##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_____________________


FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

[   ] 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.

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(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.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1215 Superior Avenue, Cleveland, Ohio    |  | 44114     
|                                         |  |           
|(Address of principal executive offices) |  | (Zip Code)

(216) 566-5300




(Registrants telephone number, including area code)


NOT APPLICABLE




(Former name, former address and former fiscal year, if changed since report)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X   No

The number of shares outstanding of the registrants sole class of common stock
as of July 31, 2002 was 218,615,797.





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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                            
|PART II  OTHER INFORMATION                      
|                                                  | ITEM 4. Submission of Matters to a Vote of Security Holders                                  
|                                                  | ITEM 5. Other Information                                                                    
|                                                  | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                       
|CERTIFICATIONS                                   
|INDEX TO EXHIBITS                                
|EX-10.12  Amend & Restated 1997 Stock Option Plan
|EX-11  Computation of Per Share Earnings         



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##### Table of Contents



TABLE OF CONTENTS

|                              |                                                                                             |                                                                                       |    |    |   |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -- | -- | - |  |  |  |  | 
|Item                          |                                                                                             |                                                                                       |    |    |   |  |  | 
|Number                        |                                                                                             | Page                                                                                  |    |    |   | 
|                              |                                                                                             |                                                                                       |    |    |   |  | 
|                             
|PART I  FINANCIAL STATEMENTS
|                             
|                              | 1.    Financial Statements                                                                  |                                                                                       |    |    |   |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Financial Condition 
June 30, 2002 and December 31, 2001  |    |    | 1 |  |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Income 
Three and six months ended June 30, 2002 and 2001 |    |    | 2 |  |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Cash Flows 
Six months ended June 30, 2002 and 2001       |    |    | 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                             |                                                                                       |    | 24 |   |  |  |  | 
|                             
|PART II  OTHER INFORMATION  
|                             
|                              | 4.    Submission of Matters to a Vote of Security Holders                                   |                                                                                       |    | 25 |   |  |  |  | 
|                              | 5.    Other Information                                                                     |                                                                                       |    | 25 |   |  |  |  | 
|                              | 6.    Exhibits and Reports on Form 8-K                                                      |                                                                                       |    | 25 |   |  |  |  | 
|Signatures                    |                                                                                             |                                                                                       | 26 |    |   |  |  | 
|Certifications                |                                                                                             |                                                                                       | 26 |    |   |  |  | 





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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)

|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           |            |            | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | --------- | ---------------------- | ---------- | ---------- | --------- | ---------- | ---------- | 
|                                                      |                                                                                                                   |                                 |                                            |           | 6/30/02                |            | 12/31/01  
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |           
|                                                      |                                                                                                                   |                                 |                                            |           | (Dollars in thousands,
|                                                      |                                                                                                                   |                                 |                                            |           | except per share data)
|ASSETS                                               
|Cash accounts                                         |                                                                                                                   | $                               | 583,448                                    |           |                        | $          | 472,658    |          
|Interest-bearing deposits with banks                  |                                                                                                                   |                                 | 9,123                                      |           |                        |            | 8,355      |          
|Federal funds sold and other                          |                                                                                                                   |                                 | 800,509                                    |           |                        |            | 35,507     |          
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      |                                                                                                                   | Total cash and cash equivalents |                                            |           | 1,393,080              |            |            |           | 516,520    |           
|Investment securities:                                |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      | Available for sale                                                                                                |                                 |                                            | 169,203   |                        |            |            | 129,312   |           
|                                                      | Held to maturity (fair value of $4,651 and $6,467)                                                                |                                 |                                            | 4,381     |                        |            |            | 6,274     |           
|Mortgage-backed securities:                           |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      | Available for sale                                                                                                |                                 |                                            | 9,634,674 |                        |            |            | 8,030,512 |           
|                                                      | Held to maturity (fair value of $759,307 and $1,022,658)                                                          |                                 |                                            | 728,003   |                        |            |            | 983,904   |           
|Loans and leases, net                                 |                                                                                                                   |                                 | 24,382,986                                 |           |                        |            | 25,396,071 |          
|Loans held for sale                                   |                                                                                                                   |                                 | 161,438                                    |           |                        |            | 332,629    |          
|Bank owned life insurance                             |                                                                                                                   |                                 | 814,429                                    |           |                        |            | 808,231    |          
|Federal Home Loan Bank and Federal Reserve Bank stock |                                                                                                                   |                                 | 668,905                                    |           |                        |            | 617,836    |          
|Premises and equipment                                |                                                                                                                   |                                 | 362,909                                    |           |                        |            | 352,235    |          
|Accrued interest receivable                           |                                                                                                                   |                                 | 165,262                                    |           |                        |            | 162,065    |          
|Real estate and other collateral owned                |                                                                                                                   |                                 | 44,511                                     |           |                        |            | 54,351     |          
|Loan servicing assets                                 |                                                                                                                   |                                 | 175,650                                    |           |                        |            | 139,840    |          
|Goodwill                                              |                                                                                                                   |                                 | 378,078                                    |           |                        |            | 350,839    |          
|Other assets                                          |                                                                                                                   |                                 | 299,303                                    |           |                        |            | 293,897    |          
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      |                                                                                                                   | Total assets                    |                                            | $         | 39,382,812             |            |            | $         | 38,174,516 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|LIABILITIES AND SHAREHOLDERS EQUITY                 
|Deposits                                              |                                                                                                                   | $                               | 26,557,315                                 |           |                        | $          | 25,123,309 |          
|Federal Home Loan Bank advances                       |                                                                                                                   |                                 | 7,841,524                                  |           |                        |            | 8,657,238  |          
|Federal funds purchased and repurchase agreements     |                                                                                                                   |                                 | 53,089                                     |           |                        |            | 203,259    |          
|Other borrowings                                      |                                                                                                                   |                                 | 720,133                                    |           |                        |            | 304,410    |          
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                 | 51,822                                     |           |                        |            | 54,103     |          
|Accrued interest payable                              |                                                                                                                   |                                 | 38,029                                     |           |                        |            | 57,704     |          
|Accrued expenses and other liabilities                |                                                                                                                   |                                 | 1,087,446                                  |           |                        |            | 845,993    |          
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      |                                                                                                                   | Total liabilities               |                                            |           | 36,349,358             |            |            |           | 35,246,016 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|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; 224,853,682 and 224,855,827 shares issued |                                 |                                            | 2,249     |                        |            |            | 2,249     |           
|                                                      | Additional paid-in capital                                                                                        |                                 |                                            | 2,104,361 |                        |            |            | 2,091,767 |           
|                                                      | Retained earnings                                                                                                 |                                 |                                            | 971,103   |                        |            |            | 811,093   |           
|                                                      | Less 4,662,584 and 516,082 shares of common stock held in treasury at cost                                        |                                 |                                            | (135,378  | )                      |            |            | (14,586   | )         
|                                                      | Accumulated other comprehensive income                                                                            |                                 |                                            | 91,119    |                        |            |            | 37,977    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      |                                                                                                                   |                                 | Total shareholders equity                 |           |                        | 3,033,454  |            |           |            | 2,928,500  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          
|                                                      |                                                                                                                   |                                 | Total liabilities and shareholders equity |           | $                      | 39,382,812 |            |           | $          | 38,174,516 | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |          

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                            |         | Six Months Ended
|                                      |                                     |                                                               |         |                                               |         |                 
|                                      |                                     |                                                               |         | 6/30/02                                       |         | 6/30/01          |         | 6/30/02     |         | 6/30/01
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |        
|                                      |                                     |                                                               |         | (Dollars in thousands, except per share data)
|Interest income:                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Loans and leases                    |                                                               | $       | 415,057                                       |         |                  | $       | 458,851     |         |         | $       | 842,895     |           |   | $       | 925,518     |          
|                                      | Mortgage-backed securities:         |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |             |          
|                                      |                                     | Available for sale                                            |         |                                               | 141,773 |                  |         |             | 84,613  |         |         |             | 252,901   |   |         |             | 167,337   | 
|                                      |                                     | Held to maturity                                              |         |                                               | 12,261  |                  |         |             | 23,283  |         |         |             | 27,061    |   |         |             | 49,570    | 
|                                      | Investment securities:              |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |             |          
|                                      |                                     | Available for sale                                            |         |                                               | 2,625   |                  |         |             | 2,216   |         |         |             | 5,587     |   |         |             | 5,052     | 
|                                      |                                     | Held to maturity                                              |         |                                               | 60      |                  |         |             | 91      |         |         |             | 131       |   |         |             | 236       | 
|                                      | Other interest-earning assets       |                                                               |         | 9,478                                         |         |                  |         | 10,888      |         |         |         | 17,390      |           |   |         | 21,505      |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total interest income                                         |         |                                               | 581,254 |                  |         |             | 579,942 |         |         |             | 1,145,965 |   |         |             | 1,169,218 | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Interest expense:                     |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Deposits                            |                                                               |         | 169,576                                       |         |                  |         | 216,327     |         |         |         | 339,977     |           |   |         | 430,784     |          
|                                      | FHLB advances                       |                                                               |         | 103,927                                       |         |                  |         | 128,186     |         |         |         | 207,643     |           |   |         | 263,933     |          
|                                      | Other borrowings                    |                                                               |         | 9,884                                         |         |                  |         | 7,758       |         |         |         | 17,381      |           |   |         | 17,349      |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total interest expense                                        |         |                                               | 283,387 |                  |         |             | 352,271 |         |         |             | 565,001   |   |         |             | 712,066   | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net interest income                                           |         |                                               | 297,867 |                  |         |             | 227,671 |         |         |             | 580,964   |   |         |             | 457,152   | 
|Provision for loan and lease losses   |                                     |                                                               | 55,277  |                                               |         |                  | 17,076  |             |         |         | 83,994  |             |           |   | 34,804  |            
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net interest income after provision for loan
and lease losses |         |                                               | 242,590 |                  |         |             | 210,595 |         |         |             | 496,970   |   |         |             | 422,348   | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Other income:                         |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Retail banking                      |                                                               |         | 83,543                                        |         |                  |         | 72,130      |         |         |         | 157,299     |           |   |         | 139,499     |          
|                                      | Mortgage banking                    |                                                               |         | 9,168                                         |         |                  |         | 8,830       |         |         |         | 20,458      |           |   |         | 18,310      |          
|                                      | Leasing operations                  |                                                               |         | 317                                           |         |                  |         | 331         |         |         |         | 587         |           |   |         | 1,538       |          
|                                      | Net gains                           |                                                               |         | 37,840                                        |         |                  |         | 25,580      |         |         |         | 59,567      |           |   |         | 41,674      |          
|                                      | Bank owned life insurance and other |                                                               |         | 8,924                                         |         |                  |         | 9,785       |         |         |         | 18,432      |           |   |         | 19,634      |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total other income                                            |         |                                               | 139,792 |                  |         |             | 116,656 |         |         |             | 256,343   |   |         |             | 220,655   | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Administrative expenses:              |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Compensation and employee benefits  |                                                               |         | 80,645                                        |         |                  |         | 65,438      |         |         |         | 157,897     |           |   |         | 133,537     |          
|                                      | Net occupancy and equipment         |                                                               |         | 27,634                                        |         |                  |         | 26,314      |         |         |         | 56,197      |           |   |         | 53,175      |          
|                                      | Marketing expenses                  |                                                               |         | 10,012                                        |         |                  |         | 9,633       |         |         |         | 18,841      |           |   |         | 15,692      |          
|                                      | Federal deposit insurance premiums  |                                                               |         | 1,106                                         |         |                  |         | 932         |         |         |         | 2,317       |           |   |         | 1,848       |          
|                                      | Amortization of goodwill            |                                                               |         | 3,832                                         |         |                  |         | 4,039       |         |         |         | 7,730       |           |   |         | 8,078       |          
|                                      | Other administrative expenses       |                                                               |         | 49,219                                        |         |                  |         | 44,467      |         |         |         | 95,526      |           |   |         | 86,079      |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total administrative expenses                                 |         |                                               | 172,448 |                  |         |             | 150,823 |         |         |             | 338,508   |   |         |             | 298,409   | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Income before income taxes            |                                     |                                                               | 209,934 |                                               |         |                  | 176,428 |             |         |         | 414,805 |             |           |   | 344,594 |            
|Income taxes                          |                                     |                                                               | 66,654  |                                               |         |                  | 56,016  |             |         |         | 131,702 |             |           |   | 109,392 |            
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net income                                                    |         | $                                             | 143,280 |                  |         | $           | 120,412 |         |         | $           | 283,103   |   |         | $           | 235,202   | 
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Basic earnings per share(1)           |                                     | $                                                             | .65     |                                               |         | $                | .55     |             |         | $       | 1.28    |             |           | $ | 1.07    |            
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Diluted earnings per share(1)         |                                     | $                                                             | .63     |                                               |         | $                | .54     |             |         | $       | 1.25    |             |           | $ | 1.05    |            
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|Average common shares outstanding(1): |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Basic                               |                                                               |         | 220,188,006                                   |         |                  |         | 217,811,601 |         |         |         | 220,420,017 |           |   |         | 218,330,403 |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            
|                                      | Diluted                             |                                                               |         | 227,736,469                                   |         |                  |         | 223,381,474 |         |         |         | 227,307,251 |           |   |         | 223,812,751 |          
|                                      |                                     |                                                               |         |                                               |         |                  |         |             |         |         |         |             |           |   |         |            



