##### Table of Contents



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SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549




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FORM 10-Q

| |  |      |  |                                                                                           | 
| |  | ---- |  | ----------------------------------------------------------------------------------------- | 
| |  | [X]  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934  
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| |  |      |  | For the quarterly period ended March 31, 2003                                            
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| |  |      |  | OR                                                                                       
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| |  |      |  |                                                                                          
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| |  | [  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-15495



CHARTER ONE FINANCIAL,
INC. (Exact name of registrant as specified in its charter)


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

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

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X   No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X   No

The number of shares outstanding of the registrants sole class of common stock
as of April 30, 2003 was 225,004,656.





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TABLE OF CONTENTS



|                                                         |                                                                                               |                                                |  |  |  |  |  | 
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                          
|                                                         | ITEM 1. Financial Statements                                                                 
|                                                         |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|                                                         |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME             
|                                                         |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                                                         |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
|                                                         | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                         | ITEM 3. Quantitative and Qualitative Disclosure About Market Risk                            
|                                                         | ITEM 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                             
|                                                         | ITEM 5. Other Information                                                                    
|                                                         | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                              
|SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
|SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
|INDEX TO EXHIBITS                                       
|EX-11  Computation of Per Share Earnings                
|EX-99.1  Section 906 Certifications                     



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##### Table of Contents



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TABLE OF CONTENTS

|                  |    |  |    |                                                                                       |                               |                             |    |  |  | 
|----------------- | -- |  | -- | ------------------------------------------------------------------------------------- | ----------------------------- | --------------------------- | -- |  |  | 
|Item              |    |  |    |                                                                                       |                               |                             |    | 
|Number            |    |  |    |                                                                                       |                               | Page                       
|                  |    |  |    |                                                                                       |                               |                            
|                  |    |  |    |                                                                                       | PART I  FINANCIAL STATEMENTS |                             |    |  | 
|                 
|                 
|                 
|                 
|                 
|                  | 1. |  |    | Financial Statements                                                                  |                               |                             |    | 
|                 
|                 
|                 
|                 
|                 
|                  |    |  |    | Consolidated
Statements of Financial Condition 
March 31, 2003 and December 31, 2002 |                               |                             | 1  | 
|                 
|                 
|                 
|                 
|                 
|                  |    |  |    | Consolidated
Statements of Income 

Three months ended March 31, 2003 and 2002       |                               |                             | 2  | 
|                 
|                 
|                 
|                 
|                 
|                  |    |  |    | Consolidated
Statements of Cash Flows 
Three months ended March 31, 2003 and 2002    |                               |                             | 3  | 
|                 
|                 
|                 
|                 
|                 
|                  |    |  |    | Notes to Consolidated Financial Statements                                            |                               |                             | 4  | 
|                 
|                 
|                 
|                 
|                 
|                  | 2. |  |    | Managements Discussion and Analysis of Financial Condition and Results of Operations |                               |                             | 6  | 
|                 
|                 
|                 
|                 
|                 
|                  | 3. |  |    | Quantitative and Qualitative Disclosure About Market Risk                             |                               |                             | 19 | 
|                 
|                 
|                 
|                 
|                 
|                  | 4. |  |    | Controls and Procedures                                                               |                               |                             | 19 | 
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|                 
|                 
|                 
|                 
|                  |    |  |    |                                                                                       |                               | PART II  OTHER INFORMATION |    |  |  | 
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|                 
|                 
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|                 
|                  | 5. |  |    | Other Information                                                                     |                               |                             | 19 | 
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|                 
|                 
|                 
|                 
|                  | 6. |  |    | Exhibits and Reports on Form 8-K                                                      |                               |                             | 19 | 
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|Signatures        |    |  | 20 |                                                                                      
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|Certifications    |    |  | 21 |                                                                                      
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|Index to Exhibits |    |  | 23 |                                                                                      





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. Financial Statements




CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)

|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |            |            |            |  | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | ------------------------------------ | ---------- | ---------------------- | ---------- | ---------- | ---------- | ---------- |  | 
|                                                      |                                                                                                                   |                                 |                                            |                                      |            | 3/31/03                |            | 12/31/02  
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            | (Dollars in thousands,
|                                                      |                                                                                                                   |                                 |                                            |                                      |            | except per share data)
|                                                      |                                                                                                                   |                                 |                                            | ASSETS                               |            |                        |            |            |            |            |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Cash accounts                                         |                                                                                                                   | $                               | 497,969                                    |                                      |            | $                      | 436,970    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Interest-bearing deposits with banks                  |                                                                                                                   |                                 | 9,757                                      |                                      |            |                        | 9,731      |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal funds sold and other                          |                                                                                                                   |                                 | 1,350,513                                  |                                      |            |                        | 512        |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   | Total cash and cash equivalents |                                            |                                      | 1,858,239  |                        |            |            | 447,213    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Investment securities:                                |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale                                                                                                |                                 |                                            | 227,137                              |            |                        |            | 210,095    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $4,457 and $4,276)                                                                |                                 |                                            | 4,157                                |            |                        |            | 3,973      |           
|                                                     
|                                                     
|                                                     
|                                                     
|Mortgage-backed securities:                           |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale                                                                                                |                                 |                                            | 12,799,506                           |            |                        |            | 11,536,608 |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $466,183 and $565,072)                                                            |                                 |                                            | 445,207                              |            |                        |            | 540,781    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans and leases, net                                 |                                                                                                                   |                                 | 24,685,258                                 |                                      |            |                        | 25,852,846 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans held for sale                                   |                                                                                                                   |                                 | 291,729                                    |                                      |            |                        | 351,892    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Bank owned life insurance                             |                                                                                                                   |                                 | 837,660                                    |                                      |            |                        | 829,043    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank and Federal Reserve Bank stock |                                                                                                                   |                                 | 679,339                                    |                                      |            |                        | 681,923    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Premises and equipment                                |                                                                                                                   |                                 | 355,084                                    |                                      |            |                        | 353,730    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest receivable                           |                                                                                                                   |                                 | 149,989                                    |                                      |            |                        | 154,962    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Real estate and other collateral owned                |                                                                                                                   |                                 | 42,106                                     |                                      |            |                        | 42,980     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loan servicing assets                                 |                                                                                                                   |                                 | 139,085                                    |                                      |            |                        | 128,564    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill                                              |                                                                                                                   |                                 | 386,372                                    |                                      |            |                        | 386,372    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                                                                                   |                                 | 347,735                                    |                                      |            |                        | 375,090    |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   | Total assets                    |                                            | $                                    | 43,248,603 |                        |            | $          | 41,896,072 |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   |                                 |                                            | LIABILITIES AND SHAREHOLDERS EQUITY |            |                        |            |            |            |            |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Deposits                                              |                                                                                                                   | $                               | 27,383,615                                 |                                      |            | $                      | 27,527,843 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank advances                       |                                                                                                                   |                                 | 10,446,630                                 |                                      |            |                        | 9,037,925  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal funds purchased and repurchase agreements     |                                                                                                                   |                                 | 52,496                                     |                                      |            |                        | 283,912    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other borrowings                                      |                                                                                                                   |                                 | 707,591                                    |                                      |            |                        | 708,853    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                 | 46,706                                     |                                      |            |                        | 23,595     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest payable                              |                                                                                                                   |                                 | 72,017                                     |                                      |            |                        | 38,372     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued expenses and other liabilities                |                                                                                                                   |                                 | 1,307,416                                  |                                      |            |                        | 1,191,747  |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   | Total liabilities               |                                            |                                      | 40,016,471 |                        |            |            | 38,812,247 |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|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; 227,571,468 and 227,571,468 shares issued |                                 |                                            | 2,276                                |            |                        |            | 2,276      |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Additional paid-in capital                                                                                        |                                 |                                            | 2,197,388                            |            |                        |            | 2,193,095  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Retained earnings                                                                                                 |                                 |                                            | 908,486                              |            |                        |            | 824,564    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Less 2,539,076 and 2,781,151 shares of common stock held in treasury at cost                                      |                                 |                                            | (74,423                              | )          |                        |            | (82,610    | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated other comprehensive income                                                                            |                                 |                                            | 198,405                              |            |                        |            | 146,500    |           
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   |                                 | Total shareholders equity                 |                                      |            | 3,232,132              |            |            |            | 3,083,825  | 
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           
|                                                      |                                                                                                                   |                                 | Total liabilities and shareholders equity |                                      | $          | 43,248,603             |            |            | $          | 41,896,072 | 
|                                                      |                                                                                                                   |                                 |                                            |                                      |            |                        |            |           

See Notes to Consolidated Financial Statements.

1



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##### Table of Contents






CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

|                                      |                                     |                                                               |         |                        |         |         |         |             |         | 
|------------------------------------- | ----------------------------------- | ------------------------------------------------------------- | ------- | ---------------------- | ------- | ------- | ------- | ----------- | ------- | 
|                                      |                                     |                                                               |         | Three Months Ended    
|                                      |                                     |                                                               |         |                       
|                                      |                                     |                                                               |         | 3/31/03                |         | 3/31/02
|                                      |                                     |                                                               |         |                        |         |        
|                                      |                                     |                                                               |         | (Dollars in thousands,
|                                      |                                     |                                                               |         | except per share data)
|Interest income:                      |                                     |                                                               |         |                        |         |         |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Loans and leases                    |                                                               | $       | 377,724                |         |         | $       | 427,838     |        
|                                     
|                                     
|                                     
|                                     
|                                      | Mortgage-backed securities:         |                                                               |         |                        |         |         |         |             |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                     | Available for sale                                            |         |                        | 149,311 |         |         |             | 111,128 | 
|                                     
|                                     
|                                     
|                                     
|                                      |                                     | Held to maturity                                              |         |                        | 8,269   |         |         |             | 14,800  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Investment securities:              |                                                               |         |                        |         |         |         |             |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                     | Available for sale                                            |         |                        | 3,043   |         |         |             | 2,962   | 
|                                     
|                                     
|                                     
|                                     
|                                      |                                     | Held to maturity                                              |         |                        | 54      |         |         |             | 71      | 
|                                     
|                                     
|                                     
|                                     
|                                      | Other interest-earning assets       |                                                               |         | 7,385                  |         |         |         | 7,912       |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Total interest income                                         |         |                        | 545,786 |         |         |             | 564,711 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Interest expense:                     |                                     |                                                               |         |                        |         |         |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Deposits                            |                                                               |         | 133,743                |         |         |         | 170,401     |        
|                                     
|                                     
|                                     
|                                     
|                                      | Federal Home Loan Bank advances     |                                                               |         | 99,799                 |         |         |         | 103,716     |        
|                                     
|                                     
|                                     
|                                     
|                                      | Other borrowings                    |                                                               |         | 13,203                 |         |         |         | 7,497       |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Total interest expense                                        |         |                        | 246,745 |         |         |             | 281,614 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Net interest income                                           |         |                        | 299,041 |         |         |             | 283,097 | 
|                                     
|                                     
|                                     
|                                     
|Provision for loan and lease losses   |                                     |                                                               | 61,471  |                        |         |         | 28,717  |            
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Net interest income after provision for loan
and lease losses |         |                        | 237,570 |         |         |             | 254,380 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Other income:                         |                                     |                                                               |         |                        |         |         |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Retail banking                      |                                                               |         | 84,100                 |         |         |         | 73,756      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Mortgage banking                    |                                                               |         | (27                    | )       |         |         | 11,290      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Leasing operations                  |                                                               |         | (6,856                 | )       |         |         | 270         |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net gains                           |                                                               |         | 76,653                 |         |         |         | 21,727      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Bank owned life insurance and other |                                                               |         | 7,956                  |         |         |         | 9,508       |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Total other income                                            |         |                        | 161,826 |         |         |             | 116,551 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Administrative expenses:              |                                     |                                                               |         |                        |         |         |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Compensation and employee benefits  |                                                               |         | 87,056                 |         |         |         | 77,252      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net occupancy and equipment         |                                                               |         | 31,186                 |         |         |         | 28,563      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Marketing expenses                  |                                                               |         | 13,647                 |         |         |         | 8,829       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Federal deposit insurance premiums  |                                                               |         | 1,142                  |         |         |         | 1,211       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Other administrative expenses       |                                                               |         | 50,261                 |         |         |         | 46,307      |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Total administrative expenses                                 |         |                        | 183,292 |         |         |             | 162,162 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Income before income taxes            |                                     |                                                               | 216,104 |                        |         |         | 208,769 |            
|                                     
|                                     
|                                     
|                                     
|Income taxes                          |                                     |                                                               | 68,613  |                        |         |         | 66,284  |            
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      |                                     | Net income                                                    |         | $                      | 147,491 |         |         | $           | 142,485 | 
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Basic earnings per share(1)           |                                     | $                                                             | .66     |                        |         | $       | .61     |            
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Diluted earnings per share(1)         |                                     | $                                                             | .64     |                        |         | $       | .60     |            
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Average common shares outstanding(1): |                                     |                                                               |         |                        |         |         |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Basic                               |                                                               |         | 224,997,398            |         |         |         | 231,684,629 |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|                                      | Diluted                             |                                                               |         | 230,460,847            |         |         |         | 238,221,934 |        
|                                      |                                     |                                                               |         |                        |         |         |         |            
|Cash dividends declared per share(1)  |                                     | $                                                             | .22     |                        |         | $       | .19     |            
|                                      |                                     |                                                               |         |                        |         |         |         |            



