

SUBSIDIARIES OF CHARTER ONE MORTGAGE CORP.

  AHF Securities Limited........................................                New York                 100%
  AHF Subordinated Securities Limited...........................                New York                 100%

SUBSIDIARIES OF FIRST FINANCIAL SERVICES AND
  DEVELOPMENT CORPORATION

  Bay Life Insurance Company, Inc. .............................                 Arizona                 100%
  Charter One Auto Finance Corp.................................                New York                 100%
  Charter One Insurance Agency, Inc.............................                  Ohio                   100%
  Charter One Mortgage Corp.....................................                New York                 100%
  ICX Corporation. .............................................                  Ohio                   100%
  Real Estate Appraisal Services, Inc. .........................                  Ohio                   100%
  1001 Insurance Agency, Inc. ..................................                Michigan                 100%

SUBSIDIARY OF INVESTMENT NETWORK, INC.

  Investment Network Advisors, Inc..............................                Illinois                 100%

SUBSIDIARIES OF SERVCO, INC.

  Thriftco, Inc.................................................                  Ohio                   100%
  1001 Services, Inc............................................                Michigan                 100%

SUBSIDIARY OF SUPERIOR WEST INC.

  Warm Springs Investments, Inc.................................                 Nevada                  100%

EX-23.1

   1
EXHIBIT 23.1

CONSENT OF DELOITTE & TOUCHE LLP

                          INDEPENDENT AUDITORS' CONSENT

Charter One Financial, Inc.

We consent to the incorporation by reference in Registration Statement Nos.
33-23805, 33-61273, 333-33259, 333-42823, 333-33169, 333-70007, 333-65137,
333-67431 and 333-85207 of Charter One Financial, Inc. on Forms S-8 of our
report dated January 23, 2001 (which expresses an unqualified opinion and refers
to the report of other auditors on the consolidated financial statements of St.
Paul Bancorp, Inc., which was merged with Charter One Financial, Inc.) appearing
in this Annual Report on Form 10-K of Charter One Financial, Inc. for the year
ended December 31, 2000.

/s/Deloitte & Touche LLP

Cleveland, Ohio
March 12, 2001

EX-23.2

   1

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP

                         CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements of
Charter One Financial, Inc. described in the following table of our report dated
January 28, 1999 with respect to the consolidated statements of income,
stockholders' equity and cash flows of St. Paul Bancorp, Inc. for the year ended
December 31, 1998 included in the Annual Report (Form 10-K) of Charter One
Financial, Inc. for the year ended December 31, 2000:

REGISTRATION STATEMENT
- ----------------------



FORM          NUMBER          PURPOSE
- ----          ------          -------

                      
S-8           33-23805        Charter One Financial, Inc. Long-Term Stock Incentive Plan
                              Charter One Financial, Inc. Directors Stock Option Plan

S-8           33-61273        FirstFed Michigan Corporation 1983 Stock Option Plan
                              FirstFed Michigan Corporation 1991 Stock Option Plan

S-8           333-33259       1986 Stock Option Plan and 1992 Stock-Based
                              Compensation Plan of RCSB Financial, Inc.

S-8           333-42823       Charter One Financial, Inc. 1997 Stock Option and
                              Incentive Plan


S-8           333-33169       Home Federal Savings Bank Stock Compensation Program
                              and Haverfield 1995 Stock Option Plan

S-8           333-70007       Charter One Bank Retirement Savings Plan

S-8           333-65137       ALBANK Financial Corporation 1992 Stock Incentive
                              Plan for Key Employees
                              ALBANK Financial Corporation 1992 Stock Incentive
                              Plan for Outside Directors
                              ALBANK Financial Corporation 1995 Stock Incentive
                              Plan for Outside Directors
                              Marble Financial Corporation 1986 Stock Option Plan
                              Marble Financial Corporation 1994 Stock Option Plan

S-8           333-67431       RCSB Financial, Inc. Non-Employee Director Stock
                              Plan and RCSB Financial, Inc. Non-Employee Director
                              Deferred Compensation Plan

S-8           333-85207       St. Paul Bancorp, Inc. Stock Option Plan
                              St. Paul Bancorp, Inc. 1995 Incentive Plan
                              St. Paul Bancorp, Inc. Employee Incentive Plan
                              Beverly Bancorporation 1994 Incentive Stock Option Plan
                              Beverly Bancorporation 1997 Incentive Stock Option Plan


/s/Ernst & Young LLP

Chicago, Illinois
March 12, 2001

EX-99.1

   1
EXHIBIT 99.1

REPORT OF ERNST & YOUNG LLP

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Charter One Financial, Inc.

We have audited the consolidated statements of income, stockholders' equity, and
cash flows of St. Paul Bancorp, Inc. for the year ended December 31, 1998 (not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
St. Paul Bancorp, Inc. for the year ended December 31, 1998, in conformity with
accounting principles generally accepted in the United States.

/s/Ernst & Young LLP

Chicago, Illinois
January 28, 1999