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|(1) |  | Restated to reflect the 5% stock dividend issued September 28, 2001.
|--- |  | --------------------------------------------------------------------

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)

|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |            |           |            |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------------- | ---------- | ---------------------- | -------- | ------- | ---------- | --------- | ---------- | -
|                                                   |                                                                                   |                                                                                                  |                                           |            | Six
Months Ended      
|                                                   |                                                                                   |                                                                                                  |                                           |            |                       
|                                                   |                                                                                   |                                                                                                  |                                           |            | 6/30/02                |          | 6/30/01
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |        
|                                                   |                                                                                   |                                                                                                  |                                           |            | (Dollars in
thousands)
|Cash flows from operating activities:              |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   | Net income                                                                        |                                                                                                  | $                                         | 283,103    |                        |          | $       | 235,202    |          
|                                                   | Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                                                  |                                           |            |                        |          |         |            |          
|                                                   |                                                                                   | Provision for loan and lease losses                                                              |                                           |            | 83,994                 |          |         |            | 34,804    |           
|                                                   |                                                                                   | Net gains                                                                                        |                                           |            | (69,787                | )        |         |            | (45,065   | )         
|                                                   |                                                                                   | Accretion of discounts, amortization of premiums, amortization of
goodwill and depreciation, net |                                           |            | 59,264                 |          |         |            | 51,939    |           
|                                                   |                                                                                   | Origination of loans held for sale                                                               |                                           |            | (1,125,258             | )        |         |            | (759,925  | )         
|                                                   |                                                                                   | Proceeds from sale of loans held for sale                                                        |                                           |            | 1,122,671              |          |         |            | 762,967   |           
|                                                   |                                                                                   | Increase
(decrease) in accrued interest payable                                                  |                                           |            | (19,675                | )        |         |            | 36,920    |           
|                                                   |                                                                                   | Other                                                                                            |                                           |            | 308,762                |          |         |            | 285,988   |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   |                                                                                   |                                                                                                  | Net cash provided by operating activities |            |                        | 643,074  |         |            |           | 602,830    |  
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|Cash flows from investing activities:              |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   | Net principal disbursed on loans and leases                                       |                                                                                                  |                                           | (2,968,722 | )                      |          |         | (3,753,417 | )        
|                                                   | Proceeds from principal repayments and maturities of:                             |                                                                                                  |                                           |            |                        |          |         |            |          
|                                                   |                                                                                   | Mortgage-backed securities held to maturity                                                      |                                           |            | 258,232                |          |         |            | 237,631   |           
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | 817,069                |          |         |            | 471,215   |           
|                                                   |                                                                                   | Investment securities held to maturity                                                           |                                           |            | 1,751                  |          |         |            | 15,946    |           
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | 21,059                 |          |         |            | 323,393   |           
|                                                   | Proceeds from sale of:                                                            |                                                                                                  |                                           |            |                        |          |         |            |          
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | 4,416,575              |          |         |            | 1,893,114 |           
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | 645                    |          |         |            | 5,104     |           
|                                                   |                                                                                   | Federal
Home Loan Bank and Federal Reserve Bank stock                                            |                                           |            | 7,538                  |          |         |            | 6,353     |           
|                                                   | Purchase of:                                                                      |                                                                                                  |                                           |            |                        |          |         |            |          
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                           |            | (2,431,548             | )        |         |            | (652,086  | )         
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                           |            | (29,315                | )        |         |            | (4,080    | )         
|                                                   |                                                                                   | Federal Home Loan Bank and Federal Reserve Bank stock                                            |                                           |            | (41,588                | )        |         |            |          |           
|                                                   |                                                                                   | Loans                                                                                            |                                           |            | (10,090                | )        |         |            | (11,723   | )         
|                                                   |                                                                                   | Loan servicing assets, including those originated                                                |                                           |            | (57,088                | )        |         |            | (25,778   | )         
|                                                   | Net cash paid in connection with business combination                             |                                                                                                  |                                           | (90,425    | )                      |          |         |           |          
|                                                   | Other                                                                             |                                                                                                  |                                           | (52,574    | )                      |          |         | (52,643    | )        
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   |                                                                                   |                                                                                                  | Net cash used in investing activities     |            |                        | (158,481 | )       |            |           | (1,546,971 | )
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|Cash flows from financing activities:              |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   | Net decrease in short-term borrowings                                             |                                                                                                  |                                           | (975,170   | )                      |          |         | (340,690   | )        
|                                                   | Proceeds from long-term borrowings                                                |                                                                                                  |                                           | 420,832    |                        |          |         | 517,177    |          
|                                                   | Repayments of long-term borrowings                                                |                                                                                                  |                                           | (11,057    | )                      |          |         | (509,762   | )        
|                                                   | Increase in deposits                                                              |                                                                                                  |                                           | 1,190,934  |                        |          |         | 1,514,400  |          
|                                                   | Decrease in advance payments by borrowers for taxes and insurance                 |                                                                                                  |                                           | (2,281     | )                      |          |         | (6,641     | )        
|                                                   | Payment of dividends on common stock                                              |                                                                                                  |                                           | (92,560    | )                      |          |         | (78,804    | )        
|                                                   | Proceeds from issuance of common stock                                            |                                                                                                  |                                           | 40,378     |                        |          |         | 31,829     |          
|                                                   | Purchase of treasury stock                                                        |                                                                                                  |                                           | (179,109   | )                      |          |         | (93,044    | )        
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   |                                                                                   | Net cash provided by financing activities                                                        |                                           |            | 391,967                |          |         |            | 1,034,465 |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|Net increase in cash and cash equivalents          |                                                                                   |                                                                                                  | 876,560                                   |            |                        |          | 90,324  |           
|Cash and cash equivalents, beginning of the period |                                                                                   |                                                                                                  | 516,520                                   |            |                        |          | 531,257 |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|Cash and cash equivalents, end of period           |                                                                                   | $                                                                                                | 1,393,080                                 |            |                        | $        | 621,581 |           
|                                                   |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|Supplemental disclosure of cash flow information:  |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   | Cash paid for interest on deposits and borrowings                                 |                                                                                                  | $                                         | 667,955    |                        |          | $       | 858,057    |          
|                                                   | Cash paid for income taxes                                                        |                                                                                                  |                                           | 4,500      |                        |          |         |           |          
|Supplemental schedule of noncash activities:       |                                                                                   |                                                                                                  |                                           |            |                        |          |         |           
|                                                   | Loans exchanged for mortgage-backed securities                                    |                                                                                                  |                                           | 4,256,953  |                        |          |         | 3,190,525  |          

See Notes to Consolidated Financial Statements.

3



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##### 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, 2001.
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 prefers to
work as an integrated unit to customize solutions for its customers, with
business line emphasis and product offerings changing over time as needs
and demands change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|3. |  | In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
These statements change the accounting for business combinations and
goodwill. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Use of
the pooling-of-interests method is prohibited. SFAS No. 142 changes the
accounting for goodwill and certain intangible assets from an amortization
method to an impairment-only approach. Any goodwill arising from business
combinations initiated after June 30, 2001 is not amortized. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, goodwill and certain intangible assets must be
tested for impairment and write-downs may be necessary. Additionally,
amortization of goodwill recorded for past business combinations ceased
upon adoption of SFAS No. 142 on January 1, 2002.
|  
|   |  | The following table reconciles reported net income to pro forma adjusted net
income for the three and six months ended June 30, 2002 and 2001,
respectively:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |         | 
|---------------------------------------------------------- | ----------------------------- | - | --------------------------------------------- | ------- | ---------------- | - | ------- | ------- | ------- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                           |                               |   | Three
Months Ended                            |         | Six
Months Ended
|                                                           |                               |   |                                               |         |                 
|                                                           |                               |   | 6/30/02                                       |         | 6/30/01          |   | 6/30/02 |         | 6/30/01
|                                                           |                               |   |                                               |         |                  |   |         |         |        
|                                                           |                               |   | (Dollars in thousands, except per share data)
|Reported net income                                        |                               | $ | 143,280                                       |         |                  | $ | 120,412 |         |         | $ | 283,103 |         |  | $ | 235,202 |        
|Add: Goodwill amortization
(excluding branch acquisitions) |                               |   |                                              |         |                  |   | 741     |         |         |   |        |         |  |   | 1,482   |        
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|                                                           | Pro forma adjusted net income |   | $                                             | 143,280 |                  |   | $       | 121,153 |         |   | $       | 283,103 |  |   | $       | 236,684 | 
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|Basic earnings per share:                                  |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|Reported net income                                        |                               | $ | .65                                           |         |                  | $ | .55     |         |         | $ | 1.28    |         |  | $ | 1.07    |        
|Add: Goodwill amortization                                 |                               |   |                                              |         |                  |   |        |         |         |   |        |         |  |   |        |        
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|                                                           | Pro forma adjusted net income |   | $                                             | .65     |                  |   | $       | .55     |         |   | $       | 1.28    |  |   | $       | 1.07    | 
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|Diluted earnings per share:                                |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|Reported net income                                        |                               | $ | .63                                           |         |                  | $ | .54     |         |         | $ | 1.25    |         |  | $ | 1.05    |        
|Add: Goodwill amortization
(excluding branch acquisitions) |                               |   |                                              |         |                  |   |        |         |         |   |        |         |  |   |        |        
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        
|                                                           | Pro forma adjusted net income |   | $                                             | .63     |                  |   | $       | .54     |         |   | $       | 1.25    |  |   | $       | 1.05    | 
|                                                           |                               |   |                                               |         |                  |   |         |         |         |   |         |         |  |   |         |        



| |  | SFAS No. 142 requires a transitional impairment test be applied to all
goodwill within the first half of 2002 and any resulting impairment loss be
reported as a change in accounting principle. The Company has performed a
transitional impairment test on its goodwill assets as of January 1, 2002.
No impairment loss was recognized as a result of this test.                                                                                                                                                                                                                                                                                                                                                                      
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In May 2002, the FASB issued an Exposure Draft, Acquisitions of Certain
Financial Institutions, that would amend SFAS No. 72, Accounting for
Certain Acquisitions of Banking or Thrift Institutions, and Interpretation
No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan
Association or a Similar Institution Is Acquired in a Business Combination,
to remove from their scope all financial institution acquisitions, except
for transactions between two or more mutual enterprises. Those transactions
would be accounted for under SFAS Nos. 141 and 142, prospectively. The
amendments to SFAS No. 72 and Interpretation 9 would be effective for
transactions completed after a final Statement is issued.