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|(1) |  | Restated to reflect the 5% stock dividend issued September 30, 2002.
|--- |  | --------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

2



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##### Table of Contents






CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |            |           |           | 
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------------- | ---------- | ---------------------- | ------- | --------- | ---------- | --------- | --------- | 
|                                                   |                                                                                   |                                                                                                  |                                           |            | Three Months Ended    
|                                                   |                                                                                   |                                                                                                  |                                           |            |                       
|                                                   |                                                                                   |                                                                                                  |                                           |            | 3/31/03                |         | 3/31/02  
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |          
|                                                   |                                                                                   |                                                                                                  |                                           |            | (Dollars in thousands)
|Cash flows from operating activities:              |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                        |                                                                                                  | $                                         | 147,491    |                        |         | $         | 142,485    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                                                  |                                           |            |                        |         |           |            |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Provision for loan and lease losses                                                              |                                           |            | 61,471                 |         |           |            | 28,717    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Net gains                                                                                        |                                           |            | (76,653                | )       |           |            | (21,727   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Accretion of discounts, amortization of premiums, amortization of
goodwill and depreciation, net |                                           |            | 55,602                 |         |           |            | 20,608    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Origination of loans held for sale                                                               |                                           |            | (763,051               | )       |           |            | (644,097  | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Proceeds from sale of loans held for sale                                                        |                                           |            | 762,027                |         |           |            | 642,876   |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Increase in accrued interest payable                                                             |                                           |            | 33,645                 |         |           |            | 2,109     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Other                                                                                            |                                           |            | 107,712                |         |           |            | 84,179    |          
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                   |                                                                                   |                                                                                                  | Net cash provided by operating activities |            |                        | 328,244 |           |            |           | 255,150   | 
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|Cash flows from investing activities:              |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net principal disbursed on loans and leases                                       |                                                                                                  |                                           | (2,252,822 | )                      |         |           | (1,552,891 | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from principal repayments and maturities of:                             |                                                                                                  |                                           |            |                        |         |           |            |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities held to maturity                                                      |                                           |            | 96,981                 |         |           |            | 155,391   |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | 974,423                |         |           |            | 465,805   |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities held to maturity                                                           |                                           |            | 75                     |         |           |            | 1,490     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | 23,533                 |         |           |            | 20,733    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from sale of:                                                            |                                                                                                  |                                           |            |                        |         |           |            |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | 2,545,803              |         |           |            | 2,181,745 |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | 1,029                  |         |           |            | 177       |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Federal Home Loan Bank and Federal Reserve Bank stock                                            |                                           |            | 14,629                 |         |           |            | 6,944     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of:                                                                      |                                                                                                  |                                           |            |                        |         |           |            |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | (1,209,871             | )       |           |            |          |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | (42,437                | )       |           |            | (24,363   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Federal Home Loan Bank and Federal Reserve Bank stock                                            |                                           |            | (5,051                 | )       |           |            | (1,035    | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Loans                                                                                            |                                           |            | (3,765                 | )       |           |            | (4,715    | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Loan servicing assets, including those originated                                                |                                           |            | (40,289                | )       |           |            | (32,067   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                                                                             |                                                                                                  |                                           | (25,650    | )                      |         |           | (15,377    | )        
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                   |                                                                                   |                                                                                                  | Net cash provided by investing activities |            |                        | 76,588  |           |            |           | 1,201,837 | 
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|Cash flows from financing activities:              |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase (decrease) in short-term borrowings                                  |                                                                                                  |                                           | 178,584    |                        |         |           | (971,027   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from long-term borrowings                                                |                                                                                                  |                                           | 1,004,160  |                        |         |           | 25,647     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Repayments of long-term borrowings                                                |                                                                                                  |                                           | (4,755     | )                      |         |           | (4,628     | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Increase in deposits                                                              |                                                                                                  |                                           | 23,111     |                        |         |           | 517,781    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Decrease in advance payments by borrowers for taxes and insurance                 |                                                                                                  |                                           | (143,816   | )                      |         |           | (9,410     | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Payment of dividends on common stock                                              |                                                                                                  |                                           | (49,508    | )                      |         |           | (44,034    | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from issuance of common stock                                            |                                                                                                  |                                           | 15,208     |                        |         |           | 19,727     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of treasury stock                                                        |                                                                                                  |                                           | (16,790    | )                      |         |           | (152,208   | )        
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                   |                                                                                   | Net cash provided by (used in) financing activities                                              |                                           |            | 1,006,194              |         |           |            | (618,152  | )        
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|Net increase in cash and cash equivalents          |                                                                                   |                                                                                                  | 1,411,026                                 |            |                        |         | 838,835   |           
|                                                  
|                                                  
|                                                  
|                                                  
|Cash and cash equivalents, beginning of the period |                                                                                   |                                                                                                  | 447,213                                   |            |                        |         | 516,520   |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|Cash and cash equivalents, end of period           |                                                                                   | $                                                                                                | 1,858,239                                 |            |                        | $       | 1,355,355 |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|Supplemental disclosure of cash flow information:  |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for interest on deposits and borrowings                                 |                                                                                                  | $                                         | 212,689    |                        |         | $         | 403,489    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for income taxes                                                        |                                                                                                  |                                           |           |                        |         |           | 2,500      |          
|                                                  
|                                                  
|                                                  
|                                                  
|Supplemental schedule of noncash activities:       |                                                                                   |                                                                                                  |                                           |            |                        |         |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Loans exchanged for mortgage-backed securities                                    |                                                                                                  |                                           | 3,419,116  |                        |         |           | 2,717,271  |          



---

| |  | 
| |  | 

See Notes to Consolidated Financial Statements

3



---



##### Table of Contents






CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



|1. |  | These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Charter One Financial, Inc. (the Company or Charter
One) Annual Report on Form 10-K for the year ended December 31, 2002.
The interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results
for the periods presented. Such adjustments are of a normal recurring
nature. The results of operations for the interim periods disclosed
herein are not necessarily indicative of the results that may be expected
for a full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Charter One has one operating segment, consumer banking, which offers an
array of products and services to its customers. Pursuant to its consumer
banking strategy, emphasis is placed on building relationships and
identifying cross-sell opportunities with its customers, as opposed to
building specific lines of business. As a result, Charter One works 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|3. |  | In November 2002, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. This interpretation expands the disclosures to be
made by a guarantor in its financial statements about its obligations
under certain guarantees and requires the guarantor to recognize a
liability for the fair value of an obligation assumed under a guarantee.
FIN 45 clarifies the requirements of Statement of Financial Accounting
Standards (SFAS) No. 5, Accounting for Contingencies, relating to
guarantees. In general, FIN 45 applies to contracts or indemnification
agreements that contingently require the guarantor to make payments to the
guaranteed party based on changes in an underlying that is related to an
asset, liability, or equity security of the guaranteed party. Certain
guarantee contracts are excluded from both the disclosure and recognition
requirements of FIN 45, including, among others, guarantees relating to
employee compensation, residual value guarantees under capital lease
arrangements, commercial letters of credit, loan commitments, subordinated
interests in a special purpose entity, and guarantees of a companys own
future performance. Other guarantees are subject to the disclosure
requirements of FIN 45 but not to the recognition provisions and include,
among others, a guarantee accounted for as a derivative instrument under
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, a parents guarantee of debt owed to a third
party by its subsidiary or vice versa, and a guarantee which is based on
performance, not price. The disclosure requirements of FIN 45 are
effective for the Company as of December 31, 2002, and require disclosure
of the nature of the guarantee, the maximum potential amount of future
payments that the guarantor could be required to make under the guarantee,
and the current amount of the liability, if any, for the guarantors
obligations under the guarantee. The recognition requirements of FIN 45
are to be applied prospectively to guarantees issued or modified after
December 31, 2002. Guarantees that have been entered into by the Company
are disclosed in Liquidity under Item 2, Managements Discussion and
Analysis of Financial Condition and Results of Operations. The adoption
of FIN 45 did not have a material impact on the Companys consolidated
financial condition or results of operations.
|  
|4. |  | On December 31, 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation -Transition and Disclosure, an amendment of SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides
alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of
an entitys accounting policy decisions with respect to stock-based
employee compensation. Finally, SFAS No. 148 amends Accounting Principles
Board (APB) Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information. The
Company has elected to continue application of APB Opinion No. 25 and
related interpretations in accounting for its stock-based employee
compensation plans. Accordingly, no stock-based employee compensation
cost is, or is expected to be, reflected in net income, as all options
granted under the Companys stock-based employee compensation plans had an
exercise price equal to the market value of the underlying common stock on
the date of grant. Had stock-based employee compensation costs 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, as amended by SFAS No. 148, the Companys net income and
earnings per share would have been reduced to the pro forma amounts
indicated below (per share data has been restated to reflect all stock
dividends as of March 31, 2003):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

4



---



##### Table of Contents



|                            |                                                                                                                         |  |                        |         |         |  |   |         | 
|--------------------------- | ----------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ------- |  | - | ------- | 
|                            |                                                                                                                         |  | Three Months Ended    
|                            |                                                                                                                         |  |                       
|                            |                                                                                                                         |  | 3/31/03                |         | 3/31/02
|                            |                                                                                                                         |  |                        |         |        
|                            |                                                                                                                         |  | (Dollars in thousands,
|                            |                                                                                                                         |  | except per share data)
|Net income:                 |                                                                                                                         |  |                        |         |         |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported                                                                                                             |  | $                      | 147,491 |         |  | $ | 142,485 | 
|                           
|                           
|                           
|                           
|                            | Less: Total stock-based employee compensation expense
determined under the fair value method for all awards, net of tax |  |                        | 7,570   |         |  |   | 7,099   | 
|                            |                                                                                                                         |  |                        |         |         |  |   |        
|                            | Pro forma                                                                                                               |  | $                      | 139,921 |         |  | $ | 135,386 | 
|                            |                                                                                                                         |  |                        |         |         |  |   |        
|Basic earnings per share:   |                                                                                                                         |  |                        |         |         |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported                                                                                                             |  | $                      | .66     |         |  | $ | .61     | 
|                           
|                           
|                           
|                           
|                            | Pro forma                                                                                                               |  |                        | .62     |         |  |   | .59     | 
|                           
|                           
|                           
|                           
|Diluted earnings per share: |                                                                                                                         |  |                        |         |         |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported                                                                                                             |  |                        | .64     |         |  |   | .60     | 
|                           
|                           
|                           
|                           
|                            | Pro forma                                                                                                               |  |                        | .61     |         |  |   | .57     | 



| |  | The fair value of each stock option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in the three months ended March 31, 2003 and 2002,
respectively:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                    |             |         |  |  |             |  
|----------------------- |  | ------------------ | ----------- | ------- |  |  | ----------- | -
|                        |  | Three Months Ended
|                        |  |                   
|                        |  | 3/31/03            |             | 3/31/02
|                        |  |                    |             |        
|Dividend yield          |  |                    | 3.00        | %       |  |  | 3.00        | %
|                       
|                       
|                       
|                       
|Volatility              |  |                    | 47.24-47.26 | %       |  |  | 35.94-36.12 | %
|                       
|                       
|                       
|                       
|Risk-free interest rate |  |                    | 3.35-3.36   | %       |  |  | 4.54-4.98   | %
|                       
|                       
|                       
|                       
|Life of grant           |  | 6 years            |             | 6 years



|   |  | The estimated weighted-average date of grant fair value (based on the above
option-pricing model and assumptions) for stock options granted in the three
months ended March 31, 2003 and 2002 was $10.99 and $8.84, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN 46 provides guidance on how to identify a variable
interest entity (VIE) and determine when the assets, liabilities,
noncontrolling interests, and results of operations of a VIE need to be
included in a companys consolidated financial statements. FIN 46 also
requires additional disclosures by primary beneficiaries and other
significant variable interest holders. The provisions of the
interpretation became effective upon issuance. The adoption of FIN 46 did
not have a material impact on the Companys consolidated financial
condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|6. |  | On April 30, 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends SFAS No. 133 for certain
decisions made by the FASB as part of the Derivatives Implementation Group
(DIG) process. For those amendments that relate to SFAS No. 133
implementation guidance, the specific SFAS No. 133 Implementation Issue
necessitating the amendment is identified. If the amendment
relates to a cleared issue, the clearance date also is noted. SFAS
No. 149 also amends SFAS No. 133 to incorporate clarifications of the
definition of a derivative. SFAS No. 149 contains amendments relating
to FASB Concepts Statement No. 7, Using Cash Flow Information and
Present Value in Accounting Measurements, SFAS No. 65,
Accounting for Certain Mortgage Banking Activities, SFAS No. 91,
Accounting for Nonrefundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Costs of Leases, SFAS No. 95,
Statement of Cash Flows, and SFAS No. 126, Exemption from
Certain Required Disclosures about Financial Instruments for Certain
Nonpublic Entities.
|  
|   |  | SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of SFAS No. 149 should be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue
to be applied in accordance with their respective effective dates. In
addition, guidance related to forward purchases or sales of
when-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts
entered into after June 30, 2003. Management has not completed the
process of evaluating SFAS No. 149 and therefore has not determined
the impact that adopting this statement will have on the consolidated
financial condition or results of
operations                                                                                                                                                                                  

5



---



##### Table of Contents






ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

HOLDING COMPANY BUSINESS

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.