4



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##### Table of Contents





|   |  | The Exposure Draft would require that unidentifiable intangible assets
previously recognized under SFAS No. 72 be reclassified and accounted for as
goodwill if both of the following criteria are met: (1) the transaction in
which the unidentifiable intangible assets arose was a business combination
and (2) intangible assets required to be separately recognized under SFAS
No. 141 were recognized apart from the unidentifiable intangible asset in
that transaction and accounted for separately after the date of acquisition.
In August 2002, the FASB redeliberated the Exposure Draft and deleted the
second criterion discussed above. The FASB affirmed all other provisions of
the Exposure Draft and granted its staff permission to proceed to draft a
final Statement for vote by written ballot. The FASB plans to issue a final
Statement by the end of the year.                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Pending the issuance of a final Statement, the Company has continued its
amortization of goodwill related to branch acquisitions. The Companys
amortization of goodwill related to branch acquisitions amounted to $3.8
million and $7.7 million, before tax, for the three and six months ended
June 30, 2002, respectively, and $2.9 million and $5.8 million, before tax,
for the three and six months ended June 30, 2001, respectively. The
amortization is included in the consolidated statements of income under the
caption amortization of goodwill. Once the proposed Statement becomes
effective, the Company may be permitted to reverse any amortization of
goodwill related to branch acquisitions recognized in the consolidated
financial statements since the Companys adoption of SFAS No. 142 on January
1, 2002.                                                                                                                                                                                                                                                                                 
|  
|4. |  | On January 7, 2002, Charter One Bank, F.S.B. (the Bank) filed an
application with the Office of the Comptroller of the Currency to convert
from a thrift to a national bank. The conversion was effective May 7,
2002 and resulted in changing the Banks name to Charter One Bank, N.A.
from Charter One Bank, F.S.B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|5. |  | On May 24, 2002, the Company completed its acquisition of Charter
National Bancorp, Inc. (Charter National), the holding company of
Charter Bank in Wyandotte, Michigan. On May 24, 2002, Charter National had
assets of $353.2 million and deposits of $242.3 million in eight branches
located south of Detroit, Michigan. The Company paid $90.4 million in
cash consideration and recorded $34.8 million of goodwill based on a
preliminary determination of the estimated fair values of the assets and
liabilities acquired as a result of this transaction. Additionally, the
Company recorded $25.0 million as an indefinite-lived trademark name
intangible. The Company accounted for this acquisition as a purchase under
the new business combinations standards discussed in Note 3 above, and
included the results of operations of Charter National in its Consolidated
Financial Statements from the effective date of the acquisition. Pro
forma results of operations for this acquisition, had the acquisition
occurred as of January 1, 2002, are not significant and accordingly, are
not provided.
|  
|6. |  | Certain items in the consolidated financial statements for 2001 have been
reclassified to conform to the 2002 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

5



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##### 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 Michigan Bancorp, Inc. As of June 30, 2002, Charter Michigan
Bancorp, Inc. owned all of the outstanding capital stock of Charter One Bank,
N.A., a national bank and Charter Bank, a Michigan state-chartered commercial
bank (see following paragraphs). The primary business of Charter One is
operating these financial institutions which we sometimes refer to in this
document collectively as the Bank. The Banks primary business is providing
consumer banking services to certain major markets in Ohio, Michigan, Illinois,
New York, Vermont and in some markets of Massachusetts. As of June 30, 2002,
the Bank and its subsidiaries were doing business through 461 full-service
branches and 27 loan production offices.

On January 7, 2002, Charter One Bank, F.S.B. filed an application with the
Office of the Comptroller of the Currency (OCC) to convert from a thrift to a
national bank. The conversion was effective May 7, 2002 and resulted in
changing the Banks name to Charter One Bank, N.A. from Charter One Bank,
F.S.B. References to Charter One Bank or the Bank shall mean Charter One Bank,
N.A. or Charter One Bank, F.S.B. as the context requires.

On May 16, 2002, Charter One Commercial, a New York state-chartered commercial
bank, was merged into Charter One Bank. On August 9, 2002, Charter Bank was
merged into Charter One Bank.

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 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, growth opportunities, interest rates, acquisition and
divestiture opportunities, and synergies, efficiencies, cost savings and
funding advantages expected to be realized from prior acquisitions. Words such
as may, could, should, would, believe, anticipate, estimate,
expect, intend, plan and similar expressions are intended to identify
these forward-looking statements.

The important factors we discuss below, 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.

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



| |  | the strength of the United States economy in general and the strength of the local economies in which we conduct our
operations; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in,
among other things, a deterioration in the credit quality of our loan assets;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal
Reserve Board;                                                                                                                                                                                   
| 
| |  | inflation, interest rate, market and monetary fluctuations;                                                                                                                                                                                                                                                                    

6



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##### 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 willingness of users to substitute competitors products and services for our products and services;                                                                                                                                                 
| 
| |  | our success in gaining regulatory approval of our products and services, when required;                                                                                                                                                                  
| 
| |  | the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and
insurance); legislative or regulatory changes may adversely affect the business in which we are engaged;                      
| 
| |  | the impact of technological changes;                                                                                                                                                                                                                     
| 
| |  | acquisitions;                                                                                                                                                                                                                                            
| 
| |  | changes in consumer spending and saving habits; and                                                                                                                                                                                                      
| 
| |  | our success at managing the risks involved in the foregoing.                                                                                                                                                                                             

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

RESULTS OF OPERATIONS

Acquisition

On May 24, 2002, the Company completed its acquisition of Charter National
Bancorp, Inc., the holding company of Charter Bank in Wyandotte, Michigan. On
May 24, 2002, Charter National had assets of $353.2 million and deposits of
$242.3 million in eight branches located south of Detroit, Michigan. The
Company paid $90.4 million in cash consideration and recorded $34.8 million of
goodwill based on a preliminary determination of the estimated fair values of
the assets and liabilities acquired as a result of this transaction.
Additionally, the Company recorded $25.0 million as an indefinite-lived
trademark name intangible. The Company accounted for this acquisition as a
purchase, and included the results of operations of Charter National in its
Consolidated Financial Statements from the effective date of the acquisition.
The merger of Charter Bank into Charter One Bank was effective August 9, 2002.

Performance Overview

Figure 1 sets forth financial results and annualized performance ratios for the
three and six months ended June 30, 2002 and 2001. Per share data have been
restated to reflect the 5% stock dividend issued September 28, 2001.

Selected Financial Results and Ratios(Figure 1)

|                                               |  |                                               |         |                  |  |         |         |         |  |   |         |   |  |   |         |  
|---------------------------------------------- |  | --------------------------------------------- | ------- | ---------------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                               |  | Three Months Ended                            |         | Six Months Ended
|                                               |  |                                               |         |                 
|                                               |  | 6/30/02                                       |         | 6/30/01          |  | 6/30/02 |         | 6/30/01
|                                               |  |                                               |         |                  |  |         |         |        
|                                               |  | (Dollars in thousands, except per share data)
|Net income                                     |  | $                                             | 143,280 |                  |  | $       | 120,412 |         |  | $ | 283,103 |   |  | $ | 235,202 |  
|Diluted earnings per share                     |  |                                               | .63     |                  |  |         | .54     |         |  |   | 1.25    |   |  |   | 1.05    |  
|Return on average assets                       |  |                                               | 1.48    | %                |  |         | 1.42    | %       |  |   | 1.51    | % |  |   | 1.40    | %
|Return on average equity                       |  |                                               | 19.53   |                  |  |         | 18.70   |         |  |   | 19.44   |   |  |   | 18.49   |  
|Return on average tangible equity(1)           |  |                                               | 22.81   |                  |  |         | 20.45   |         |  |   | 22.64   |   |  |   | 20.28   |  
|Average equity to average assets               |  |                                               | 7.59    |                  |  |         | 7.60    |         |  |   | 7.75    |   |  |   | 7.56    |  
|Net interest income to administrative expenses |  |                                               | 1.73 x  |                  |  |         | 1.51 x  |         |  |   | 1.72 x  |   |  |   | 1.53 x  |  
|Administrative expenses to average assets      |  |                                               | 1.78    | %                |  |         | 1.78    | %       |  |   | 1.80    | % |  |   | 1.77    | %
|Efficiency ratio                               |  |                                               | 38.53   |                  |  |         | 42.63   |         |  |   | 39.50   |   |  |   | 42.83   |  



---

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

7



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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.

8



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##### Table of Contents



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

|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |      |      |      | 
|----------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------------ | ---------- | ---------------------- | ---------- | -------- | ------- | ------- | ------- | ------- | ---- | -------- | ---- | --------- | ---------- | --------- | ---------- | ------- | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                                        |                                       |                                       |                                            |            | Three Months Ended    
|                                                                        |                                       |                                       |                                            |            |                       
|                                                                        |                                       |                                       |                                            |            | 6/30/02                |            | 6/30/01 
|                                                                        |                                       |                                       |                                            |            |                        |            |         
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      | Avg.     |      |           |            |           |            |         |         |         |         | Avg.  
|                                                                        |                                       |                                       |                                            |            | Average                |            |          |         |         |         | Yield/  |      | Average  |      |           |            |           |            | Yield/ 
|                                                                        |                                       |                                       |                                            |            | Balance                |            | Interest |         | Cost    |         | Balance |      | Interest |      | Cost     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |          
|                                                                        |                                       |                                       |                                            |            | (Dollars in thousands)
|Interest-earning assets:                                                |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        | Loans and leases                      |                                       | $                                          | 24,838,010 |                        |            | $        | 415,057 |         |         |         | 6.69 | %        |      | $         | 24,545,830 |           |            | $       | 458,851 |         |         |        | 7.48 | %   
|                                                                        | Mortgage-backed securities:           |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 9,367,419              |            |          |         | 141,773 |         |         |      | 6.05     |      |           |            | 4,987,864 |            |         |         | 84,613  |         |        |      | 6.79 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 759,826                |            |          |         | 12,261  |         |         |      | 6.45     |      |           |            | 1,320,154 |            |         |         | 23,283  |         |        |      | 7.05 |     
|                                                                        | Investment securities:                |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 152,179                |            |          |         | 2,625   |         |         |      | 6.90     |      |           |            | 114,039   |            |         |         | 2,216   |         |        |      | 7.77 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 4,819                  |            |          |         | 60      |         |         |      | 4.97     |      |           |            | 7,234     |            |         |         | 91      |         |        |      | 5.00 |     
|                                                                        | Other interest-earning assets         |                                       |                                            | 1,028,371  |                        |            |          | 9,478   |         |         |         | 3.65 |          |      |           | 636,982    |           |            |         | 10,888  |         |         |        | 6.76 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-earning assets              |            |                        | 36,150,624 |          |         |         | 581,254 |         |      |          | 6.43 |           |            |           | 31,612,103 |         |         |         | 579,942 |        |      |      | 7.34 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|Allowance for loan and lease losses                                     |                                       |                                       | (257,591                                   | )          |                        |            |          |         |         |         |         |      |          |      | (192,922  | )          |           |            |         |         |         |         |        |     
|Noninterest-earning assets                                              |                                       |                                       | 2,761,972                                  |            |                        |            |          |         |         |         |         |      |          |      | 2,466,163 |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total assets                               |            | $                      | 38,655,005 |          |         |         |         |         |      |          |      |           |            | $         | 33,885,344 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|Interest-bearing liabilities:                                           |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        | Deposits:                             |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |      |     
|                                                                        |                                       | Checking accounts                     |                                            | $          | 5,883,423              |            |          |         | 30,456  |         |         |      | 2.08     |      |           | $          | 3,067,873 |            |         |         | 24,371  |         |        |      | 3.19 |     
|                                                                        |                                       | Money market and savings
accounts     |                                            |            | 8,519,541              |            |          |         | 50,252  |         |         |      | 2.37     |      |           |            | 6,293,361 |            |         |         | 58,149  |         |        |      | 3.71 |     
|                                                                        |                                       | Certificates of deposit               |                                            |            | 10,093,412             |            |          |         | 88,868  |         |         |      | 3.53     |      |           |            | 9,708,127 |            |         |         | 133,807 |         |        |      | 5.53 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total deposits                             |            |                        | 24,496,376 |          |         |         | 169,576 |         |      |          | 2.78 |           |            |           | 19,069,361 |         |         |         | 216,327 |        |      |      | 4.55 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        | FHLB advances                         |                                       |                                            | 7,878,506  |                        |            |          | 103,927 |         |         |         | 5.29 |          |      |           | 9,411,921  |           |            |         | 128,186 |         |         |        | 5.46 |     
|                                                                        | Other borrowings                      |                                       |                                            | 584,882    |                        |            |          | 9,884   |         |         |         | 6.74 |          |      |           | 427,597    |           |            |         | 7,758   |         |         |        | 7.23 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total borrowings                           |            |                        | 8,463,388  |          |         |         | 113,811 |         |      |          | 5.39 |           |            |           | 9,839,518  |         |         |         | 135,944 |        |      |      | 5.54 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-bearing liabilities         |            |                        | 32,959,764 |          |         |         | 283,387 |         |      |          | 3.45 |           |            |           | 28,908,879 |         |         |         | 352,271 |        |      |      | 4.89 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|Noninterest-bearing liabilities:                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        | Demand deposit accounts               |                                       |                                            | 1,743,736  |                        |            |          |         |         |         |         |      |          |      |           | 1,448,093  |           |            |         |         |         |         |        |      |     
|                                                                        | Other noninterest-bearing
liabilities |                                       |                                            | 1,016,379  |                        |            |          |         |         |         |         |      |          |      |           | 952,392    |           |            |         |         |         |         |        |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       | Total noninterest-bearing
liabilities |                                            |            | 2,760,115              |            |          |         |         |         |         |      |          |      |           |            | 2,400,485 |            |         |         |         |         |        |      |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities                          |            |                        | 35,719,879 |          |         |         |         |         |      |          |      |           |            |           | 31,309,364 |         |         |         |         |        |      |      |      | 
|Shareholders equity                                                    |                                       |                                       | 2,935,126                                  |            |                        |            |          |         |         |         |         |      |          |      | 2,575,980 |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities and
shareholders equity |            | $                      | 38,655,005 |          |         |         |         |         |      |          |      |           |            | $         | 33,885,344 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|Net interest income                                                     |                                       |                                       |                                            |            |                        | $          | 297,867  |         |         |         |         |      |          |      |           |            |           | $          | 227,671 |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |         |         |      |          |      |           |            |           |            |         |         |         |         |        |     
|Interest rate spread                                                    |                                       |                                       |                                            |            |                        |            |          |         |         |         | 2.98    |      |          |      |           |            |           |            |         |         |         |         | 2.45   |     
|Net yield on average interest-
earning assets                           |                                       |                                       |                                            |            |                        |            |          |         |         |         | 3.30    |      |          |      |           |            |           |            |         |         |         |         | 2.88   |     
|Average interest-earning assets to
average interest-bearing liabilities |                                       |                                       |                                            |            |                        |            |          |         |         |         | 109.68  | %    |          |      |           |            |           |            |         |         |         |         | 109.35 | %   