General

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 One Bank, N.A., which we sometimes refer to in this document
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. As of March 31, 2003, the Bank
and its subsidiaries were doing business through 477 full-service branches, 26
loan production offices and 918 ATMs.

Pending Acquisition

On January 16, 2003, the Boards of Directors of the Company and Advance
Bancorp, Inc. announced a definitive agreement pursuant to which the Company
will acquire Advance Bancorp for $72 million in Charter One common stock.
Advance Bank, the principal subsidiary of Advance Bancorp, is a state-chartered
commercial bank headquartered in Lansing, Illinois with approximately $632
million in assets, $491 million in deposits, and 14 branch offices located in
Cook County, Illinois. The merger is expected to close in the second quarter of 2003. The transaction has been
approved by Advance Bancorp shareholders and is subject to required bank
regulatory approvals.

Discussion of Forward-Looking Statements

This document, including information incorporated by reference, contains, and
future filings by Charter One on Form 10-K, Form 10-Q and Form 8-K and future
oral and written statements and press releases by Charter One and its
management may contain, forward-looking statements about Charter One 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, deposits and
refinancing of liabilities, growth opportunities, interest rates, acquisition
and divestiture opportunities, and synergies, efficiencies, cost savings and
funding advantages expected to be realized from prior acquisitions. These
forward-looking statements are based on currently available competitive,
financial and economic data and managements views and assumptions regarding
future events. These forward-looking statements are inherently uncertain, and
investors must recognize that actual results may differ from those expressed or
implied in the forward-looking statements. Accordingly, Charter One cautions
readers not to place undue reliance on any forward-looking statements.

Many of these forward-looking statements appear throughout this document.
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 discussed below, as well as
other factors discussed elsewhere in this document and factors identified in
our filings with the Securities and Exchange Commission 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. Among the factors that could cause our actual results to
differ from these forward-looking statements are:



| |  | 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 loans and leases and other assets;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the effects of, and changes in, trade, monetary and fiscal policies and
laws, including interest rate policies of the Federal Reserve Board;                                                                                                                                                                                                         
| 
| |  | financial markets, monetary and interest rate fluctuations, particularly
the relative relationship of short-term interest rates to long-term
interest rates;                                                                                                                                                                                         

6



---



##### Table of Contents





| |  | the timely development of and acceptance of new products and services of
Charter One 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 impact of changes in financial services laws and regulations
(including laws and regulations concerning taxes, accounting standards,
banking, securities and insurance); legislative or regulatory changes may
adversely affect the business in which we are engaged;
| 
| |  | the impact of technological changes;                                                                                                                                                                                                                                     
| 
| |  | our ability to successfully integrate acquisitions into our existing
operations, and the availability of new acquisitions, joint ventures and
alliance opportunities that build shareholder value;                                                                       
| 
| |  | changes in consumer spending and saving habits; and                                                                                                                                                                                                                      
| 
| |  | our success at managing the risks involved in the foregoing.                                                                                                                                                                                                             

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.

RESULTS OF OPERATIONS

Performance Overview

Figure 1 sets forth financial results and annualized performance ratios for the
three months ended March 31, 2003 and 2002. Per share data have been restated
to reflect the 5% stock dividend issued September 30, 2002.

Selected Financial Results and Ratios(Figure 1)

|                                               |  |                        |         |         |  |   |         |  
|---------------------------------------------- |  | ---------------------- | ------- | ------- |  | - | ------- | -
|                                               |  | Three Months Ended    
|                                               |  |                       
|                                               |  | 3/31/03                |         | 3/31/02
|                                               |  |                        |         |        
|                                               |  | (Dollars in thousands,
|                                               |  | except per share data)
|Net income                                     |  | $                      | 147,491 |         |  | $ | 142,485 |  
|                                              
|                                              
|                                              
|                                              
|Diluted earnings per share                     |  |                        | .64     |         |  |   | .60     |  
|                                              
|                                              
|                                              
|                                              
|Return on average assets                       |  |                        | 1.38    | %       |  |   | 1.52    | %
|                                              
|                                              
|                                              
|                                              
|Return on average equity                       |  |                        | 18.48   |         |  |   | 19.71   |  
|                                              
|                                              
|                                              
|                                              
|Return on average tangible equity(1)           |  |                        | 21.29   |         |  |   | 22.50   |  
|                                              
|                                              
|                                              
|                                              
|Average equity to average assets               |  |                        | 7.46    |         |  |   | 7.71    |  
|                                              
|                                              
|                                              
|                                              
|Net interest income to administrative expenses |  |                        | 1.63x   |         |  |   | 1.75x   |  
|                                              
|                                              
|                                              
|                                              
|Administrative expenses to average assets      |  |                        | 1.71    | %       |  |   | 1.73    | %
|                                              
|                                              
|                                              
|                                              
|Efficiency ratio(2)                            |  |                        | 39.77   |         |  |   | 40.58   |  



---

|(1) |  | Computed as the ratio of net income, excluding the amortization of other
intangible assets, to average tangible equity.
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Computed as the ratio of total administrative expenses to net interest
income and total other income.                  

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 periods 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.
Noninterest-bearing demand deposit accounts are included in noninterest-bearing
liabilities. The cost of liabilities includes the annualized effect of
interest rate risk management instruments.

7



---



##### Table of Contents



Average Balances, Interest Rates and Yields/Costs(Figure 2)

|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |      |      |      | 
|----------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------------ | ---------- | ---------------------- | ---------- | -------- | ------- | ------- | ------- | ------- | ---- | -------- | ---- | --------- | ---------- | ---------- | ---------- | ------- | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                                        |                                       |                                       |                                            |            | Three Months Ended    
|                                                                        |                                       |                                       |                                            |            |                       
|                                                                        |                                       |                                       |                                            |            | 3/31/03                |            | 3/31/02 
|                                                                        |                                       |                                       |                                            |            |                        |            |         
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      | Avg.     |      |           |            |            |            |         |         |         |         | Avg.  
|                                                                        |                                       |                                       |                                            |            | Average                |            |          |         |         |         | Yield/  |      | Average  |      |           |            |            |            | Yield/ 
|                                                                        |                                       |                                       |                                            |            | Balance                |            | Interest |         | Cost    |         | Balance |      | Interest |      | Cost     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |          
|                                                                        |                                       |                                       |                                            |            | (Dollars in thousands)
|Interest-earning assets:                                                |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans and leases                      |                                       | $                                          | 25,851,471 |                        |            | $        | 377,724 |         |         |         | 5.86 | %        |      | $         | 25,530,842 |            |            | $       | 427,838 |         |         |        | 6.73 | %   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Mortgage-backed securities:           |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Available for sale                    |                                            |            | 12,656,663             |            |          |         | 149,311 |         |         |      | 4.72     |      |           |            | 7,377,573  |            |         |         | 111,128 |         |        |      | 6.03 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Held to maturity                      |                                            |            | 480,882                |            |          |         | 8,269   |         |         |      | 6.88     |      |           |            | 879,440    |            |         |         | 14,800  |         |        |      | 6.73 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Investment securities:                |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Available for sale                    |                                            |            | 206,860                |            |          |         | 3,043   |         |         |      | 5.88     |      |           |            | 144,910    |            |         |         | 2,962   |         |        |      | 8.18 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Held to maturity                      |                                            |            | 4,060                  |            |          |         | 54      |         |         |      | 5.29     |      |           |            | 5,709      |            |         |         | 71      |         |        |      | 4.95 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other interest-earning assets         |                                       |                                            | 762,760    |                        |            |          | 7,385   |         |         |         | 3.87 |          |      |           | 846,552    |            |            |         | 7,912   |         |         |        | 3.74 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-earning assets              |            |                        | 39,962,696 |          |         |         | 545,786 |         |      |          | 5.48 |           |            |            | 34,785,026 |         |         |         | 564,711 |        |      |      | 6.51 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|Allowance for loan and lease losses                                     |                                       |                                       | (327,090                                   | )          |                        |            |          |         |         |         |         |      |          |      | (255,109  | )          |            |            |         |         |         |         |        |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Noninterest-earning assets                                              |                                       |                                       | 3,150,359                                  |            |                        |            |          |         |         |         |         |      |          |      | 2,954,656 |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total assets                               |            | $                      | 42,785,965 |          |         |         |         |         |      |          |      |           |            | $          | 37,484,573 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|Interest-bearing liabilities:                                           |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Deposits:                             |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Checking accounts                     |                                            | $          | 7,541,679              |            |          |         | 30,618  |         |         |      | 1.65     |      |           | $          | 6,137,213  |            |         |         | 36,380  |         |        |      | 2.40 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Money market and savings
accounts     |                                            |            | 7,929,274              |            |          |         | 30,327  |         |         |      | 1.55     |      |           |            | 6,780,737  |            |         |         | 37,230  |         |        |      | 2.23 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                       | Certificates of deposit               |                                            |            | 9,562,013              |            |          |         | 72,798  |         |         |      | 3.09     |      |           |            | 10,448,328 |            |         |         | 96,791  |         |        |      | 3.76 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total deposits                             |            |                        | 25,032,966 |          |         |         | 133,743 |         |      |          | 2.17 |           |            |            | 23,366,278 |         |         |         | 170,401 |        |      |      | 2.96 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        | Federal Home Loan Bank advances       |                                       |                                            | 10,410,188 |                        |            |          | 99,799  |         |         |         | 3.88 |          |      |           | 8,071,957  |            |            |         | 103,716 |         |         |        | 5.21 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other borrowings                      |                                       |                                            | 866,495    |                        |            |          | 13,203  |         |         |         | 6.10 |          |      |           | 460,700    |            |            |         | 7,497   |         |         |        | 6.51 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total borrowings                           |            |                        | 11,276,683 |          |         |         | 113,002 |         |      |          | 4.05 |           |            |            | 8,532,657  |         |         |         | 111,213 |        |      |      | 5.28 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-bearing liabilities         |            |                        | 36,309,649 |          |         |         | 246,745 |         |      |          | 2.75 |           |            |            | 31,898,935 |         |         |         | 281,614 |        |      |      | 3.58 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|Noninterest-bearing liabilities:                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Demand deposit accounts               |                                       |                                            | 2,017,036  |                        |            |          |         |         |         |         |      |          |      |           | 1,695,741  |            |            |         |         |         |         |        |      |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other noninterest-bearing
liabilities |                                       |                                            | 1,266,385  |                        |            |          |         |         |         |         |      |          |      |           | 997,966    |            |            |         |         |         |         |        |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       | Total noninterest-bearing
liabilities |                                            |            | 3,283,421              |            |          |         |         |         |         |      |          |      |           |            | 2,693,707  |            |         |         |         |         |        |      |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities                          |            |                        | 39,593,070 |          |         |         |         |         |      |          |      |           |            |            | 34,592,642 |         |         |         |         |        |      |      |      | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Shareholders equity                                                    |                                       |                                       | 3,192,895                                  |            |                        |            |          |         |         |         |         |      |          |      | 2,891,931 |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities and
shareholders equity |            | $                      | 42,785,965 |          |         |         |         |         |      |          |      |           |            | $          | 37,484,573 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|Net interest income                                                     |                                       |                                       |                                            |            |                        | $          | 299,041  |         |         |         |         |      |          |      |           |            |            | $          | 283,097 |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |            |            |         |         |         |         |        |     
|Interest rate spread                                                    |                                       |                                       |                                            |            |                        |            |          |         |         |         | 2.73    |      |          |      |           |            |            |            |         |         |         |         | 2.93   |     
|Net yield on average interest-earning assets                            |                                       |                                       |                                            |            |                        |            |          |         |         |         | 2.99    |      |          |      |           |            |            |            |         |         |         |         | 3.26   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Average interest-earning assets to
average interest-bearing liabilities |                                       |                                       |                                            |            |                        |            |          |         |         |         | 110.06  | %    |          |      |           |            |            |            |         |         |         |         | 109.05 | %   

8



---



##### Table of Contents



Figure 3 shows the approximate relative contribution of changes in average
interest rates and volume to changes in net interest income for the periods
indicated. Changes not solely attributable to volume or rate have been
allocated in proportion to the changes due to volume and rate. Amortization of
net deferred loan costs and automobile dealer reserves included as a reduction
in interest income was $27.5 million and $23.5 million for the three months
ended March 31, 2003 and 2002, respectively.

Rate/Volume Analysis(Figure 3)

|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |         |        |         |   | 
|----------------------------- | --------------------------------- | ------------------ | ------- | ------- | ------- | ---------------------------- | ------ | ------ | ------ | ------ | ------ | ------- | ------ | ------- | - | 
|                              |                                   |                    |         |         |         | Three Months Ended March 31,
|                              |                                   |                    |         |         |         |                             
|                              |                                   |                    |         |         |         | 2003 v. 2002                
|                              |                                   |                    |         |         |         |                             
|                              |                                   |                    |         |         |         | Increase (decrease) due to   |        |        |        |       
|                              |                                   |                    |         |         |         |                              |        |        |        |       
|                              |                                   |                    |         |         |         | Rate                         |        | Volume |        | Total 
|                              |                                   |                    |         |         |         |                              |        |        |        |       
|                              |                                   |                    |         |         |         | (Dollars in thousands)      
|Interest income:              |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|                             
|                             
|                             
|                             
|                              | Loans and leases                  |                    | $       | (55,985 | )       |                              | $      | 5,871  |        |        | $      | (50,114 | )     
|                             
|                             
|                             
|                             
|                              | Mortgage-backed securities:       |                    |         |         |         |                              |        |        |        |        |        |         |       
|                             
|                             
|                             
|                             
|                              |                                   | Available for sale |         |         | (28,104 | )                            |        |        | 66,287 |        |        |         | 38,183 |        
|                             
|                             
|                             
|                             
|                              |                                   | Held to maturity   |         |         | 315     |                              |        |        | (6,846 | )      |        |         | (6,531 | )      
|                             
|                             
|                             
|                             
|                              | Investment securities:            |                    |         |         |         |                              |        |        |        |        |        |         |       
|                             
|                             
|                             
|                             
|                              |                                   | Available for sale |         |         | (971    | )                            |        |        | 1,052  |        |        |         | 81     |        
|                             
|                             
|                             
|                             
|                              |                                   | Held to maturity   |         |         | 5       |                              |        |        | (22    | )      |        |         | (17    | )      
|                             
|                             
|                             
|                             
|                              | Other interest-earning assets     |                    |         | 277     |         |                              |        | (804   | )      |        |        | (527    | )     
|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|                              |                                   |                    | Total   |         |         | (84,463                      | )      |        |        | 65,538 |        |         |        | (18,925 | )
|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|Interest expense:             |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|                             
|                             
|                             
|                             
|                              | Checking accounts                 |                    |         | (12,984 | )       |                              |        | 7,222  |        |        |        | (5,762  | )     
|                             
|                             
|                             
|                             
|                              | Money market and savings accounts |                    |         | (13,615 | )       |                              |        | 6,712  |        |        |        | (6,903  | )     
|                             
|                             
|                             
|                             
|                              | Certificates of deposit           |                    |         | (16,254 | )       |                              |        | (7,739 | )      |        |        | (23,993 | )     
|                             
|                             
|                             
|                             
|                              | Federal Home Loan Bank advances   |                    |         | (26,641 | )       |                              |        | 22,724 |        |        |        | (3,917  | )     
|                             
|                             
|                             
|                             
|                              | Other borrowings                  |                    |         | (1,486  | )       |                              |        | 7,192  |        |        |        | 5,706   |       
|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|                              |                                   |                    | Total   |         |         | (70,980                      | )      |        |        | 36,111 |        |         |        | (34,869 | )
|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |        
|Change in net interest income |                                   | $                  | (13,483 | )       |         | $                            | 29,427 |        |        | $      | 15,944 |        
|                              |                                   |                    |         |         |         |                              |        |        |        |        |        |        

Net interest income was $299.0 million for the three months ended March 31,
2003, up $15.9 million, or 5.6%, from the first quarter of 2002. The increase
in net interest income was driven by a $5.2 billion, or 14.9%,increase in
average interest-earning assets. Net yield on average interest-earning assets
during the first quarter of 2003 was 2.99%, down 27 basis points from the first
quarter of 2002. The reduction in the net yield resulted from downward pressure
on asset yields in the declining interest rate environment, offset in part by
the benefits obtained from deposit repricings in 2002.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the three months ended March 31,
2003 was $61.5 million, an increase of $32.8 million from the three months
ended March 31, 2002. The increased provision during the first quarter of 2003
was necessary to cover higher charge-offs and maintain the allowance for loan
and lease losses at a level considered adequate to absorb losses inherent in
the loan and lease portfolio. Additionally, the provision for loan and lease
losses was increased to reflect the continued weakening in the national economy
in the first quarter of 2003, specifically in the airline industry. Net
charge-offs totaled $33.6 million in the three months ended March 31, 2003,
compared to $25.6 million in the three months ended March 31, 2002. The ratio
of net charge-offs as a percent of average loans and leases increased 12 basis
points to .52% in the first quarter of 2003 from .40% in the first quarter of
2002. The $33.6 million of net charge-offs for 2003 included a $6.1 million
charge-off related to the sale of a $19.6 million airline lease. As previously
disclosed, the Company also has a second aircraft lessee that has requested
concessions on its $14.8 million leveraged lease. At March 31, 2003, we
reported this leveraged lease as nonaccrual in our Nonperforming and
Underperforming Assets table in Figure 9 below. All other aircraft lease
contracts are paying as agreed.

The Companys aircraft leasing portfolio totaled $379.5 million at March 31,
2003, or 1.5% of its total loans and leases. The aircraft leasing portfolio
includes $274.3 million to domestic air carriers, with the remainder on
corporate jets and cargo planes leased to corporations. The Company has no
direct exposure to US Air, United Airlines, American Airlines or Air Canada.

9



---



##### Table of Contents



As part of the Banks conversion in May 2002 to a national bank subject to
regulation by the Office of the Comptroller of the Currency (OCC), the
Company conformed various policies and reporting practices associated with
asset quality to more closely compare to those of its commercial bank peers.
These changes neither increased nor decreased ultimate net loan and lease
charge-offs. They only affected the timing of recognizing net consumer asset
charge-offs through the allowance for loan and lease losses and the disclosure
of underperforming consumer assets. Consumer assets include single-family,
retail consumer, automobile and consumer finance loan portfolios. These changes
had no impact on Charter Ones non-consumer loan portfolios, which include
commercial real estate and corporate loans and its lease portfolio, as these
portfolios already conformed with OCC-regulated banking practices.

The most significant effect of the change in charge-off policy was in the
automobile and consumer finance portfolios. Prior to the second quarter of
2002, automobile loans were charged off at the point of repossessed collateral
disposition. Beginning with the second quarter of 2002, consistent with
OCC-regulated banking practices, automobile loans going through repossession or
bankruptcies were written down to the net realizable value of the collateral at
the time of the repossession or bankruptcy discharge. Any automobile loan that
reached the 120-day delinquency point was charged off completely. Charge-offs
in the consumer finance portfolio were previously recognized at the point of
foreclosure. Beginning with the second quarter of 2002, consistent with
OCC-regulated banking practices, consumer finance loans, along with other loans
backed by single-family residential real estate collateral, were reflected at
the lower of cost or net realizable value at the earliest point of six payments
past due or foreclosure.

See Financial Condition  Asset Quality for further information regarding our
allowance for loan and lease losses.

Other Income

Other income for the three months ended March 31, 2003 was $161.8 million, an
increase of $45.3 million, or 38.8%, over the $116.6 million for the three
months ended March 31, 2002. The increase was primarily attributable to income
from retail banking and net gains on sales. Retail banking income increased
$10.3 million, or 14.0%, over the comparable period in 2002. Growth in income
from retail banking was primarily attributable to ongoing franchise development
initiatives and increased marketing efforts. With respect to franchise
development activities, we plan aggressive de novo expansion during 2003 and
2004, including 18 in-store locations in Indiana. The expansion is expected to
include 125 new banking centers, with 97 in-store and 28 traditional locations.
The 2003 goal is to open approximately 85 new banking centers, with 69 in-store
and 16 traditional locations. The Company opened 16 banking centers during the
first quarter of 2003, the majority of which were in-store locations. Net
gains totaled $76.7 million for the first quarter of 2003, an increase of $54.9
million over the first quarter of 2002. The $2.5 billion of mortgage-backed
securities sold during the first quarter 2003 were comprised primarily of
bank-originated residential mortgage and consumer products, as we generated
significantly more residential mortgage and consumer loans than we needed to
meet our balance sheet and mix objectives. We did not utilize any
special-purpose entities for the sale of any of our mortgage-backed securities.

With respect to the decline in mortgage banking income, we increased the
valuation allowance on loan servicing assets by $20.7 million in the first
quarter of 2003 to $123.4 million due to increasing prepayment speeds. Total
mortgage banking income, excluding the $20.7 million increase in the valuation
allowance, was $20.6 million in the first quarter of 2003. In the year ago
quarter, mortgage banking income totaled $11.3 million. As a result of the
strong loan origination and securitization activity in the past 12 months, the
portfolio of loans serviced for others increased to $18.7 billion, up 18.0%
since March 31, 2002. The related loan servicing asset was reduced to .74% of
the portfolio at $139.1 million at March 31, 2003. With an average servicing
spread of 36 basis points, that translates into a servicing asset valuation of
2.06 times the servicing spread.

Leasing operations reflected a loss of $6.9 million in the first quarter of
2003, compared to income of $270,000 for the first quarter of 2002. The
decline in income resulted from $8.7 million in residual adjustments, which
were primarily related to the Companys aircraft leasing portfolio. See
Provision for Loan and Lease Losses above and Financial Condition  Asset
Quality below for further discussion regarding the Companys aircraft leasing
portfolio.

On April 27, 2003, MasterCard International, Inc. agreed to
settle a class action lawsuit with Wal-Mart Stores, Inc. and other retailers
regarding, among other things, the acceptance of debit cards and the
processing of debit transactions. We issue MasterCard debit cards to the
majority of our checking account customers. Over the past few years, revenue
generated by debit point-of-sale transactions has been one of our fastest
growing sources of revenue. The revenue generated from a specific transaction
depends on whether it is processed off line (signature based) or on line
(PIN based). Off-line transactions tend to generate a higher level of revenue
than on-line transactions. During the three months ended March 31, 2003, gross
revenue from signature-based debit transactions totaled $11.1 million.
Preliminary information on the settlement includes a reduction in the
signature-based fee collected from merchants

10



---



##### Table of Contents



of at least 33% beginning on August 1, 2003. Assuming no increase in debit card volume over first-quarter levels, the lower fee would translate into a reduction in net income of approximately $4.0 million for the five-month period from August 1, 2003 to December 31, 2003.

Administrative Expenses

Administrative expenses were $183.3 million for the three months ended March
31, 2003, an increase of $21.1 million, or 13.0%, as compared to the first
quarter of 2002. The increase in administrative expenses was primarily
attributable to increased health care and marketing costs, as well as expenses
related to the addition of 27 new banking centers in the past 12 months.
Despite the increase in administrative expenses, our efficiency ratio improved
to 39.77% for the three months ended March 31, 2003, compared to 40.58% for the
three months ended March 31, 2002. See the above discussion in Other Income regarding factors
that contributed to the improvement in our efficiency ratio.

Federal Income Tax

Federal income tax expense for the three months ended March 31, 2003 was $68.6
million, compared to $66.3 million for the same period in 2002. The primary
reason for this increase in the provision for federal income taxes was an
increase in pre-tax income. The effective tax rate was 31.7% for both the 2003
and 2002 period.

FINANCIAL CONDITION

Overview

At March 31, 2003, total assets were $43.2 billion, compared to total assets of
$41.9 billion at December 31, 2002.