9



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##### Table of Contents



|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |      |      |      | 
|----------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------------ | ---------- | ---------------------- | ---------- | -------- | ------- | ------- | --------- | ------- | ---- | -------- | ---- | --------- | ---------- | --------- | ---------- | ------- | ------- | ------- | --------- | ------ | ---- | ---- | ---- | 
|                                                                        |                                       |                                       |                                            |            | Six Months Ended      
|                                                                        |                                       |                                       |                                            |            |                       
|                                                                        |                                       |                                       |                                            |            | 6/30/02                |            | 6/30/01 
|                                                                        |                                       |                                       |                                            |            |                        |            |         
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      | Avg.     |      |           |            |           |            |         |         |         |           | Avg.  
|                                                                        |                                       |                                       |                                            |            | Average                |            |          |         |         |           | Yield/  |      | Average  |      |           |            |           |            | Yield/ 
|                                                                        |                                       |                                       |                                            |            | Balance                |            | Interest |         | Cost    |           | Balance |      | Interest |      | Cost     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |          
|                                                                        |                                       |                                       |                                            |            | (Dollars in thousands)
|Interest-earning assets:                                                |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        | Loans and leases                      |                                       | $                                          | 25,182,491 |                        |            | $        | 842,895 |         |           |         | 6.71 | %        |      | $         | 24,480,418 |           |            | $       | 925,518 |         |           |        | 7.58 | %   
|                                                                        | Mortgage-backed securities:           |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 8,377,993              |            |          |         | 252,901 |           |         |      | 6.04     |      |           |            | 4,820,338 |            |         |         | 167,337 |           |        |      | 6.94 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 819,302                |            |          |         | 27,061  |           |         |      | 6.61     |      |           |            | 1,382,697 |            |         |         | 49,570  |           |        |      | 7.17 |     
|                                                                        | Investment securities:                |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 148,564                |            |          |         | 5,587   |           |         |      | 7.52     |      |           |            | 129,511   |            |         |         | 5,052   |           |        |      | 7.80 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 5,262                  |            |          |         | 131     |           |         |      | 4.96     |      |           |            | 8,854     |            |         |         | 236     |           |        |      | 5.33 |     
|                                                                        | Other interest-earning assets         |                                       |                                            | 937,964    |                        |            |          | 17,390  |         |           |         | 3.69 |          |      |           | 615,850    |           |            |         | 21,505  |         |           |        | 6.95 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total interest-earning assets              |            |                        | 35,471,576 |          |         |         | 1,145,965 |         |      |          | 6.47 |           |            |           | 31,437,668 |         |         |         | 1,169,218 |        |      |      | 7.45 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|Allowance for loan and lease losses                                     |                                       |                                       | (256,464                                   | )          |                        |            |          |         |         |           |         |      |          |      | (190,308  | )          |           |            |         |         |         |           |        |     
|Noninterest-earning assets                                              |                                       |                                       | 2,368,313                                  |            |                        |            |          |         |         |           |         |      |          |      | 2,381,222 |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total assets                               |            | $                      | 37,583,425 |          |         |         |           |         |      |          |      |           |            | $         | 33,628,582 |         |         |         |           |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|Interest-bearing liabilities:                                           |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        | Deposits:                             |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |      |     
|                                                                        |                                       | Checking accounts                     |                                            | $          | 5,959,645              |            |          |         | 66,836  |           |         |      | 2.26     |      |           | $          | 2,833,759 |            |         |         | 43,302  |           |        |      | 3.08 |     
|                                                                        |                                       | Money market and savings
accounts     |                                            |            | 7,615,664              |            |          |         | 87,482  |           |         |      | 2.32     |      |           |            | 6,078,657 |            |         |         | 110,196 |           |        |      | 3.66 |     
|                                                                        |                                       | Certificates of deposit               |                                            |            | 9,935,478              |            |          |         | 185,659 |           |         |      | 3.77     |      |           |            | 9,835,645 |            |         |         | 277,286 |           |        |      | 5.69 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total deposits                             |            |                        | 23,510,787 |          |         |         | 339,977   |         |      |          | 2.92 |           |            |           | 18,748,061 |         |         |         | 430,784   |        |      |      | 4.63 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        | FHLB advances                         |                                       |                                            | 7,974,697  |                        |            |          | 207,643 |         |           |         | 5.25 |          |      |           | 9,614,742  |           |            |         | 263,933 |         |           |        | 5.53 |     
|                                                                        | Other borrowings                      |                                       |                                            | 523,134    |                        |            |          | 17,381  |         |           |         | 6.64 |          |      |           | 479,098    |           |            |         | 17,349  |         |           |        | 7.22 |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total borrowings                           |            |                        | 8,497,831  |          |         |         | 225,024   |         |      |          | 5.33 |           |            |           | 10,093,840 |         |         |         | 281,282   |        |      |      | 5.61 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total interest-bearing liabilities         |            |                        | 32,008,618 |          |         |         | 565,001   |         |      |          | 3.56 |           |            |           | 28,841,901 |         |         |         | 712,066   |        |      |      | 4.98 | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|Noninterest-bearing liabilities:                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        | Demand deposit accounts               |                                       |                                            | 1,691,166  |                        |            |          |         |         |           |         |      |          |      |           | 1,404,668  |           |            |         |         |         |           |        |      |     
|                                                                        | Other noninterest-bearing
liabilities |                                       |                                            | 970,698    |                        |            |          |         |         |           |         |      |          |      |           | 838,351    |           |            |         |         |         |           |        |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       | Total noninterest-bearing
liabilities |                                            |            | 2,661,864              |            |          |         |         |           |         |      |          |      |           |            | 2,243,019 |            |         |         |         |           |        |      |      |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total liabilities                          |            |                        | 34,670,482 |          |         |         |           |         |      |          |      |           |            |           | 31,084,920 |         |         |         |           |        |      |      |      | 
|Shareholders equity                                                    |                                       |                                       | 2,912,943                                  |            |                        |            |          |         |         |           |         |      |          |      | 2,543,662 |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|                                                                        |                                       |                                       | Total liabilities and
shareholders equity |            | $                      | 37,583,425 |          |         |         |           |         |      |          |      |           |            | $         | 33,628,582 |         |         |         |           |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|Net interest income                                                     |                                       |                                       |                                            |            |                        | $          | 580,964  |         |         |           |         |      |          |      |           |            |           | $          | 457,152 |         |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                        |            |          |         |         |           |         |      |          |      |           |            |           |            |         |         |         |           |        |     
|Interest rate spread                                                    |                                       |                                       |                                            |            |                        |            |          |         |         |           | 2.91    |      |          |      |           |            |           |            |         |         |         |           | 2.47   |     
|Net yield on average interest-earning assets                            |                                       |                                       |                                            |            |                        |            |          |         |         |           | 3.28    |      |          |      |           |            |           |            |         |         |         |           | 2.91   |     
|Average interest-earning assets to
average interest-bearing liabilities |                                       |                                       |                                            |            |                        |            |          |         |         |           | 110.82  | %    |          |      |           |            |           |            |         |         |         |           | 109.00 | %   

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##### 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 $24.6 million and $48.1 million for the three and six
months ended June 30, 2002, respectively, and $19.8 million and $36.5 million
for the three and six months ended June 30, 2001, respectively.

Rate/Volume Analysis(Figure 3)

|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |         |         |         |          |  
|----------------------------- | --------------------------------- | ------------------ | ------ | ------- | ------ | --------------------------- | ------- | ------------------------- | ------ | ------ | ------ | -------------------------- | ------- | ------ | ------- | -------- | ------- | -------- | -------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | -------- | -
|                              |                                   |                    |        |         |        | Three Months Ended June 30, |         | Six Months Ended June 30,
|                              |                                   |                    |        |         |        |                             |         |                          
|                              |                                   |                    |        |         |        | 2002 v. 2001                |         | 2002 v. 2001             
|                              |                                   |                    |        |         |        |                             |         |                          
|                              |                                   |                    |        |         |        | Increase (decrease) due to  |         |                           |        |        |        | Increase (decrease) due to |         |        |         |         
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |         
|                              |                                   |                    |        |         |        | Rate                        |         | Volume                    |        | Total  |        | Rate                       |         | Volume |         | Total   
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |         
|                              |                                   |                    |        |         |        | (Dollars in thousands)     
|Interest income:              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|                              | Loans and leases                  |                    | $      | (49,433 | )      |                             | $       | 5,639                     |        |        | $      | (43,794                    | )       |        | $       | (108,735 | )       |          | $        | 26,112  |         |         | $       | (82,623 | )      
|                              | Mortgage-backed securities:       |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |         |        
|                              |                                   | Available for sale |        |         | (9,999 | )                           |         |                           | 67,159 |        |        |                            | 57,160  |        |         |          | (24,249 | )        |          |         | 109,813 |         |         |         | 85,564  |        
|                              |                                   | Held to maturity   |        |         | (1,840 | )                           |         |                           | (9,182 | )      |        |                            | (11,022 | )      |         |          | (3,643  | )        |          |         | (18,866 | )       |         |         | (22,509 | )      
|                              | Investment securities:            |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |         |        
|                              |                                   | Available for sale |        |         | (270   | )                           |         |                           | 679    |        |        |                            | 409     |        |         |          | (187    | )        |          |         | 722     |         |         |         | 535     |        
|                              |                                   | Held to maturity   |        |         | (1     | )                           |         |                           | (30    | )      |        |                            | (31     | )      |         |          | (15     | )        |          |         | (90     | )       |         |         | (105    | )      
|                              | Other interest-earning assets     |                    |        | (6,281  | )      |                             |         | 4,871                     |        |        |        | (1,410                     | )       |        |         | (12,528  | )       |          |          | 8,413   |         |         |         | (4,115  | )      
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|                              |                                   |                    | Total  |         |        | (67,824                     | )       |                           |        | 69,136 |        |                            |         | 1,312  |         |          |         | (149,357 | )        |         |         | 126,104 |         |         |         | (23,253 | )       
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|Interest expense:             |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|                              | Checking accounts                 |                    |        | (10,634 | )      |                             |         | 16,719                    |        |        |        | 6,085                      |         |        |         | (13,992  | )       |          |          | 37,526  |         |         |         | 23,534  |        
|                              | Money market and savings accounts |                    |        | (27,129 | )      |                             |         | 19,232                    |        |        |        | (7,897                     | )       |        |         | (50,433  | )       |          |          | 27,719  |         |         |         | (22,714 | )      
|                              | Certificates of deposit           |                    |        | (50,059 | )      |                             |         | 5,120                     |        |        |        | (44,939                    | )       |        |         | (94,414  | )       |          |          | 2,787   |         |         |         | (91,627 | )      
|                              | FHLB advances                     |                    |        | (3,228  | )      |                             |         | (21,031                   | )      |        |        | (24,259                    | )       |        |         | (12,008  | )       |          |          | (44,282 | )       |         |         | (56,290 | )      
|                              | Other borrowings                  |                    |        | (1,617  | )      |                             |         | 3,743                     |        |        |        | 2,126                      |         |        |         | (3,532   | )       |          |          | 3,564   |         |         |         | 32      |        
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|                              |                                   |                    |        | Total   |        |                             | (92,667 | )                         |        |        | 23,783 |                            |         |        | (68,884 | )        |         |          | (174,379 | )       |         |         | 27,314  |         |         |         | (147,065 | )
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        
|Change in net interest income |                                   | $                  | 24,843 |         |        | $                           | 45,353  |                           |        | $      | 70,196 |                            |         | $      | 25,022  |          |         | $        | 98,790   |         |         | $       | 123,812 |        
|                              |                                   |                    |        |         |        |                             |         |                           |        |        |        |                            |         |        |         |          |         |          |          |         |         |         |         |        

Net interest income was $297.9 million for the three months ended June 30,
2002, up 30.8% from the second quarter of 2001. The increase in net interest
income was primarily attributed to the reduction in the cost of average
interest-bearing liabilities from 4.89% during the second quarter of 2001 to
3.45% during the second quarter of 2002. The reduction in the cost of average
interest-bearing liabilities resulted primarily from the maturity and repricing
of higher interest rate certificates of deposit since June 30, 2001.