Loans and Leases

Composition of Loans and Leases(Figure 4)

|                                       |                                                             |                   |                 |                          |           |                        |            |            |           |           |            | 
|-------------------------------------- | ----------------------------------------------------------- | ----------------- | --------------- | ------------------------ | --------- | ---------------------- | ---------- | ---------- | --------- | --------- | ---------- | 
|                                       |                                                             |                   |                 |                          |           | 3/31/03                |            | 12/31/02  
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 |                          |           | (Dollars in thousands)
|                                       | One-to-four family:                                         |                   |                 |                          |           |                        |            |            |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Permanent:        |                 |                          |           |                        |            |            |           |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Fixed rate      |                          | $         | 5,506,314              |            |            | $         | 5,869,554 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Adjustable rate |                          |           | 2,546,426              |            |            |           | 2,437,166 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Construction      |                 |                          | 412,973   |                        |            |            | 427,729   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 8,465,713       |                          |           |                        | 8,734,449  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Commercial real estate:                                     |                   |                 |                          |           |                        |            |            |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Multifamily       |                 |                          | 920,295   |                        |            |            | 953,688   |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Commercial        |                 |                          | 1,340,272 |                        |            |            | 1,307,593 |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 2,260,567       |                          |           |                        | 2,261,281  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Consumer:                                                   |                   |                 |                          |           |                        |            |            |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Retail            |                 |                          | 4,173,080 |                        |            |            | 5,494,453 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Automobile        |                 |                          | 5,934,502 |                        |            |            | 5,606,329 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Consumer finance  |                 |                          | 1,005,077 |                        |            |            | 984,772   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 11,112,659      |                          |           |                        | 12,085,554 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Business:                                                   |                   |                 |                          |           |                        |            |            |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Leasing           |                 |                          | 2,125,905 |                        |            |            | 2,133,468 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Corporate banking |                 |                          | 1,368,069 |                        |            |            | 1,318,003 |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 3,493,974       |                          |           |                        | 3,451,471  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Loans and leases before allowance for loan and lease losses |                   |                 | 25,332,913               |           |                        |            | 26,532,755 |          
|                                      
|                                      
|                                      
|                                      
|                                       | Allowance for loan and lease losses                         |                   |                 | (355,926                 | )         |                        |            | (328,017   | )        
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 | Loans and leases, net(1) |           | $                      | 24,976,987 |            |           | $         | 26,204,738 | 
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|Portfolio of loans serviced for others |                                                             | $                 | 18,713,649      |                          |           | $                      | 16,893,609 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           



---

|(1) |  | Includes loans held for sale.
|--- |  | -----------------------------

11



---



##### Table of Contents



Loan and Lease Activity(Figure 5)

|                                                     |                                                |                    |                                   |                                      |           |                        |            |           |           |           |            |  
|---------------------------------------------------- | ---------------------------------------------- | ------------------ | --------------------------------- | ------------------------------------ | --------- | ---------------------- | ---------- | --------- | --------- | --------- | ---------- | -
|                                                     |                                                |                    |                                   |                                      |           | Three Months Ended    
|                                                     |                                                |                    |                                   |                                      |           |                       
|                                                     |                                                |                    |                                   |                                      |           | 3/31/03                |            | 3/31/02  
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    |                                   |                                      |           | (Dollars in thousands)
|Originations:                                        |                                                |                    |                                   |                                      |           |                        |            |          
|                                                    
|                                                    
|                                                    
|                                                    
|Real estate:                                         |                                                |                    |                                   |                                      |           |                        |            |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Permanent:                                     |                    |                                   |                                      |           |                        |            |           |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | One-to-four family |                                   | $                                    | 3,095,718 |                        |            | $         | 2,657,994 |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Multifamily        |                                   |                                      | 51,440    |                        |            |           | 35,719    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Commercial         |                                   |                                      | 90,213    |                        |            |           | 92,088    |          
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    | Total permanent loans             |                                      |           | 3,237,371              |            |           |           | 2,785,801 |           
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     | Construction:                                  |                    |                                   |                                      |           |                        |            |           |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | One-to-four family |                                   |                                      | 3,499     |                        |            |           | 14,031    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Multifamily        |                                   |                                      | 19,283    |                        |            |           | 24,988    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Commercial         |                                   |                                      | 10,830    |                        |            |           | 66,234    |          
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    | Total construction loans          |                                      |           | 33,612                 |            |           |           | 105,253   |           
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    |                                   | Total real estate loans originated   |           |                        | 3,270,983  |           |           |           | 2,891,054  |  
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|Retail consumer                                      |                                                |                    | 1,079,290                         |                                      |           |                        | 998,727    |          
|                                                    
|                                                    
|                                                    
|                                                    
|Automobile                                           |                                                |                    | 981,114                           |                                      |           |                        | 684,045    |          
|                                                    
|                                                    
|                                                    
|                                                    
|Consumer finance                                     |                                                |                    | 101,927                           |                                      |           |                        | 56,083     |          
|                                                    
|                                                    
|                                                    
|                                                    
|Leases                                               |                                                |                    | 101,571                           |                                      |           |                        | 93,041     |          
|                                                    
|                                                    
|                                                    
|                                                    
|Corporate banking                                    |                                                |                    | 448,326                           |                                      |           |                        | 353,640    |          
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    | Total loans and leases originated |                                      |           | 5,983,211              |            |           |           | 5,076,590 |           
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|Acquired through business combinations and purchases |                                                |                    | 3,765                             |                                      |           |                        | 4,715      |          
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|Sales and principal reductions:                      |                                                |                    |                                   |                                      |           |                        |            |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loans sold                                     |                    |                                   | 763,051                              |           |                        |            | 644,097   |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loans exchanged for mortgage backed securities |                    |                                   | 3,419,116                            |           |                        |            | 2,717,271 |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Principal reductions                           |                    |                                   | 2,993,773                            |           |                        |            | 2,921,080 |          
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    |                                   | Total sales and principal reductions |           |                        | 7,175,940  |           |           |           | 6,282,448  |  
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          
|                                                     |                                                |                    |                                   | Decrease before net items            |           | $                      | (1,188,964 | )         |           | $         | (1,201,143 | )
|                                                     |                                                |                    |                                   |                                      |           |                        |            |          

Investment and Mortgage-Backed Securities

Figures 6 and 7 summarize our investment and mortgage-backed securities
portfolios at March 31, 2003 and December 31, 2002. The amounts reflected
represent the fair value of securities available for sale and the amortized
cost of securities held to maturity.

Investment Securities(Figure 6)

|                   |                                                      |                                                |       |         |                        |         |          |         |         |         | 
|------------------ | ---------------------------------------------------- | ---------------------------------------------- | ----- | ------- | ---------------------- | ------- | -------- | ------- | ------- | ------- | 
|                   |                                                      |                                                |       |         | 3/31/03                |         | 12/31/02
|                   |                                                      |                                                |       |         |                        |         |         
|                   |                                                      |                                                |       |         | (Dollars in thousands)
|Available for Sale |                                                      |                                                |       |         |                        |         |          |        
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities                  |                                                | $     | 108,660 |                        |         | $        | 91,462  |        
|                  
|                  
|                  
|                  
|                   | Securities of U.S. states and political subdivisions |                                                |       | 1,895   |                        |         |          | 1,898   |        
|                  
|                  
|                  
|                  
|                   | Corporate and other securities                       |                                                |       | 116,582 |                        |         |          | 116,735 |        
|                   |                                                      |                                                |       |         |                        |         |          |        
|                   |                                                      | Total investment securities available for sale |       |         | 227,137                |         |          |         | 210,095 |        
|                   |                                                      |                                                |       |         |                        |         |          |        
|Held to Maturity   |                                                      |                                                |       |         |                        |         |          |        
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities                  |                                                |       | 261     |                        |         |          | 3,943   |        
|                  
|                  
|                  
|                  
|                   | Securities of U.S. states and political subdivisions |                                                |       | 3,866   |                        |         |          |        |        
|                  
|                  
|                  
|                  
|                   | Corporate and other securities                       |                                                |       | 30      |                        |         |          | 30      |        
|                   |                                                      |                                                |       |         |                        |         |          |        
|                   |                                                      | Total investment securities held to maturity   |       |         | 4,157                  |         |          |         | 3,973   |        
|                   |                                                      |                                                |       |         |                        |         |          |        
|                   |                                                      |                                                | Total |         | $                      | 231,294 |          |         | $       | 214,068 | 
|                   |                                                      |                                                |       |         |                        |         |          |        
|                   | Weighted average rate                                |                                                |       | 5.43    | %                      |         |          | 5.64    | %      
|                   |                                                      |                                                |       |         |                        |         |          |        

12



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##### Table of Contents



Mortgage-Backed Securities(Figure 7)

|                   |                                      |                                   |                                                     |       |            |                        |            |          |            |            |            | 
|------------------ | ------------------------------------ | --------------------------------- | --------------------------------------------------- | ----- | ---------- | ---------------------- | ---------- | -------- | ---------- | ---------- | ---------- | 
|                   |                                      |                                   |                                                     |       |            | 3/31/03                |            | 12/31/02
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|                   |                                      |                                   |                                                     |       |            | (Dollars in thousands)
|Available for Sale |                                      |                                   |                                                     |       |            |                        |            |         
|                  
|                  
|                  
|                  
|                   | Participation certificates:          |                                   |                                                     |       |            |                        |            |          |           
|                  
|                  
|                  
|                  
|                   |                                      | U.S. government and agency issues |                                                     | $     | 11,375,333 |                        |            | $        | 10,051,046 |           
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |            |                        |            |          |           
|                  
|                  
|                  
|                  
|                   |                                      | U.S. government and agency issues |                                                     |       | 1,085,381  |                        |            |          | 1,068,518  |           
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                    |                                                     |       | 338,792    |                        |            |          | 417,044    |           
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|                   |                                      |                                   | Total mortgage-backed securities available for sale |       |            | 12,799,506             |            |          |            | 11,536,608 |           
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|Held to Maturity   |                                      |                                   |                                                     |       |            |                        |            |         
|                  
|                  
|                  
|                  
|                   | Participation certificates:          |                                   |                                                     |       |            |                        |            |          |           
|                  
|                  
|                  
|                  
|                   |                                      | U.S. government and agency issues |                                                     |       | 277,945    |                        |            |          | 311,398    |           
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                    |                                                     |       | 42,546     |                        |            |          | 51,717     |           
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |            |                        |            |          |           
|                  
|                  
|                  
|                  
|                   |                                      | U.S. government and agency issues |                                                     |       | 71,665     |                        |            |          | 96,130     |           
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                    |                                                     |       | 53,051     |                        |            |          | 81,536     |           
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|                   |                                      |                                   | Total mortgage-backed securities held to maturity   |       |            | 445,207                |            |          |            | 540,781    |           
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|                   |                                      |                                   |                                                     | Total |            | $                      | 13,244,713 |          |            | $          | 12,077,389 | 
|                   |                                      |                                   |                                                     |       |            |                        |            |         
|                   |                                      | Weighted average rate             |                                                     |       | 4.97       | %                      |            |          | 4.95       | %         
|                   |                                      |                                   |                                                     |       |            |                        |            |         

Asset Quality

Being mindful of an economy that continues to exhibit weakness, particularly in
the non-consumer sectors, Charter One continued to strengthen its level of loan
loss reserves as shown in Figure 8 below. See also Provision for Loan and
Lease Losses for further discussion.

Analysis of the Allowance for Loan and Lease Losses(Figure 8)

|                                     |                                                          |                        |                   |                                |         |                        |         |         |         |         |         |  
|------------------------------------ | -------------------------------------------------------- | ---------------------- | ----------------- | ------------------------------ | ------- | ---------------------- | ------- | ------- | ------- | ------- | ------- | -
|                                     |                                                          |                        |                   |                                |         | Three Months Ended    
|                                     |                                                          |                        |                   |                                |         |                       
|                                     |                                                          |                        |                   |                                |         | 3/31/03                |         | 3/31/02
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     |                                                          |                        |                   |                                |         | (Dollars in thousands)
|Allowance for loan and lease losses: |                                                          |                        |                   |                                |         |                        |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Balance, beginning of period                             |                        | $                 | 328,017                        |         |                        | $       | 255,478 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Provision for loan and lease losses                      |                        |                   | 61,471                         |         |                        |         | 28,717  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Loans and leases charged off:                            |                        |                   |                                |         |                        |         |         |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | One-to-four family     |                   |                                | (670    | )                      |         |         | (976    | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Commercial real estate |                   |                                | (500    | )                      |         |         | (801    | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Retail consumer        |                   |                                | (3,478  | )                      |         |         | (2,258  | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Automobile             |                   |                                | (16,450 | )                      |         |         | (16,920 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Consumer finance       |                   |                                | (4,537  | )                      |         |         | (3,822  | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Leases                 |                   |                                | (6,061  | )                      |         |         | (460    | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Corporate banking      |                   |                                | (7,245  | )                      |         |         | (4,023  | )      
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     |                                                          |                        | Total charge-offs |                                |         | (38,941                | )       |         |         | (29,260 | )      
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     | Recoveries:                                              |                        |                   |                                |         |                        |         |         |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | One-to-four family     |                   |                                | 17      |                        |         |         | 2       |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Commercial real estate |                   |                                | 148     |                        |         |         | 121     |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Retail consumer        |                   |                                | 433     |                        |         |         | 403     |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Automobile             |                   |                                | 4,115   |                        |         |         | 2,408   |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Consumer finance       |                   |                                | 105     |                        |         |         | 63      |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Leases                 |                   |                                | 393     |                        |         |         |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Corporate banking      |                   |                                | 168     |                        |         |         | 673     |        
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     |                                                          |                        | Total recoveries  |                                |         | 5,379                  |         |         |         | 3,670   |        
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     |                                                          |                        |                   | Net loan and lease charge-offs |         |                        | (33,562 | )       |         |         | (25,590 | )
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     | Balance, end of period                                   |                        | $                 | 355,926                        |         |                        | $       | 258,605 |        
|                                     |                                                          |                        |                   |                                |         |                        |         |        
|                                     | Net charge-offs to average loans and leases (annualized) |                        |                   | .52                            | %       |                        |         | .40     | %      

In terms of nonperforming asset disclosures, Charter Ones policy, prior to the
second quarter of 2002, was to place all consumer assets backed by residential
real estate on nonaccrual status (disclosed as nonperforming) at 90 days
delinquent. Beginning in the second quarter of 2002, consistent with
OCC-regulated banking practices, loans backed by residential real estate are
being placed on nonaccrual status (nonperforming) at six payments past due as
long as the loan is well secured and in the process of collection.

13



---



##### Table of Contents



Figure 9 sets forth information concerning nonperforming and underperforming
assets for the periods reported. Underperforming assets consist of (1)
nonperforming assets (nonaccrual loans and leases, restructured real estate
mortgage loans, and real estate acquired through foreclosure and other
collateral owned) and (2) accruing loans and leases delinquent more than 90
days.

Nonperforming and Underperforming Assets(Figure 9)

|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |          |        |        |         | 
|------------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------------------ | ------------------------------------ | ------ | ---------------------- | ------- | -------- | ------ | ------ | ------- | 
|                                                        |                                                                                          |                                         |                                                              |                                      |        | 3/31/03                |         | 12/31/02
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         |                                                              |                                      |        | (Dollars in thousands)
|Nonperforming assets:                                   |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Nonaccrual loans and leases:                                                             |                                         |                                                              |                                      |        |                        |         |          |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Real estate mortgage loans:             |                                                              |                                      |        |                        |         |          |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          |                                         | One-to-four family                                           |                                      | $      | 27,867                 |         |          | $      | 27,904 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          |                                         | Multifamily and commercial                                   |                                      |        | 5,591                  |         |          |        | 5,369  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          |                                         | Construction and land                                        |                                      |        | 8,015                  |         |          |        | 9,885  |        
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         |                                                              | Total real estate mortgage loans     |        |                        | 41,473  |          |        |        | 43,158  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Retail consumer                         |                                                              |                                      | 12,046 |                        |         |          | 13,937 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Automobile                              |                                                              |                                      |       |                        |         |          |       |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Consumer finance                        |                                                              |                                      | 42,562 |                        |         |          | 40,227 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Leases                                  |                                                              |                                      | 15,264 |                        |         |          | 6,211  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Corporate banking                       |                                                              |                                      | 42,068 |                        |         |          | 39,098 |       
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         |                                                              | Total nonaccrual loans and leases    |        |                        | 153,413 |          |        |        | 142,631 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Restructured real estate mortgage loans                                                  |                                         |                                                              | 494                                  |        |                        |         | 501      |       
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         |                                                              | Total nonperforming loans and leases |        |                        | 153,907 |          |        |        | 143,132 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Real estate and other collateral owned                                                   |                                         |                                                              | 40,020                               |        |                        |         | 40,776   |       
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         |                                                              | Total nonperforming assets           |        | $                      | 193,927 |          |        | $      | 183,908 | 
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|Ratio of:                                               |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Nonperforming loans and leases to total loans and leases                                 |                                         |                                                              | .62                                  | %      |                        |         | .55      | %     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Nonperforming assets to total assets                                                     |                                         |                                                              | .45                                  |        |                        |         | .44      |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Nonperforming assets to total loans, leases and real estate and other collateral owned   |                                         |                                                              | .78                                  |        |                        |         | .70      |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Allowance for loan and lease losses to:                                                  |                                         |                                                              |                                      |        |                        |         |          |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Nonperforming loans and leases          |                                                              |                                      | 231.26 |                        |         |          | 229.17 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Total loans and leases before allowance |                                                              |                                      | 1.40   |                        |         |          | 1.24   |       
|                                                       
|                                                       
|                                                       
|                                                       
|Accruing loans and leases delinquent more than 90 days: |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Real estate mortgage loans:                                                              |                                         |                                                              |                                      |        |                        |         |          |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | One-to-four family                      |                                                              | $                                    | 23,507 |                        |         | $        | 25,643 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Multifamily and commercial              |                                                              |                                      |       |                        |         |          |       |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Construction and land                   |                                                              |                                      |       |                        |         |          |       |       
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                        |                                                                                          |                                         | Total real estate mortgage loans                             |                                      |        | 23,507                 |         |          |        | 25,643 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retail consumer                                                                          |                                         |                                                              | 3,229                                |        |                        |         | 4,758    |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Automobile                                                                               |                                         |                                                              | 3,579                                |        |                        |         | 3,621    |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Consumer finance                                                                         |                                         |                                                              | 27,395                               |        |                        |         | 26,739   |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Leases                                                                                   |                                         |                                                              | 181                                  |        |                        |         | 19       |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Corporate banking                                                                        |                                         |                                                              | 471                                  |        |                        |         | 1,536    |       
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          |                                         | Total accruing loans and leases delinquent more than 90 days |                                      | $      | 58,362                 |         |          | $      | 62,316 |        
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|Total underperforming assets                            |                                                                                          | $                                       | 252,289                                                      |                                      |        | $                      | 246,224 |         
|                                                        |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|Ratio of:                                               |                                                                                          |                                         |                                                              |                                      |        |                        |         |         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Underperforming assets to total assets                                                   |                                         |                                                              | .58                                  | %      |                        |         | .59      | %     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Underperforming assets to total loans, leases and real estate and other collateral owned |                                         |                                                              | 1.01                                 |        |                        |         | .94      |       

Loans and leases not reflected in the table above, but where known information
about possible credit problems of borrowers causes management to have serious
doubts as to the ability of the borrower to comply with present repayment terms
and that may result in disclosure of such loans and leases as underperforming
assets in the future, are commonly referred to as potential problem loans and
leases. The amount included in potential problem loans and leases results
from an evaluation, on a loan-by-loan basis, of loans and leases classified as
substandard. The amount of potential problem loans and
leases was $61.9
million as of the date of this report. This total included a $26.4 million commercial
airline leveraged lease in which the lessee has experienced financial
difficulties in the

14



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##### Table of Contents



present economic environment. This lease relationship was current as of March 31,
2003. The $61.9 million of potential
problem loans and leases also included
a $15.4 million commercial real estate loan that is
well-collateralized by developmental properties.
At the present time, we expect no material losses on this loan. The vast majority of our potential problem loans and leases, as well as
our underperforming assets, are collateralized.

SOURCES OF FUNDS

Management considers our interest-sensitivity profile when deciding on sources
of funds. At March 31, 2003, our one-year gap was 3.01% of total
interest-earning assets. See Part I, Item 3 Quantitative and Qualitative
Disclosure About Market Risk, of this Form 10-Q regarding further information
on our interest rate risk profile.

Deposits

Composition of Deposits(Figure 10)

|                                            |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |      |      |      | 
|------------------------------------------- | ------------------- | --------------------------- | ------------------- | --------- | ---------------------- | ---------- | -------- | ---- | -------- | ---- | --------- | --------- | ---------- | ---------- | -------- | ---- | ---- | ---- | 
|                                            |                     |                             |                     |           | 3/31/03                |            | 12/31/02
|                                            |                     |                             |                     |           |                        |            |         
|                                            |                     |                             |                     |           |                        |            |          |      | Weighted |      |           |           |            |            | Weighted
|                                            |                     |                             |                     |           |                        |            |          |      | Average  |      |           |           |            |            | Average 
|                                            |                     |                             |                     |           | Amount                 |            | Rate     |      | Amount   |      | Rate     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |          
|                                            |                     |                             |                     |           | (Dollars in thousands)
|Checking accounts:                          |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |     
|                                           
|                                           
|                                           
|                                           
|                                            | Interest-bearing    |                             | $                   | 7,267,602 |                        |            |          | 1.50 | %        |      | $         | 7,460,530 |            |            |          | 1.80 | %   
|                                           
|                                           
|                                           
|                                           
|                                            | Noninterest-bearing |                             |                     | 2,385,243 |                        |            |          |     |          |      |           | 2,189,903 |            |            |          |     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |     
|                                            |                     | Total checking accounts     |                     |           | 9,652,845              |            |          |      | 1.13     |      |           |           | 9,650,433  |            |          |      | 1.39 |     
|                                           
|                                           
|                                           
|                                           
|Money market and savings accounts           |                     |                             | 8,207,576           |           |                        |            | 1.62     |      |          |      | 8,157,534 |           |            |            | 1.51     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |     
|                                            |                     | Total transactions accounts |                     |           | 17,860,421             |            |          |      | 1.35     |      |           |           | 17,807,967 |            |          |      | 1.45 |     
|                                           
|                                           
|                                           
|                                           
|Certificates of deposit                     |                     |                             | 9,523,194           |           |                        |            | 3.43     |      |          |      | 9,719,876 |           |            |            | 3.61     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |     
|                                            |                     |                             | Total deposits, net |           | $                      | 27,383,615 |          |      |          | 2.08 |           |           | $          | 27,527,843 |          |      |      | 2.21 | 
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |           |           |            |            |          |     
|Including the effect of interest rate swaps |                     |                             |                     |           |                        |            | 1.96     | %    |          |      |           |           |            |            | 2.06     | %   

Investment securities and mortgage-backed securities with a par value of $467.6
million at March 31, 2003 and $489.0 million at December 31, 2002, were pledged
to secure public deposits and for other purposes required or permitted by law.

Borrowings

At March 31, 2003, borrowings consisted primarily of Federal Home Loan Bank
(FHLB) advances. These positions were secured by our investment in the stock
of the FHLB, as well as $9.6 billion in certain real estate loans and $6.1
billion in mortgage-backed securities.

FHLB Advances(Figure 11)

|                                            |                        |                     |            |           |            |          |      |                        |      |      |           |           |           |          |      |      |      | 
|------------------------------------------- | ---------------------- | ------------------- | ---------- | --------- | ---------- | -------- | ---- | ---------------------- | ---- | ---- | --------- | --------- | --------- | -------- | ---- | ---- | ---- | 
|                                            |                        |                     |            | 3/31/03   |            | 12/31/02
|                                            |                        |                     |            |           |            |         
|                                            |                        |                     |            |           |            |          |      | Weighted               |      |      |           |           |           | Weighted
|                                            |                        |                     |            |           |            |          |      | Average                |      |      |           |           |           | Average 
|                                            |                        |                     |            | Amount    |            | Rate     |      | Amount                 |      | Rate
|                                            |                        |                     |            |           |            |          |      |                        |      |     
|                                            |                        |                     |            |           |            |          |      | (Dollars in thousands) |      |      |           |          
|Short-term                                  |                        | $                   | 3,105,000  |           |            |          | 1.46 | %                      |      | $    | 2,595,000 |           |           |          | 1.34 | %   
|                                           
|                                           
|                                           
|                                           
|Long-term:                                  |                        |                     |            |           |            |          |      |                        |      |      |           |           |           |          |      |     
|                                           
|                                           
|                                           
|                                           
|                                            | Fixed-rate advances    |                     |            | 5,924,548 |            |          |      | 5.68                   |      |      |           | 6,024,560 |           |          |      | 5.68 |     
|                                           
|                                           
|                                           
|                                           
|                                            | Variable-rate advances |                     |            | 1,409,605 |            |          |      | 1.33                   |      |      |           | 409,605   |           |          |      | 1.23 |     
|                                            |                        |                     |            |           |            |          |      |                        |      |      |           |           |           |          |      |     
|Total advances                              |                        |                     | 10,439,153 |           |            |          | 3.84 |                        |      |      | 9,029,165 |           |           |          | 4.23 |     
|                                           
|                                           
|                                           
|                                           
|Plus unamortized premium on advances        |                        |                     | 7,477      |           |            |          |      |                        |      |      | 8,760     |           |           |          |     |     
|                                            |                        |                     |            |           |            |          |      |                        |      |      |           |           |           |          |      |     
|                                           
|                                           
|                                           
|                                           
|                                            |                        | Total advances, net |            | $         | 10,446,630 |          |      |                        | 3.80 |      |           | $         | 9,037,925 |          |      |      | 4.18 | 
|                                            |                        |                     |            |           |            |          |      |                        |      |      |           |           |           |          |      |     
|Including the effect of interest rate swaps |                        |                     |            |           |            |          | 3.89 | %                      |      |      |           |           |           |          | 4.26 | %   

Interest Rate Swaps

We use interest rate swaps as one of the tools to manage our interest rate risk
profile (defined as the sensitivity of our earnings and economic value to
changes in interest rates). We utilize fixed receipt callable interest rate
swaps to convert certain longer-term callable certificates of deposit into
short-term and medium-term variable instruments. Under certain of these
agreements totaling $465.0 million in notional principal amount, we have 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 during the entire term of the interest rate swap. In other agreements
totaling $1.4 billion in notional principal amount, we have 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 fixed rate, converting to floating rate
indexed to LIBOR after the first two years of the interest rate swap term.
Such interest rate swaps are designated and qualify as fair value hedges under
SFAS No. 133. We have assumed no ineffectiveness in the respective hedging

15



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##### Table of Contents



relationships. Any gain or loss on the interest rate swap was offset by a gain
or loss on the certificates of deposit during the period of change in fair
values.

We utilize fixed payment interest rate swaps to convert certain floating-rate
FHLB advances into fixed-rate instruments. Under these agreements totaling
$409.6 million in notional principal amount, we have 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. Such interest rate swaps are designated and qualify as cash flow
hedges under SFAS No. 133. We have assumed no ineffectiveness in the
respective hedging relationships. Any gain or loss on the interest rate swaps
was offset by the expected future cash flows on the FHLB advances during the
period of change in fair values.

We utilized a fixed receipt interest rate swap to convert our $400.0 million of
subordinated notes into a variable instrument. Under this agreement, we have
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. Such interest rate swap is designated and qualifies as a
fair value hedge under SFAS No. 133. We have assumed no ineffectiveness in the
hedging relationship. Any gain or loss on the interest rate swap was offset by
a gain or loss on the subordinated notes during the period of change in fair
values.