Net interest income was $581.0 million for the six months ended June 30, 2002,
up 27.1% from $457.2 million in the comparable 2001 period. The increase in net
interest income was primarily attributed to the reduction in the cost of
average interest-bearing liabilities from 4.98% during the six months ended
June 30, 2001 to 3.56% during the 2002 period. The reduction in the cost of
average interest-bearing liabilities resulted primarily from the maturity and
repricing of higher interest rate certificates of deposit since June 30, 2001.

Other Income

Other income for the three months ended June 30, 2002 was $139.8 million, an
increase of $23.1 million, or 19.8%, over the $116.7 million for the three
months ended June 30, 2001. The increase was primarily attributable to income
from retail banking and net gains on sales. Retail banking income increased
$11.4 million, or 15.8%, over the comparable period in 2001. Growth in income
from retail banking was attributed to successful integration of past mergers
and branch acquisitions together with ongoing franchise development
initiatives. Net gains totaled $37.8 million for the second quarter of 2002,
an increase of $12.3 million over the second quarter of 2001. The $2.2 billion
of mortgage-backed securities sold during the second quarter 2002 were
comprised primarily of seasoned, bank-originated residential mortgage products.
We did not utilize any special-purpose entities for the sale of any of our
mortgage-backed securities. Offsetting the net gains on sale of
mortgage-backed securities of $45.3 million was an $8.1 million unrealized loss
on interest rate swaps that are accounted for at fair value under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended.
The $8.1 million unrealized loss was the result of the decline in interest
rates since issuance of the interest rate swaps in May 2002.

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With respect to mortgage banking income, we increased the valuation allowance
on loan servicing assets by $6.4 million in the second quarter of 2002 to
approximately $33.3 million as a result of increasing prepayment speeds. Total
mortgage banking income, excluding the increase in the valuation allowance, was
$15.6 million in the second quarter of 2002. In the year ago quarter, mortgage
banking income totaled $12.8 million, excluding a $4.0 million increase in the
valuation allowance. 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 $16.9 billion, up 22.0% since December 31, 2001 and
39.4% since June 30, 2001. The related loan servicing asset remained at just
over 1% of the portfolio at $175.7 million. With an average servicing spread
of 35 basis points, that translates into a servicing asset valuation of just
over three times the servicing spread.

Other income for the six months ended June 30, 2002 was $256.3 million, an
increase of $35.7 million, or 16.2%, over the $220.7 million for the six months
ended June 30, 2001. Retail banking income increased $17.8 million, or 12.8%,
for the six months ended June 30, 2002 compared to the six month period in
2001. Net gains on sales totaled $59.6 million for the six months ended June
30, 2002, an increase of $17.9 million over the comparable 2001 period. The
reasons for these increases were substantially the same as for the second
quarter results discussed in the above paragraph.

Administrative Expenses

Administrative expenses were $172.4 million for the three months ended June 30,
2002, an increase of $21.6 million, or 14.3%, as compared to the second quarter
of 2001. The increase in administrative expenses was primarily attributable to
costs associated with mergers and acquisitions completed in the last 12 months.
Administrative expenses, as a percentage of average assets, was 1.78% for both
the second quarter of 2002 and 2001. Despite the increase in administrative
expenses, our efficiency ratio improved to 38.53% for the three months ended
June 30, 2002, compared to 42.63% for the three months ended June 30, 2001.
See the discussion in Other Income regarding factors that contributed to the
improvement in our efficiency ratio.

Administrative expenses were $338.5 million for the six months ended June 30,
2002, an increase of $40.1 million, or 13.4%, as compared to the 2001 period.
The reason for the increase in administrative expenses was substantially the
same as for the second quarter results discussed in the above paragraph.
Additionally, marketing expenses increased $3.1 million, or 20.1%, for the six
months ended June 30, 2002, as compared to the 2001 period, as we implemented
various programs geared to support sales efforts throughout the Bank. Despite
the increase in administrative expenses, administrative expenses, as a
percentage of average assets, was 1.80% for the six months ended June 30, 2002,
as compared to 1.77% for the comparable period in 2001. Additionally, our
efficiency ratio improved to 39.50% for the six months ended June 30, 2001,
compared to 42.83% for the comparable period in 2001. See the 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 June 30, 2002 was $66.7
million, compared to $56.0 million for the same period in 2001. 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 the 2002
period and 31.8% for the comparable 2001 period.

Federal income tax expense for the six months ended June 30, 2002 was $131.7
million, compared to $109.4 million for the same period in 2001. 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 31.8% for the 2002
period and 31.7% for the comparable 2001 period.

FINANCIAL CONDITION

Overview

At June 30, 2002, total assets were $39.4 billion, compared to total assets of
$38.2 billion at December 31, 2001.

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Loans and Leases

Composition of Loans and Leases(Figure 4)

|                                       |                                                             |                   |                 |                          |           |                        |            |            |           |           |            | 
|-------------------------------------- | ----------------------------------------------------------- | ----------------- | --------------- | ------------------------ | --------- | ---------------------- | ---------- | ---------- | --------- | --------- | ---------- | 
|                                       |                                                             |                   |                 |                          |           | 6/30/02                |            | 12/31/01  
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 |                          |           | (Dollars in thousands)
|                                       | One-to-four family:                                         |                   |                 |                          |           |                        |            |            |          
|                                       |                                                             | Permanent:        |                 |                          |           |                        |            |            |           |          
|                                       |                                                             |                   | Fixed rate      |                          | $         | 5,556,239              |            |            | $         | 6,419,819 |           
|                                       |                                                             |                   | Adjustable rate |                          |           | 2,584,413              |            |            |           | 3,350,370 |           
|                                       |                                                             | Construction      |                 |                          | 414,716   |                        |            |            | 409,369   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 8,555,368       |                          |           |                        | 10,179,558 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Commercial real estate:                                     |                   |                 |                          |           |                        |            |            |          
|                                       |                                                             | Multifamily       |                 |                          | 1,036,049 |                        |            |            | 1,189,777 |          
|                                       |                                                             | Other             |                 |                          | 1,321,438 |                        |            |            | 1,279,889 |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 2,357,487       |                          |           |                        | 2,469,666  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Consumer:                                                   |                   |                 |                          |           |                        |            |            |          
|                                       |                                                             | Retail            |                 |                          | 4,855,164 |                        |            |            | 4,857,473 |          
|                                       |                                                             | Automobile        |                 |                          | 4,826,370 |                        |            |            | 4,397,425 |          
|                                       |                                                             | Consumer finance  |                 |                          | 976,446   |                        |            |            | 1,042,522 |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 10,657,980      |                          |           |                        | 10,297,420 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Business:                                                   |                   |                 |                          |           |                        |            |            |          
|                                       |                                                             | Leasing           |                 |                          | 2,026,955 |                        |            |            | 1,994,524 |          
|                                       |                                                             | Corporate banking |                 |                          | 1,213,789 |                        |            |            | 1,043,010 |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 3,240,744       |                          |           |                        | 3,037,534  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Loans and leases before allowance for loan and lease losses |                   |                 | 24,811,579               |           |                        |            | 25,984,178 |          
|                                       | Allowance for loan and lease losses                         |                   |                 | (267,155                 | )         |                        |            | (255,478   | )        
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 | Loans and leases, net(1) |           | $                      | 24,544,424 |            |           | $         | 25,728,700 | 
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|Portfolio of loans serviced for others |                                                             | $                 | 16,889,298      |                          |           | $                      | 13,846,807 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           



---

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

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Loan and Lease Activity(Figure 5)

|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |           |           |           |           | 
|---------------------------------------------------- | ---------------------------------------------- | ------------------ | --------------------------------- | ------------------------------------ | --------- | ---------------------- | --------- | ---------------- | --------- | --------- | --------- | --------- | --------- | --------- | ---------- | --------- | --------- | --------- | --------- | 
|                                                     |                                                |                    |                                   |                                      |           | Three Months Ended     |           | Six Months Ended
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                 
|                                                     |                                                |                    |                                   |                                      |           | 6/30/02                |           | 6/30/01          |           | 6/30/02   |           | 6/30/01  
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |          
|                                                     |                                                |                    |                                   |                                      |           | (Dollars in thousands)
|Originations:                                        |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|Real estate:                                         |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     | Permanent:                                     |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |           |          
|                                                     |                                                | One-to-four family |                                   | $                                    | 1,974,839 |                        |           | $                | 2,512,966 |           |           | $         | 4,632,833 |           |            | $         | 3,966,889 |          
|                                                     |                                                | Multifamily        |                                   |                                      | 23,979    |                        |           |                  | 5,650     |           |           |           | 59,698    |           |            |           | 19,676    |          
|                                                     |                                                | Commercial         |                                   |                                      | 34,686    |                        |           |                  | 65,775    |           |           |           | 126,774   |           |            |           | 126,581   |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    | Total permanent loans             |                                      |           | 2,033,504              |           |                  |           | 2,584,391 |           |           |           | 4,819,305 |            |           |           | 4,113,146 |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     | Construction:                                  |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |           |          
|                                                     |                                                | One-to-four family |                                   |                                      | 7,941     |                        |           |                  | 203,528   |           |           |           | 21,972    |           |            |           | 325,457   |          
|                                                     |                                                | Multifamily        |                                   |                                      |          |                        |           |                  | 32,327    |           |           |           | 24,988    |           |            |           | 70,514    |          
|                                                     |                                                | Commercial         |                                   |                                      | 15,489    |                        |           |                  | 19,207    |           |           |           | 81,723    |           |            |           | 105,423   |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    | Total construction loans          |                                      |           | 23,430                 |           |                  |           | 255,062   |           |           |           | 128,683   |            |           |           | 501,394   |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    |                                   | Total real estate loans originated   |           |                        | 2,056,934 |                  |           |           | 2,839,453 |           |           |           | 4,947,988  |           |           |           | 4,614,540 | 
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|Retail consumer                                      |                                                |                    | 938,328                           |                                      |           |                        | 1,135,388 |                  |           |           | 1,937,055 |           |           |           | 1,719,733  |          
|Automobile                                           |                                                |                    | 781,763                           |                                      |           |                        | 688,682   |                  |           |           | 1,465,808 |           |           |           | 1,179,307  |          
|Consumer finance                                     |                                                |                    | 55,338                            |                                      |           |                        | 68,657    |                  |           |           | 111,421   |           |           |           | 125,362    |          
|Leases                                               |                                                |                    | 117,544                           |                                      |           |                        | 111,288   |                  |           |           | 210,585   |           |           |           | 256,125    |          
|Corporate banking                                    |                                                |                    | 399,173                           |                                      |           |                        | 254,980   |                  |           |           | 752,813   |           |           |           | 468,965    |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    | Total loans and leases originated |                                      |           | 4,349,080              |           |                  |           | 5,098,448 |           |           |           | 9,425,670 |            |           |           | 8,364,032 |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|Acquired through business combinations and
purchases |                                                |                    | 206,640                           |                                      |           |                        | 3,827     |                  |           |           | 211,355   |           |           |           | 11,723     |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|Sales and principal reductions:                      |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     | Loans sold                                     |                    |                                   | 481,161                              |           |                        |           | 466,831          |           |           |           | 1,125,258 |           |           |            | 759,925   |          
|                                                     | Loans exchanged for mortgage-backed
securities |                    |                                   | 1,539,682                            |           |                        |           | 1,768,191        |           |           |           | 4,256,953 |           |           |            | 3,190,525 |          
|                                                     | Principal reductions                           |                    |                                   | 2,447,093                            |           |                        |           | 2,306,019        |           |           |           | 5,368,173 |           |           |            | 3,903,345 |          
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    |                                   | Total sales and principal reductions |           |                        | 4,467,936 |                  |           |           | 4,541,041 |           |           |           | 10,750,384 |           |           |           | 7,853,795 | 
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          
|                                                     |                                                |                    |                                   | Increase (decrease) before net items |           | $                      | 87,784    |                  |           | $         | 561,234   |           |           | $         | (1,113,359 | )         |           | $         | 521,960   | 
|                                                     |                                                |                    |                                   |                                      |           |                        |           |                  |           |           |           |           |           |           |            |          