In May 2002, we entered into $575.0 million of fixed payment and variable
receipt interest rate swaps related to the issuance of the Banks subordinated
notes. However, these interest rate swaps did not qualify for hedge accounting
under SFAS No. 133. For the three months ended March 31, 2003, the net
unrealized loss attributed to these interest rate swaps increased $5.5 million
to an ending balance of $31.4 million. The corresponding interest rate swap
liabilities were recognized in our Consolidated Statements of Financial
Condition at March 31, 2003 under the caption Accrued expenses and other
liabilities.

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

Interest Rate Swaps(Figure 12)

|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      |  |  |  | 
|-------------------------- | ---------- | ---- | ----- | - | ---------------------- | --------- | --------- |  | -------- | ---- | --------- |  | --------- | ---- | -------- | - | --------- | --------- |  |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  |  | 
|                           |            |      |       |   | 3/31/03                |           | 12/31/02  |  |          |      |          
|                           |            |      |       |   |                        |           |           |  |          |      |          
|                           |            |      |       |   | Notional               |           | Receiving |  | Paying   |      | Notional  |  | Receiving |      | Paying   |   |           |           | 
|                           |            |      |       |   | Principal              |           | Interest  |  | Interest |      | Principal |  | Interest  |      | Interest |   |           |           | 
|                           |            |      |       |   | Amount                 |           | Rate      |  | Rate     |      | Amount    |  | Rate      |      | Rate     |   |           |           | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           | 
|                           |            |      |       |   | (Dollars in thousands) |           |           |  |         
|Fixed Payment and Fixed    |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                          
|                          
|                          
|                          
|                           | Receipt(1) |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      |  | 
|                          
|                          
|                          
|                          
|                           |            | 2007 |       | $ | 1,005,000              |           |           |  | 4.31     | %    |           |  | 2.75      | %    |          | $ | 1,005,000 |           |  |  | 4.31 | %    |      |  | 2.75 | %    |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2008 |       |   | 375,000                |           |           |  | 3.64     |      |           |  | 2.04      |      |          |   |          |           |  |  |     |      |      |  |     |      |      |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                           |            |      | Total |   | $                      | 1,380,000 |           |  |          | 4.13 | %         |  |           | 2.56 | %        |   | $         | 1,005,000 |  |  |      | 4.31 | %    |  |      | 2.75 | %    |  |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|Fixed Payment and Variable |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                          
|                          
|                          
|                          
|                           | Receipt    |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      |  | 
|                          
|                          
|                          
|                          
|                           |            | 2003 |       | $ | 409,605                |           |           |  | 1.29     | %    |           |  | 3.55      | %    |          | $ | 409,605   |           |  |  | 1.42 | %    |      |  | 3.55 | %    |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2004 |       |   | 375,000                |           |           |  | 1.40     |      |           |  | 3.66      |      |          |   | 375,000   |           |  |  | 1.40 |      |      |  | 3.66 |      |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2006 |       |   | 200,000                |           |           |  | 1.40     |      |           |  | 4.69      |      |          |   | 200,000   |           |  |  | 1.40 |      |      |  | 4.69 |      |      |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                           |            |      | Total |   | $                      | 984,605   |           |  |          | 1.35 | %(2)      |  |           | 3.82 | %        |   | $         | 984,605   |  |  |      | 1.41 | %(2) |  |      | 3.82 | %    |  |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|Variable Payment and Fixed |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                          
|                          
|                          
|                          
|                           | Receipt    |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      |  | 
|                          
|                          
|                          
|                          
|                           |            | 2004 |       | $ | 145,000                |           |           |  | 2.56     | %    |           |  | 1.34      | %    |          | $ | 315,000   |           |  |  | 2.80 | %    |      |  | 1.57 | %    |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2005 |       |   | 165,000                |           |           |  | 2.16     |      |           |  | 1.33      |      |          |   |          |           |  |  |     |      |      |  |     |      |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2007 |       |   | 155,000                |           |           |  | 5.35     |      |           |  | 1.35      |      |          |   | 555,000   |           |  |  | 5.51 |      |      |  | 1.55 |      |      |  |  | 
|                          
|                          
|                          
|                          
|                           |            | 2012 |       |   | 400,000                |           |           |  | 5.76     |      |           |  | 1.34      |      |          |   | 400,000   |           |  |  | 5.76 |      |      |  | 1.75 |      |      |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 
|                           |            |      | Total |   | $                      | 865,000   |           |  |          | 4.47 | %         |  |           | 1.34 | %(2)     |   | $         | 1,270,000 |  |  |      | 4.92 | %    |  |      | 1.62 | %(2) |  |  |  | 
|                           |            |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |           |           |  |  |      |      |      |  |      |      |      | 



---

|(1) |  | Converts to variable payment indexed to LIBOR after the first two years
of the interest rate swap agreement.
|--- |  | ------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Rates are based upon LIBOR.                                                                                 

Additionally, we have entered into forward fixed payment and variable receipt
interest rate swaps totaling $1.4 billion in notional principal amount that are
not reflected in Figure 12 above. These forward interest rate swaps are
scheduled to begin in September 2003 and mature in January 2006.
The weighted average fixed payment rate on these forward interest rate swaps is
2.91%. The forward interest rate swaps will convert certain floating-rate FHLB
advances into fixed-rate instruments. Such interest rate swaps will be
designated and qualify as cash flow hedges under SFAS No. 133 at time of
commencement.

16



---



##### Table of Contents



The fair value of the Companys interest rate swap contracts 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.
Information on the fair values of the interest rate swaps is as follows:

Fair Value of Interest Rate Swaps(Figure 13)

|                        |                              |                  |   |                        |        |      |   |        |       | 
|----------------------- | ---------------------------- | ---------------- | - | ---------------------- | ------ | ---- | - | ------ | ----- | 
|                        |                              |                  |   | March 31,             
|                        |                              |                  |   |                       
|                        |                              |                  |   | 2003                   |        | 2002
|                        |                              |                  |   |                        |        |     
|                        |                              |                  |   | (Dollars in thousands)
|Unrealized gain (loss): |                              |                  |   |                        |        |      |   |       
|                       
|                       
|                       
|                       
|                        | Fair value hedges            |                  | $ | 85,658                 |        |      | $ | 10,658 |      
|                       
|                       
|                       
|                       
|                        | Cash flow hedges             |                  |   | (5,217                 | )      |      |   | (1,074 | )    
|                       
|                       
|                       
|                       
|                        | Unhedged interest rate swaps |                  |   | (31,418                | )      |      |   |       |      
|                        |                              |                  |   |                        |        |      |   |       
|                        |                              | Total fair value |   | $                      | 49,023 |      |   | $      | 9,584 | 
|                        |                              |                  |   |                        |        |      |   |       

The net benefit of interest rate swaps included in interest expense is as
follows:

Net Benefit of Interest Risk Management(Figure 14)

|                           |                              |                   |   |                        |        |         |   |         |        |  
|-------------------------- | ---------------------------- | ----------------- | - | ---------------------- | ------ | ------- | - | ------- | ------ | -
|                           |                              |                   |   | Three Months Ended    
|                           |                              |                   |   |                       
|                           |                              |                   |   | 3/31/03                |        | 3/31/02
|                           |                              |                   |   |                        |        |        
|                           |                              |                   |   | (Dollars in thousands)
|Interest expense (income): |                              |                   |   |                        |        |         |   |        
|                          
|                          
|                          
|                          
|                           | Deposits                     |                   | $ | (9,782                 | )      |         | $ | (11,412 | )     
|                          
|                          
|                          
|                          
|                           | FHLB advances                |                   |   | 2,244                  |        |         |   | 1,736   |       
|                          
|                          
|                          
|                          
|                           | Subordinated notes           |                   |   | (4,391                 | )      |         |   |        |       
|                          
|                          
|                          
|                          
|                           | Unhedged interest rate swaps |                   |   | 3,798                  |        |         |   |        |       
|                           |                              |                   |   |                        |        |         |   |        
|                           |                              | Total net benefit |   | $                      | (8,131 | )       |   | $       | (9,676 | )
|                           |                              |                   |   |                        |        |         |   |        

Liquidity

Our principal sources of funds are deposits, advances from the FHLB of
Cincinnati, federal funds purchased and 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 to supplement deposits with longer term and/or lower cost
alternative sources of funds such as FHLB advances and federal funds purchased
and repurchase agreements. We may, from time to time, decide to price deposits
aggressively for strategic reasons which may result in significant deposit
inflows.

In the ordinary course of business, we enter 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. We anticipate that we
will have sufficient funds available to meet our commitments. As of March 31,
2003, there were outstanding commitments to originate $2.4 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.
Additionally, there were outstanding unfunded consumer lines of credit of $4.7
billion and corporate banking lines of credit of $408.8 million as of March 31,
2003. 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 $97.8 million as of March 31, 2003.

Capital and Dividends

On April 23, 2002, the Companys Board of Directors authorized management to
repurchase up to 10% of the Companys outstanding common stock, or
approximately 22 million shares, under a program of open market purchases or
privately negotiated transactions. This program replaced the repurchase
program that had been in effect since July 18, 2000 and under which the Company
repurchased approximately 15.0 million shares for a total cost of $394.8
million. The Company repurchased 602,600 shares under the new authorization
during the first quarter of 2003 at an average cost of $27.86 per share. This
brought the total number of shares repurchased under this program to 8.5
million shares at an average cost of $30.76 per share. Shares and per share
data discussed in this paragraph have not been restated to reflect the 5% stock
dividend issued September 30, 2002.

17



---



##### Table of Contents



Charter One, a financial holding company, is subject to regulation by the
Federal Reserve Board (FRB) under the Bank Holding Company Act of 1956 as
amended, and the regulations of the FRB, including various capital
requirements. The Bank is subject to various regulatory capital requirements
administered by the OCC. 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, 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 the Bank 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. The actual
regulatory capital ratios calculated for Charter One and the Bank, along with
the capital amounts and ratios for capital adequacy purposes and the amounts
required to be categorized as well capitalized, are as follows:

Regulatory Capital(Figure 15)

|                  |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |       |  
|----------------- | -------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  | ----------- | --------- | ----- |  |  | ----- | - |  | - | --------- |  |  | - | ----- | -
|                  |                                        |  | 3/31/03               
|                  |                                        |  |                       
|                  |                                        |  |                        |           |                   |  |                          |       |       |  | For Capital |           |       |  |  |       |   |  |  
|                  |                                        |  | Actual                 |           | Adequacy Purposes |  | To Be "Well Capitalized"
|                  |                                        |  |                        |           |                   |  |                         
|                  |                                        |  | Amount                 |           | Ratio             |  | Amount                   |       | Ratio |  | Amount      |           | Ratio
|                  |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |      
|                  |                                        |  | (Dollars in thousands)
|Charter One:      |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |      
|                 
|                 
|                 
|                 
|                  | Total capital to risk-weighted assets  |  | $                      | 3,351,195 |                   |  |                          | 11.97 | %     |  | $           | 2,240,273 |       |  |  | >8.00 | % |  | $ | 2,800,341 |  |  | > | 10.00 | %
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to risk-weighted assets |  |                        | 2,601,533 |                   |  |                          | 9.29  |       |  |             | 1,120,136 |       |  |  | >4.00 |   |  |   | 1,680,205 |  |  | > | 6.00  |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to average assets       |  |                        | 2,601,533 |                   |  |                          | 6.16  |       |  |             | 1,689,243 |       |  |  | >4.00 |   |  |   | N/A       |  |  |   | N/A   |  
|                 
|                 
|                 
|                 
|Charter One Bank: |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |      
|                 
|                 
|                 
|                 
|                  | Total capital to risk-weighted assets  |  |                        | 3,390,837 |                   |  |                          | 12.12 |       |  |             | 2,238,151 |       |  |  | >8.00 |   |  |   | 2,797,689 |  |  | > | 10.00 |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to risk-weighted assets |  |                        | 2,308,430 |                   |  |                          | 8.25  |       |  |             | 1,119,075 |       |  |  | >4.00 |   |  |   | 1,678,613 |  |  | > | 6.00  |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to average assets       |  |                        | 2,308,430 |                   |  |                          | 5.48  |       |  |             | 1,686,119 |       |  |  | >4.00 |   |  |   | 2,107,649 |  |  | > | 5.00  |  

|                  |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |       |  
|----------------- | -------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  | ----------- | --------- | ----- |  |  | ----- | - |  | - | --------- |  |  | - | ----- | -
|                  |                                        |  | 12/31/02              
|                  |                                        |  |                       
|                  |                                        |  |                        |           |                   |  |                          |       |       |  | For Capital |           |       |  |  |       |   |  |  
|                  |                                        |  | Actual                 |           | Adequacy Purposes |  | To Be "Well Capitalized"
|                  |                                        |  |                        |           |                   |  |                         
|                  |                                        |  | Amount                 |           | Ratio             |  | Amount                   |       | Ratio |  | Amount      |           | Ratio
|                  |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |      
|                  |                                        |  | (Dollars in thousands)
|Charter One:      |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |      
|                 
|                 
|                 
|                 
|                  | Total capital to risk-weighted assets  |  | $                      | 3,239,604 |                   |  |                          | 11.67 | %     |  | $           | 2,220,734 |       |  |  | >8.00 | % |  | $ | 2,775,917 |  |  | > | 10.00 | %
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to risk-weighted assets |  |                        | 2,513,577 |                   |  |                          | 9.05  |       |  |             | 1,110,367 |       |  |  | >4.00 |   |  |   | 1,665,550 |  |  | > | 6.00  |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to average assets       |  |                        | 2,513,577 |                   |  |                          | 6.10  |       |  |             | 1,648,861 |       |  |  | >4.00 |   |  |   | N/A       |  |  |   | N/A   |  
|                 
|                 
|                 
|                 
|Charter One Bank: |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |   |      
|                 
|                 
|                 
|                 
|                  | Total capital to risk-weighted assets  |  |                        | 3,150,686 |                   |  |                          | 11.36 |       |  |             | 2,219,719 |       |  |  | >8.00 |   |  |   | 2,774,649 |  |  | > | 10.00 |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to risk-weighted assets |  |                        | 2,091,615 |                   |  |                          | 7.54  |       |  |             | 1,109,860 |       |  |  | >4.00 |   |  |   | 1,664,789 |  |  | > | 6.00  |  
|                 
|                 
|                 
|                 
|                  | Tier 1 capital to average assets       |  |                        | 2,091,615 |                   |  |                          | 5.11  |       |  |             | 1,636,187 |       |  |  | >4.00 |   |  |   | 2,045,234 |  |  | > | 5.00  |  