Investment and Mortgage-Backed Securities

Figures 6 and 7 summarize our investment and mortgage-backed securities
portfolios at June 30, 2002 and December 31, 2001. 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)

|                   |                                                      |                                                |       |         |                        |         |          |        |         |         | 
|------------------ | ---------------------------------------------------- | ---------------------------------------------- | ----- | ------- | ---------------------- | ------- | -------- | ------ | ------- | ------- | 
|                   |                                                      |                                                |       |         | 6/30/02                |         | 12/31/01
|                   |                                                      |                                                |       |         |                        |         |         
|                   |                                                      |                                                |       |         | (Dollars in thousands)
|Available for Sale |                                                      |                                                |       |         |                        |         |          |       
|                   | U.S. Treasury and agency securities                  |                                                | $     | 57,324  |                        |         | $        | 30,929 |        
|                   | Securities of U.S. states and political subdivisions |                                                |       | 2,822   |                        |         |          | 8      |        
|                   | Corporate and other securities                       |                                                |       | 109,057 |                        |         |          | 98,375 |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      | Total investment securities available for sale |       |         | 169,203                |         |          |        | 129,312 |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|Held to Maturity   |                                                      |                                                |       |         |                        |         |          |       
|                   | U.S. Treasury and agency securities                  |                                                |       |        |                        |         |          |       |        
|                   | Securities of U.S. states and political subdivisions |                                                |       | 4,346   |                        |         |          | 5,839  |        
|                   | Corporate and other securities                       |                                                |       | 35      |                        |         |          | 435    |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      | Total investment securities held to maturity   |       |         | 4,381                  |         |          |        | 6,274   |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      |                                                | Total |         | $                      | 173,584 |          |        | $       | 135,586 | 
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   | Weighted average rate                                |                                                |       | 6.63    | %                      |         |          | 8.21   | %      
|                   |                                                      |                                                |       |         |                        |         |          |       

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Mortgage-Backed Securities(Figure 7)

|                   |                                      |                                   |                                                     |       |           |                        |            |          |           |           |           | 
|------------------ | ------------------------------------ | --------------------------------- | --------------------------------------------------- | ----- | --------- | ---------------------- | ---------- | -------- | --------- | --------- | --------- | 
|                   |                                      |                                   |                                                     |       |           | 6/30/02                |            | 12/31/01
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|                   |                                      |                                   |                                                     |       |           | (Dollars in thousands)
|Available for Sale |                                      |                                   |                                                     |       |           |                        |            |         
|                   | Participation certificates:          |                                   |                                                     |       |           |                        |            |          |          
|                   |                                      | U.S. government and agency issues |                                                     | $     | 8,679,481 |                        |            | $        | 6,950,425 |          
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |           |                        |            |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 437,663   |                        |            |          | 518,251   |          
|                   |                                      | Private issues                    |                                                     |       | 517,530   |                        |            |          | 561,836   |          
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|                   |                                      |                                   | Total mortgage-backed securities available for sale |       |           | 9,634,674              |            |          |           | 8,030,512 |          
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|Held to Maturity   |                                      |                                   |                                                     |       |           |                        |            |         
|                   | Participation certificates:          |                                   |                                                     |       |           |                        |            |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 384,495   |                        |            |          | 475,622   |          
|                   |                                      | Private issues                    |                                                     |       | 67,821    |                        |            |          | 90,203    |          
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |           |                        |            |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 134,647   |                        |            |          | 185,944   |          
|                   |                                      | Private issues                    |                                                     |       | 141,040   |                        |            |          | 232,135   |          
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|                   |                                      |                                   | Total mortgage-backed securities held to maturity   |       |           | 728,003                |            |          |           | 983,904   |          
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|                   |                                      |                                   |                                                     | Total |           | $                      | 10,362,677 |          |           | $         | 9,014,416 | 
|                   |                                      |                                   |                                                     |       |           |                        |            |         
|                   |                                      | Weighted average rate             |                                                     |       | 6.04      | %                      |            |          | 6.18      | %        
|                   |                                      |                                   |                                                     |       |           |                        |            |         

Asset Quality

In conjunction with Charter One Banks conversion in May 2002 to a national
bank, 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 will neither increase nor decrease ultimate net loan and
lease charge-offs. They only affect 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. Previously, automobile loans were
charged off at the point of repossessed collateral disposition. Going forward,
consistent with OCC-regulated banking practices, automobile loans going through
repossession or bankruptcies will be written down to the net realizable value
of the collateral at the time of the repossession or bankruptcy discharge. Any
automobile loan reaching the 120-day delinquency point will be charged off
completely. Charge-offs in the consumer finance portfolio, which is being
intentionally downsized, were previously recognized at the point of
foreclosure. Going forward, consistent with OCC-regulated banking practices,
consumer finance loans, along with other loans backed by single-family
residential real estate collateral, will be reflected at the lower of cost or
net realizable value at the earliest point of six payments past due or
foreclosure. These policy changes resulted in an additional $27.3 million of
charge-offs recognized during the second quarter of 2002.

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.

15



---



##### Table of Contents



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

|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |         |         |         |         |  
|------------------------------------ | ----------------------------------------------------------- | ---------------------- | -------------------- | --------------------------------- | ------- | ---------------------- | ------- | ---------------- | ------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | -
|                                     |                                                             |                        |                      |                                   |         | Three Months Ended     |         | Six Months Ended
|                                     |                                                             |                        |                      |                                   |         |                        |         |                 
|                                     |                                                             |                        |                      |                                   |         | 6/30/02                |         | 6/30/01          |        | 6/30/02 |         | 6/30/01
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |        
|                                     |                                                             |                        |                      |                                   |         | (Dollars in thousands)
|Allowance for loan and lease losses: |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     | Balance, beginning of period                                |                        | $                    | 258,605                           |         |                        | $       | 192,991          |        |         | $       | 255,478 |         |         | $       | 189,616 |        
|                                     | Provision for loan and lease losses                         |                        |                      | 55,277                            |         |                        |         | 17,076           |        |         |         | 83,994  |         |         |         | 34,804  |        
|                                     | Acquired through business combination                       |                        |                      | 3,184                             |         |                        |         |                 |        |         |         | 3,184   |         |         |         |        |        
|                                     | Loans and leases charged off:                               |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |         |        
|                                     |                                                             | One-to-four family     |                      |                                   | (3,056  | )                      |         |                  | (357   | )       |         |         | (4,032  | )       |         |         | (1,362  | )      
|                                     |                                                             | Commercial real estate |                      |                                   | (117    | )                      |         |                  | (448   | )       |         |         | (918    | )       |         |         | (483    | )      
|                                     |                                                             | Retail consumer        |                      |                                   | (5,530  | )                      |         |                  | (1,694 | )       |         |         | (7,788  | )       |         |         | (3,649  | )      
|                                     |                                                             | Automobile             |                      |                                   | (29,675 | )                      |         |                  | (8,794 | )       |         |         | (46,595 | )       |         |         | (18,780 | )      
|                                     |                                                             | Consumer finance       |                      |                                   | (11,628 | )                      |         |                  | (2,537 | )       |         |         | (15,450 | )       |         |         | (4,594  | )      
|                                     |                                                             | Leases                 |                      |                                   | (1,801  | )                      |         |                  | (262   | )       |         |         | (2,261  | )       |         |         | (262    | )      
|                                     |                                                             | Corporate banking      |                      |                                   | (2,014  | )                      |         |                  | (284   | )       |         |         | (6,037  | )       |         |         | (1,553  | )      
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     |                                                             |                        | Total charge-offs(1) |                                   |         | (53,821                | )       |                  |        | (14,376 | )       |         |         | (83,081 | )       |         |         | (30,683 | )      
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     | Recoveries:                                                 |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |         |        
|                                     |                                                             | One-to-four family     |                      |                                   | 32      |                        |         |                  | 21     |         |         |         | 34      |         |         |         | 45      |        
|                                     |                                                             | Commercial real estate |                      |                                   | 9       |                        |         |                  | 4      |         |         |         | 130     |         |         |         | 5       |        
|                                     |                                                             | Retail consumer        |                      |                                   | 359     |                        |         |                  | 499    |         |         |         | 762     |         |         |         | 920     |        
|                                     |                                                             | Automobile             |                      |                                   | 3,123   |                        |         |                  | 1,678  |         |         |         | 5,531   |         |         |         | 3,044   |        
|                                     |                                                             | Consumer finance       |                      |                                   | 32      |                        |         |                  | 77     |         |         |         | 95      |         |         |         | 128     |        
|                                     |                                                             | Leases                 |                      |                                   |        |                        |         |                  | 220    |         |         |         |        |         |         |         | 220     |        
|                                     |                                                             | Corporate banking      |                      |                                   | 355     |                        |         |                  | 188    |         |         |         | 1,028   |         |         |         | 279     |        
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     |                                                             |                        | Total recoveries     |                                   |         | 3,910                  |         |                  |        | 2,687   |         |         |         | 7,580   |         |         |         | 4,641   |        
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     |                                                             |                        |                      | Net loan and lease charge-offs(1) |         |                        | (49,911 | )                |        |         | (11,689 | )       |         |         | (75,501 | )       |         |         | (26,042 | )
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     | Balance, end of period                                      |                        | $                    | 267,155                           |         |                        | $       | 198,378          |        |         | $       | 267,155 |         |         | $       | 198,378 |        
|                                     |                                                             |                        |                      |                                   |         |                        |         |                  |        |         |         |         |         |         |         |        
|                                     | Net charge-offs to average loans and leases
(annualized)(1) |                        |                      | .80                               | %       |                        |         | .19              | %      |         |         | .60     | %       |         |         | .21     | %      



---

|(1) |  | Includes $27.3 million in charge-offs recorded in the second quarter of
2002 in conjunction with Charter Ones adoption of the new consumer loan
charge-off policy discussed above. This new policy is being implemented
prospectively and as such, prior periods have not been restated.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Even with the impact of the policy changes discussed above, the provision for
loan and lease losses exceeded net charge-offs by $5.4 million during the
second quarter of 2002 and the ratio of the allowance for loan and lease losses
to total loans and leases before the allowance increased to 1.08% at June 30,
2002 from .98% at December 31, 2001.

Net charge-offs during the second quarter totaled $49.9 million, including
$27.3 million resulting from the change in policy discussed above. Excluding
the policy change, annualized net charge-offs equaled .36% of average loans for
the second quarter, compared to .40% in the first quarter of 2002, and .19% in
the second quarter of 2001.

Figure 9 sets forth net charge-offs by portfolio for the three months ended
June 30, 2002 with and without the policy change.