Management believes that, as of March 31, 2003, Charter One and the Bank
individually met the capital adequacy requirements to which they were subject.
Events beyond managements control, such as fluctuations in interest rates or a
downturn in the economy in areas in which the institutions loans and
securities are concentrated could adversely affect future earnings and,
consequently, the institutions ability to meet its future capital
requirements.

Quarterly Stock Prices and Dividends(Figure 16)

|                                            |       |  |                    |       |          |  |         |       |         |  |         |       |  |  |     |       |  |  |     |       | 
|------------------------------------------- | ----- |  | ------------------ | ----- | -------- |  | ------- | ----- | ------- |  | ------- | ----- |  |  | --- | ----- |  |  | --- | ----- | 
|                                            |       |  | Three Months Ended
|                                            |       |  |                   
|                                            |       |  | 3/31/03            |       | 12/31/02 |  | 9/30/02 |       | 6/30/02 |  | 3/31/02
|                                            |       |  |                    |       |          |  |         |       |         |  |        
|Market price of common stock (NYSE: CF)(1): |       |  |                    |       |          |  |         |       |         |  |         |       |  |  |     |       |  |  |     |      
|                                           
|                                           
|                                           
|                                           
|                                            | High  |  | $                  | 30.74 |          |  | $       | 31.48 |         |  | $       | 33.42 |  |  | $   | 34.77 |  |  | $   | 30.95 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Low   |  |                    | 27.05 |          |  |         | 23.89 |         |  |         | 25.81 |  |  |     | 29.30 |  |  |     | 25.19 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Close |  |                    | 27.66 |          |  |         | 28.73 |         |  |         | 29.72 |  |  |     | 32.74 |  |  |     | 29.73 | 
|                                           
|                                           
|                                           
|                                           
|Dividends declared and paid(1)              |       |  | .22                |       |          |  | .22     |       |         |  | .21     |       |  |  | .21 |       |  |  | .19 |      



---

|(1) |  | Restated to reflect the 5% stock dividend issued September 30, 2002.
|--- |  | --------------------------------------------------------------------

18



---



##### Table of Contents






ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in our December 31, 2002 Form 10-K. The assumptions used in our
model have been updated as of March 31, 2003. The table below indicates the
estimated impact on net interest income under the various interest rate
scenarios as a percentage of base case net interest income projections.

|                    |  |                               |       |   
|------------------- |  | ----------------------------- | ----- | --
|Changes in          |  | Estimated Percentage Change  
|Interest Rates      |  | in Future Net Interest Income
|(basis points)      |  | 12 Months                    
|                    |  |                              
|+200 over one year  |  |                               | (6.17 | )%
|                   
|                   
|                   
|                   
|+100 over one year  |  |                               | (3.02 | ) 
|                   
|                   
|                   
|                   
|- 100 over one year |  |                               | 3.64  |   

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.




ITEM 4. Controls and Procedures

An evaluation of the Companys disclosure controls and procedures (as defined
in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the Act)) was
carried out under the supervision and with the participation of the Companys
Chief Executive Officer, Chief Financial Officer and several other members of
the Companys senior management within the 90-day period preceding the filing
date of this quarterly report. The Companys Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures as currently in effect are effective in ensuring that the
information required to be disclosed by the Company in the reports it files or
submits under the Act is (i) accumulated and communicated to the Companys
management (including the Chief Executive Officer and Chief Financial Officer)
in a timely manner, and (ii) recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms. Since the date
of this evaluation there have been no significant changes in, or corrective
actions taken regarding, the Companys internal controls or in other factors
that could significantly affect these controls.

The Company intends to continually review and evaluate the design and
effectiveness of its disclosure controls and procedures and to improve its
controls and procedures over time and to correct any deficiencies that it may
discover in the future. The goal is to ensure that senior management has
timely access to all material financial and non-financial information
concerning the Companys business. While the Company believes the present
design of its disclosure controls and procedures is effective to achieve its
goal, future events affecting its business may cause the Company to modify its
disclosure controls and procedures.




PART II  OTHER INFORMATION




ITEM 5. Other Information

Cash Dividend On April 22, 2003, the Companys Board of Directors declared a
regular quarterly cash dividend of $.24 per share, up 9% from $.22 last
quarter. The cash dividend is payable May 20, 2003 to shareholders of record
on May 6, 2003.




ITEM 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits: See Index to Exhibits.                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Reports on Form 8-K: On January 17, 2003, the Company filed a report on
Form 8-K containing its earnings release dated January 17, 2003.            
|   
|    |  | On March 18, 2003, the Company filed a report on Form 8-K containing a press
release announcing earnings expectations for the first quarter of 2003.

19



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |  |             |  |                                                                                                                                                               
|----- |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |             |  | CHARTER ONE FINANCIAL, INC.                                                                                                                                   
|     
|Date: |  | May 9, 2003 |  | /s/ Charles John KochCharles John Koch
Chairman of the Board, President and Chief
Executive Officer
(Duly Authorized Officer and Principal
Executive Officer) 
|     
|Date: |  | May 9, 2003 |  | /s/ Richard W. NeuRichard W. Neu
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)

20



---



##### Table of Contents






CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Charles John Koch, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Charter One Financial,
Inc. (the Registrant);

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the consolidated financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the consolidated financial condition, results of operations
and cash flows of the Registrant as of, and for, the periods presented in this
quarterly report;

4.     The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | b) evaluated the effectiveness of the Registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The Registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrants auditors and the Audit Committee of
Registrants Board of Directors (or persons performing the equivalent
function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrants ability to record,
process, summarize and report financial data and have identified for the
Registrants auditors any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrants internal
controls; and                                                                                                                                        

6.     The Registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                  |  |                                                                                                    
|----------------- |  | ---------------------------------------------------------------------------------------------------
|Date: May 9, 2003 |  | /s/ Charles John KochCharles John Koch
Chairman of the Board, President and Chief Executive Officer

21



---



##### Table of Contents






CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Richard W. Neu, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Charter One Financial,
Inc. (the Registrant);

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the consolidated financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the consolidated financial condition, results of operations
and cash flows of the Registrant as of, and for, the periods presented in this
quarterly report;

4.     The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | b) evaluated the effectiveness of the Registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The Registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrants auditors and the Audit Committee of
Registrants Board of Directors (or persons performing the equivalent
function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrants ability to record,
process, summarize and report financial data and have identified for the
Registrants auditors any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrants internal
controls; and                                                                                                                                        

6.     The Registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                  |  |                                                                    
|----------------- |  | -------------------------------------------------------------------
|Date: May 9, 2003 |  | /s/ Richard W. Neu                                                 
|                  |  | Richard W. Neu
Executive Vice President and Chief Financial Officer

22



---



##### Table of Contents






INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.1     |  | Registrants Second Restated
Certificate of Incorporation, as
amended and currently in effect, filed
as Exhibit 3.1 to Registrants Report
on Form 10-K for the fiscal year ended
December 31, 2000 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                       
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|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.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                
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|4.1     |  | Form of Certificate of Common Stock,
as currently in effect, filed as
Exhibit 4.1 to Registrants Report on
Form 10-K for the fiscal year ended
December 31, 2000 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                         
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|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 30, 1999 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                           
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|4.3     |  | The Registrant hereby agrees to
furnish to the Securities and Exchange
Commission, upon request, with copies
of all instruments defining rights of
holders of long-term debt of Charter
One and its consolidated subsidiaries.                                                                                                                                                                                                                                                                                                                                                       
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|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.                                                                                                                                                                                                                                                                                                                                                                                  
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|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.                                                                                                                                                                                                                                                                                                                                                                                    
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|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. 000-16311)
is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                  
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|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.
000-16311), are incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                     
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|10.5    |  | 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.                                                                                                                                                                                                                                                                                                                                                                           
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|10.6    |  | 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
filed as Exhibit 10.7 to the
Registrants Report on Form 10-K for
the fiscal year ended December 31,
1998 (File No. 000-16311), is
incorporated herein by reference. 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.
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|10.7    |  | 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. 000-16311), is
incorporated herein by reference.                                                                                                                                                                                                                   
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|10.8    |  | Alliance Bancorp 1997 Long-Term
Incentive Stock Benefit Plan, filed as
an attachment to the proxy statement
for the annual meeting of stockholders
of Alliance held on May 28, 1997 (File
No. 000-20082), is incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                       
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|10.9    |  | Hinsdale Financial Corporation 1994
Incentive Stock Option Plan, filed as
an attachment to the proxy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                        
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|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                        
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                            
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|        |  | statement for the annual meeting of stockholders
of Alliance held on February 8, 1995
(File No. 000-20082), is incorporated
herein by reference.                                                                                                                                                                                       
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|10.10   |  | Hinsdale Financial Corporation 1992
Stock Option Plan for Outside
Directors and the Hinsdale Financial
Corporation 1992 Incentive Stock
Option Plan, filed as attachments to
the proxy statement for the annual
meeting of stockholders of Alliance
held on February 10, 1993 (File No.
000-20082) is incorporated herein by
reference.
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.11   |  | Charter One Financial, Inc. 1997 Stock
Option and Incentive Plan, as amended
and restated, filed as Exhibit 10.13
to the Registrants Quarterly Report
on Form 10-Q for the quarter ended
June 30, 2002 (File No. 001-15495), is
incorporated herein by reference.                                                                     
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|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.                                                                                                          
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|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.                                                                                                              
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|10.14   |  | 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.
000-16311), is incorporated herein by
reference.                                       
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|10.15   |  | 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. 000-19843), is
incorporated herein by reference.                                               
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|10.16   |  | 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. 000-19843), is incorporated
herein by reference.                                                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.17   |  | 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 (File No. 001-19843), is incorporated herein by reference.                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.18   |  | 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. 000-16311), is incorporated
herein by reference.                                                 
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.19   |  | 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.                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.20   |  | Charter One Bank, N.A.s Director Non-Stock Deferred Compensation
Plan, filed as Exhibit 10.20 to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2002 (File No.
001-15495), is incorporated herein by reference.                                                                                   
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.21   |  | Charter One Bank, N.A.s Non-Stock Deferred Compensation Plan,
filed as Exhibit 10.21 to the Registrants Annual Report on Form
10-K for the fiscal year ended December 31, 2002 (File No.
001-15495), is incorporated herein by reference.                                                                                            
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.22   |  | Charter One Bank, N.A.s Stock Deferred Compensation Plan, filed as
Exhibit 10.22 to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 (File No. 001-15495), is
incorporated herein by reference.                                                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.23   |  | Master Trust Agreement for Charter One Financial, Inc. Deferred
Compensation Plans, filed as Exhibit 10.23 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31,
2002 (File No. 001-15495), is incorporated herein by reference.                                                                       
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|        |  |                                                                                                                                                                                                                                                                                                                                        
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|10.24   |  | Amendment No. 1 to the amended and restated Charter One Financial,
Inc. 1997 Stock Option and Incentive Plan, filed as Exhibit 10.24
to the Registrant Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 (File No. 001-15495), is incorporated
herein by reference.                                             

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##### Table of Contents



|        |  |                                                                                                                                     
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|EXHIBIT |  |                                                                                                                                     
|NUMBER  |  | DESCRIPTION                                                                                                                         
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|11      |  | Statement Regarding Computation of Per Share Earnings                                                                               
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|99.1    |  | Certifications of Principal Executive Officer and Principal
Financial Officer Pursuant to Item 906 of the Sarbanes-Oxley Act of
2002

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