Net Charge-offs to Average Loans and Leases for the Three Months Ended June 30,
2002(Figure 9)

|                       |                       |                                                          |        |                        |     |        |        |        |     |   |        |        |     |  
|---------------------- | --------------------- | -------------------------------------------------------- | ------ | ---------------------- | --- | ------ | ------ | ------ | --- | - | ------ | ------ | --- | -
|                       |                       |                                                          |        | Previous               |     | Policy |        | New   
|                       |                       |                                                          |        | Policy                 |     | Change |        | Policy
|                       |                       |                                                          |        |                        |     |        |        |       
|                       |                       |                                                          |        | (Dollars in thousands)
|One-to-four family     |                       | $                                                        | 1,197  |                        |     | $      | 1,827  |        |     | $ | 3,024  |       
|Commercial real estate |                       |                                                          | 108    |                        |     |        |       |        |     |   | 108    |       
|Retail consumer        |                       |                                                          | 2,168  |                        |     |        | 3,003  |        |     |   | 5,171  |       
|Automobile             |                       |                                                          | 11,604 |                        |     |        | 14,948 |        |     |   | 26,552 |       
|Consumer finance       |                       |                                                          | 4,040  |                        |     |        | 7,556  |        |     |   | 11,596 |       
|Leases                 |                       |                                                          | 1,801  |                        |     |        |       |        |     |   | 1,801  |       
|Corporate banking      |                       |                                                          | 1,659  |                        |     |        |       |        |     |   | 1,659  |       
|                       |                       |                                                          |        |                        |     |        |        |        |     |   |        |       
|                       | Total net charge-offs |                                                          | $      | 22,577                 |     |        | $      | 27,334 |     |   | $      | 49,911 |    
|                       |                       |                                                          |        |                        |     |        |        |        |     |   |        |       
|                       |                       | Net charge-offs to average loans and leases (annualized) |        |                        | .36 | %      |        |        | .44 | % |        |        | .80 | %

16



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##### Table of Contents



As was anticipated, net charge-offs in the automobile portfolio showed
improvement from the first quarter of 2002. Excluding the charge-offs
associated with the policy change, the net charge-off ratio was 98 basis points
in the second quarter, down from 130 basis points in the first quarter of 2002.
Both delinquency trends and the inventory of repossessed units mirrored the
improvement. Total delinquencies declined to .85% at June 30, 2002, down from
1.13% at March 31, 2002.

In terms of nonperforming asset disclosures, Charter Ones previous policy was
to place all consumer assets backed by residential real estate on nonaccrual
status (disclosed as nonperforming) at 90 days delinquent. Going forward,
consistent with OCC-regulated banking practices, loans backed by residential
real estate will be placed on nonaccrual status (nonperforming) at six payments
past due as long as the loan is well secured and in the process of collection.
These changes resulted in nonperforming assets dropping to .44% of total assets
at June 30, 2002, from .61% at December 31, 2001.

Additionally, as is the practice of certain other commercial banks, the Company
has added a reporting category of underperforming assets which combines
nonperforming assets and loans 90 days or more delinquent and still accruing.
The new category of underperforming assets totaled .57% of total assets,
compared to .64% at December 31, 2001.

Figure 10 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.

17



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##### Table of Contents



Nonperforming and Underperforming Assets(Figure 10)

|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |          |        |        |         | 
|---------------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ------ | ---------------------- | ------- | -------- | ------ | ------ | ------- | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        | 6/30/02                |         | 12/31/01
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        | (Dollars in thousands)
|Nonperforming assets(1):                                   |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Nonaccrual loans and leases:                                                             |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | Real estate mortgage loans:             |                                                              |                                                                                                 |        |                        |         |          |        |       
|                                                           |                                                                                          |                                         | One-to-four family(2)                                        |                                                                                                 | $      | 34,641                 |         |          | $      | 79,394 |        
|                                                           |                                                                                          |                                         | Multifamily and commercial                                   |                                                                                                 |        | 4,640                  |         |          |        | 13,552 |        
|                                                           |                                                                                          |                                         | Construction and land                                        |                                                                                                 |        | 11,273                 |         |          |        | 10,276 |        
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total real estate mortgage loans                                                                |        |                        | 50,554  |          |        |        | 103,222 | 
|                                                           |                                                                                          | Retail consumer(2)                      |                                                              |                                                                                                 | 12,092 |                        |         |          | 16,592 |       
|                                                           |                                                                                          | Automobile                              |                                                              |                                                                                                 |       |                        |         |          |       |       
|                                                           |                                                                                          | Consumer finance(2)                     |                                                              |                                                                                                 | 40,313 |                        |         |          | 68,485 |       
|                                                           |                                                                                          | Leases                                  |                                                              |                                                                                                 | 8,958  |                        |         |          | 904    |       
|                                                           |                                                                                          | Corporate banking                       |                                                              |                                                                                                 | 19,807 |                        |         |          | 10,551 |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonaccrual loans and leases                                                               |        |                        | 131,724 |          |        |        | 199,754 | 
|                                                           |                                                                                          |                                         |                                                              | Less government guaranteed loans(1)                                                             |        |                        |        |          |        |        | 19,630  | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonaccrual loans net of government guaranteed loans                                       |        |                        | 131,724 |          |        |        | 180,124 | 
|                                                           | Restructured real estate mortgage loans                                                  |                                         |                                                              | 1,159                                                                                           |        |                        |         | 653      |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonperforming loans and leases                                                            |        |                        | 132,883 |          |        |        | 180,777 | 
|                                                           | Real estate and other collateral owned(3)                                                |                                         |                                                              | 40,186                                                                                          |        |                        |         | 50,265   |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonperforming assets                                                                      |        | $                      | 173,069 |          |        | $      | 231,042 | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Ratio of (excluding government guaranteed loans):          |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Nonperforming loans and leases to total loans and leases                                 |                                         |                                                              | .54                                                                                             | %      |                        |         | .70      | %     
|                                                           | Nonperforming assets to total assets                                                     |                                         |                                                              | .44                                                                                             |        |                        |         | .61      |       
|                                                           | Nonperforming assets to total loans, leases and real estate and other collateral owned   |                                         |                                                              | .70                                                                                             |        |                        |         | .90      |       
|                                                           | Allowance for loan and lease losses to:                                                  |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | Nonperforming loans and leases          |                                                              |                                                                                                 | 201.05 |                        |         |          | 141.32 |       
|                                                           |                                                                                          | Total loans and leases before allowance |                                                              |                                                                                                 | 1.08   |                        |         |          | .98    |       
|Accruing loans and leases delinquent more than 90 days(1): |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Real estate mortgage loans:                                                              |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | One-to-four family(2)                   |                                                              | $                                                                                               | 21,781 |                        |         | $        |       |       
|                                                           |                                                                                          | Multifamily and commercial              |                                                              |                                                                                                 | 944    |                        |         |          |       |       
|                                                           |                                                                                          | Construction and land                   |                                                              |                                                                                                 |       |                        |         |          |       |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         | Total real estate mortgage loans                             |                                                                                                 |        | 22,725                 |         |          |        |       |        
|                                                           | Retail consumer(2)                                                                       |                                         |                                                              | 4,362                                                                                           |        |                        |         | 4,519    |       
|                                                           | Automobile                                                                               |                                         |                                                              | 2,211                                                                                           |        |                        |         | 6,000    |       
|                                                           | Consumer finance(2)                                                                      |                                         |                                                              | 19,470                                                                                          |        |                        |         |         |       
|                                                           | Leases                                                                                   |                                         |                                                              | 219                                                                                             |        |                        |         |         |       
|                                                           | Corporate banking                                                                        |                                         |                                                              | 3,330                                                                                           |        |                        |         | 4,691    |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         | Total accruing loans and leases delinquent more than 90 days |                                                                                                 |        | 52,317                 |         |          |        | 15,210 |        
|                                                           |                                                                                          |                                         | Less government guaranteed loans(1)                          |                                                                                                 |        |                       |         |          |        | 1,876  |        
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total accruing loans and leases delinquent more than 90 days net of
government guaranteed loans |        | $                      | 52,317  |          |        | $      | 13,334  | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Total underperforming assets                               |                                                                                          | $                                       | 225,386                                                      |                                                                                                 |        | $                      | 244,376 |         
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Ratio of (excluding government guaranteed loans):          |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Underperforming assets to total assets                                                   |                                         |                                                              | .57                                                                                             | %      |                        |         | .64      | %     
|                                                           | Underperforming assets to total loans, leases and real estate and other collateral owned |                                         |                                                              | .92                                                                                             |        |                        |         | .95      |       



---

|(1) |  | Effective June 30, 2002, amounts exclude loans guaranteed by the Federal
Housing Administration or Veterans Administration. Prior periods have
not been restated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Effective June 30, 2002, Charter One adopted a new accrual policy in
which consumer loans secured by residential real estate are placed on
nonaccrual at six payments past due as long as the loan is well secured
and in the process of collection. This new policy is being implemented
prospectively and as such, prior periods have not been restated. The
change in the accrual policy did not have a material impact on interest
income. Management believes the changes to this policy conforms Charter
Ones accrual methodology to that of its commercial banking peers.                                                                                                                 
|   
|   
|   
|   
|(3) |  | Effective for the period June 30, 2002, Charter One adopted a new loan
charge-off policy in which automobile loans are charged off based upon
repossession and in certain cases, at the point of bankruptcy discharge.
Any automobile loan reaching 120 days delinquent will be charged off
completely. Previously, Charter Ones policy was to record charge-offs of
loans secured by automobiles at the point of repossessed collateral
disposition. This new policy is being implemented prospectively and as
such, prior periods have not been restated. Management believes the
changes to this policy conforms Charter Ones charge-off methodology to
that of its commercial banking peers.

18



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##### Table of Contents



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.
During the second quarter of 2002, we changed how we determine potential
problem loans to be consistent with commercial banking practice. Previously
that determination included all loans and leases classified as substandard
not already included as underperforming, without a loan-by-loan evaluation,
even though historically only a very small percentage of those loans and leases
was ultimately reflected in future charge-offs. Under the newly adopted method,
the amount included in potential problem loans will result from an evaluation,
on a loan-by-loan basis, of loans classified as substandard. After
implementing the new determination method, the amount of potential problem
loans was less than $25.0 million at June 30, 2002. The vast majority of these
loans and leases, as well as our underperforming assets, are collateralized.
As such, we would anticipate that any losses resulting from possible future
charge-offs would be significantly less than the respective loan and lease
balances.

SOURCES OF FUNDS

Management considers our interest-sensitivity profile when deciding on sources
of funds. At June 30, 2002, our one-year gap was 11.13% 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 11)

|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |      |      |      | 
|------------------------------------------- | ------------------- | --------------------------- | ------------------- | --------- | ---------------------- | ---------- | -------- | ---- | -------- | ---- |  |  | ------ |  | ---------- | --------- | ---------- | ---------- | -------- | ---- | ---- | ---- | 
|                                            |                     |                             |                     |           | 6/30/02                |            | 12/31/01
|                                            |                     |                             |                     |           |                        |            |         
|                                            |                     |                             |                     |           |                        |            |          |      | Weighted |      |  |  |        |  |            |           |            |            | Weighted
|                                            |                     |                             |                     |           |                        |            |          |      | Average  |      |  |  |        |  |            |           |            |            | Average 
|                                            |                     |                             |                     |           | Amount                 |            | Rate     |      |          |      |  |  | Amount |  | Rate      
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |           
|                                            |                     |                             |                     |           | (Dollars in thousands)
|Checking accounts:                          |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |     
|                                            | Interest-bearing    |                             | $                   | 5,917,228 |                        |            |          | 2.13 | %        |      |  |  |        |  | $          | 5,973,545 |            |            |          | 2.45 | %   
|                                            | Noninterest-bearing |                             |                     | 1,820,330 |                        |            |          |     |          |      |  |  |        |  |            | 1,856,481 |            |            |          |     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |     
|                                            |                     | Total checking accounts     |                     |           | 7,737,558              |            |          |      | 1.62     |      |  |  |        |  |            |           | 7,830,026  |            |          |      | 1.87 |     
|Money market and savings accounts           |                     |                             | 8,893,253           |           |                        |            | 2.33     |      |          |      |  |  |        |  | 6,737,160  |           |            |            | 2.26     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |     
|                                            |                     | Total transactions accounts |                     |           | 16,630,811             |            |          |      | 2.00     |      |  |  |        |  |            |           | 14,567,186 |            |          |      | 2.05 |     
|Certificates of deposit                     |                     |                             | 9,926,504           |           |                        |            | 3.95     |      |          |      |  |  |        |  | 10,556,123 |           |            |            | 4.43     |     
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |     
|                                            |                     |                             | Total deposits, net |           | $                      | 26,557,315 |          |      |          | 2.73 |  |  |        |  |            |           | $          | 25,123,309 |          |      |      | 3.05 | 
|                                            |                     |                             |                     |           |                        |            |          |      |          |      |  |  |        |  |            |           |            |            |          |     
|Including the effect of interest rate swaps |                     |                             |                     |           |                        |            | 2.54     | %    |          |      |  |  |        |  |            |           |            |            | 2.88     | %   

Investment securities and mortgage-backed securities with a par value of $500.9
million at June 30, 2002 and $573.0 million at December 31, 2001, were pledged
to secure public deposits and for other purposes required or permitted by law.

Borrowings

At June 30, 2002, borrowings consisted primarily of FHLB advances. These
positions were secured by our investment in the stock of the FHLB, as well as
$1.4 billion in certain real estate loans and $10.7 billion in mortgage-backed
securities.

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Federal Home Loan Bank Advances(Figure 12)

|                                     |                                             |                |                     |           |                        |           |          |      |          |      |           |           |           |           |          |      |      |      | 
|------------------------------------ | ------------------------------------------- | -------------- | ------------------- | --------- | ---------------------- | --------- | -------- | ---- | -------- | ---- | --------- | --------- | --------- | --------- | -------- | ---- | ---- | ---- | 
|                                     |                                             |                |                     |           | 6/30/02                |           | 12/31/01
|                                     |                                             |                |                     |           |                        |           |         
|                                     |                                             |                |                     |           |                        |           |          |      | Weighted |      |           |           |           |           | Weighted
|                                     |                                             |                |                     |           |                        |           |          |      | Average  |      |           |           |           |           | Average 
|                                     |                                             |                |                     |           | Amount                 |           | Rate     |      | Amount   |      | Rate     
|                                     |                                             |                |                     |           |                        |           |          |      |          |      |          
|                                     |                                             |                |                     |           | (Dollars in thousands)
|Short-term                           |                                             | $              | 364,873             |           |                        |           | 5.26     | %    |          | $    | 1,114,873 |           |           |           | 3.03     | %   
|Long-term:                           |                                             |                |                     |           |                        |           |          |      |          |      |           |           |           |           |          |     
|                                     | Fixed-rate advances                         |                |                     | 7,055,428 |                        |           |          | 5.51 |          |      |           | 7,118,827 |           |           |          | 5.52 |     
|                                     | Variable-rate advances                      |                |                     | 409,605   |                        |           |          | 1.65 |          |      |           | 409,604   |           |           |          | 1.74 |     
|                                     |                                             |                |                     |           |                        |           |          |      |          |      |           |           |           |           |          |     
|                                     |                                             | Total advances |                     |           | 7,829,906              |           |          |      | 5.30     |      |           |           | 8,643,304 |           |          |      | 5.02 |     
|Plus unamortized premium on advances |                                             |                | 11,618              |           |                        |           |         |      |          |      | 13,934    |           |           |           |         |     
|                                     |                                             |                |                     |           |                        |           |          |      |          |      |           |           |           |           |          |     
|                                     |                                             |                | Total advances, net |           | $                      | 7,841,524 |          |      |          | 5.22 |           |           | $         | 8,657,238 |          |      |      | 4.95 | 
|                                     |                                             |                |                     |           |                        |           |          |      |          |      |           |           |           |           |          |     
|                                     | Including the effect of interest rate swaps |                |                     |           |                        |           |          | 5.31 | %        |      |           |           |           |           |          | 5.02 | %   

On May 20, 2002, Charter One Bank issued $400.0 million of 6.375% subordinated
notes due May 15, 2012. Interest on the subordinated notes is payable
semiannually. The subordinated notes are unsecured and subordinated to the
claims of our depositors and rank on a parity in the event of liquidation or
similar proceeding with respect to the Bank with all other present and future
unsecured subordinated debt obligations of the Bank, except any unsecured
subordinated debt which may be expressly stated to be subordinated notes or is
otherwise subordinated as a matter of law. The net proceeds from the
subordinated notes were used by the Bank for general corporate purposes.

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 variable instruments. Under these agreements Charter One has agreed
to receive interest from the counterparty on a notional amount at a fixed rate
defined in the agreement, and to pay interest at a floating rate indexed to
LIBOR. 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 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, Charter One
has agreed to pay interest to the counterparty on a notional principal amount
at a fixed rate defined in the agreement, and receive interest at a floating
rate indexed to LIBOR. The amounts of interest exchanged are calculated on the
basis of notional principal amounts. 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 Charter
One has agreed to receive interest from the counterparty on a notional amount
at a fixed rate defined in the agreement, and to pay interest at a floating
rate indexed to LIBOR. 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.

Additionally, on May 20, 2002, we entered into $575.0 million of fixed payment
and variable receipt interest rate swaps in which there was no hedging
designation assigned. The net unrealized loss of $8.1 million attributed to
these interest rate swaps was recognized in the Companys consolidated
statements of operations for the three and six months ended June 30, 2002 under
the caption net gains. The corresponding interest rate swap liabilities were
recognized in the Companys consolidated statement of position at June 30, 2002
under the caption accrued expenses and other liabilities.

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

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Interest Rate Swaps(Figure 13)

|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      |  |      |      |     
|-------------------------- | ------- | ---- | ----- | - | ---------------------- | --------- | --------- |  | -------- | ---- | --------- |  | --------- | ---- | -------- | - | ------- | --------- |  |  | ---- | ---- | ---- |  | ---- | ---- | ----
|                           |         |      |       |   | 6/30/02                |           | 12/31/01 
|                           |         |      |       |   |                        |           |          
|                           |         |      |       |   | Notional               |           | Receiving |  | Paying   |      | Notional  |  | Receiving |      | Paying  
|                           |         |      |       |   | Principal              |           | Interest  |  | Interest |      | Principal |  | Interest  |      | Interest
|                           |         |      |       |   | Amount                 |           | Rate      |  | Rate     |      | Amount    |  | Rate      |      | Rate    
|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |         
|                           |         |      |       |   | (Dollars in thousands)
|Fixed Payment and Variable |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 
|                           | Receipt |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      |  |     
|                           |         | 2002 |       | $ | 25,000                 |           |           |  | 1.92     | %    |           |  | 6.44      | %    |          | $ | 25,000  |           |  |  | 3.73 | %    |      |  | 6.44 | %   
|                           |         | 2003 |       |   | 409,605                |           |           |  | 1.84     |      |           |  | 3.55      |      |          |   | 409,605 |           |  |  | 1.94 |      |      |  | 3.55 |     
|                           |         | 2004 |       |   | 375,000                |           |           |  | 1.90     |      |           |  | 3.66      |      |          |   |        |           |  |  |     |      |      |  |     |     
|                           |         | 2006 |       |   | 200,000                |           |           |  | 1.90     |      |           |  | 4.69      |      |          |   |        |           |  |  |     |      |      |  |     |     
|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 
|                           |         |      | Total |   | $                      | 1,009,605 |           |  |          | 1.88 | %(1)      |  |           | 3.88 | %        |   | $       | 434,605   |  |  |      | 2.04 | %(1) |  |      | 3.71 | %   
|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 
|Variable Payment and Fixed |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 
|                           | Receipt |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      |  |     
|                           |         | 2003 |       | $ | 50,000                 |           |           |  | 3.31     | %    |           |  | 1.93      | %    |          | $ | 255,000 |           |  |  | 4.08 | %    |      |  | 2.14 | %   
|                           |         | 2004 |       |   | 400,000                |           |           |  | 3.88     |      |           |  | 1.93      |      |          |   |        |           |  |  |     |      |      |  |     |     
|                           |         | 2006 |       |   | 420,000                |           |           |  | 5.50     |      |           |  | 1.91      |      |          |   | 930,000 |           |  |  | 5.80 |      |      |  | 2.12 |     
|                           |         | 2007 |       |   | 745,000                |           |           |  | 5.42     |      |           |  | 2.30      |      |          |   | 10,000  |           |  |  | 7.25 |      |      |  | 2.36 |     
|                           |         | 2010 |       |   | 10,000                 |           |           |  | 7.40     |      |           |  | 1.80      |      |          |   | 10,000  |           |  |  | 7.40 |      |      |  | 2.06 |     
|                           |         | 2011 |       |   | 10,000                 |           |           |  | 6.25     |      |           |  | 1.87      |      |          |   | 45,000  |           |  |  | 6.33 |      |      |  | 1.94 |     
|                           |         | 2012 |       |   | 400,000                |           |           |  | 5.76     |      |           |  | 1.90      |      |          |   |        |           |  |  |     |      |      |  |     |     
|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 
|                           |         |      | Total |   | $                      | 2,035,000 |           |  |          | 5.16 | %         |  |           | 2.06 | %(1)     |   | $       | 1,250,000 |  |  |      | 5.49 | %    |  |      | 2.12 | %(1)
|                           |         |      |       |   |                        |           |           |  |          |      |           |  |           |      |          |   |         |           |  |  |      |      |      | 



---

|(1) |  | Rates are based upon LIBOR.
|--- |  | ---------------------------

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 14)

|                        |                              |                  |   |                        |        |      |   |        |        | 
|----------------------- | ---------------------------- | ---------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | 
|                        |                              |                  |   | June 30,              
|                        |                              |                  |   |                       
|                        |                              |                  |   | 2002                   |        | 2001
|                        |                              |                  |   |                        |        |     
|                        |                              |                  |   | (Dollars in thousands)
|Unrealized gain (loss): |                              |                  |   |                        |        |      |   |       
|                        | Fair value hedges            |                  | $ | 46,979                 |        |      | $ | 14,066 |       
|                        | Cash flow hedges             |                  |   | (6,231                 | )      |      |   | (622   | )     
|                        | Unhedged interest rate swaps |                  |   | (8,118                 | )      |      |   |       |       
|                        |                              |                  |   |                        |        |      |   |       
|                        |                              | Total fair value |   | $                      | 32,630 |      |   | $      | 13,444 | 
|                        |                              |                  |   |                        |        |      |   |       

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

Net Benefit of Interest Risk Management(Figure 15)

|                           |                              |                   |   |                    |         |                  |   |                        |        |         |   |         |         |   |   |        |        |  
|-------------------------- | ---------------------------- | ----------------- | - | ------------------ | ------- | ---------------- | - | ---------------------- | ------ | ------- | - | ------- | ------- | - | - | ------ | ------ | -
|                           |                              |                   |   | Three Months Ended |         | Six Months Ended
|                           |                              |                   |   |                    |         |                 
|                           |                              |                   |   | 6/30/02            |         | 6/30/01          |   | 6/30/02                |        | 6/30/01
|                           |                              |                   |   |                    |         |                  |   |                        |        |        
|                           |                              |                   |   |                    |         |                  |   | (Dollars in thousands) |        |         |   |        
|Interest expense (income): |                              |                   |   |                    |         |                  |   |                        |        |         |   |         |         |   |   |       
|                           | Deposits                     |                   | $ | (11,971            | )       |                  | $ | (4,816                 | )      |         | $ | (23,383 | )       |   | $ | (8,008 | )     
|                           | FHLB advances                |                   |   | 1,750              |         |                  |   |                       |        |         |   | 3,486   |         |   |   |       |       
|                           | Subordinated notes           |                   |   | (1,737             | )       |                  |   |                       |        |         |   | (1,737  | )       |   |   |       |       
|                           | Unhedged interest rate swaps |                   |   | 1,352              |         |                  |   |                       |        |         |   | 1,352   |         |   |   |       |       
|                           |                              |                   |   |                    |         |                  |   |                        |        |         |   |         |         |   |   |       
|                           |                              | Total net benefit |   | $                  | (10,606 | )                |   | $                      | (4,816 | )       |   | $       | (20,282 | ) |   | $      | (8,008 | )
|                           |                              |                   |   |                    |         |                  |   |                        |        |         |   |         |         |   |   |       

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

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manage the pricing of deposits to maintain a steady deposit balance, but from
time to time may decide not to pay rates on deposits as high as our competition
and, when necessary, to supplement deposits with longer term and/or lower cost
alternative sources of funds such as FHLB advances and federal funds purchased
and repurchase agreements. Conversely, we may, from time to time, decide to
price deposits aggressively due to 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 June 30,
2002, there were outstanding commitments to originate $1.4 billion of mortgage
loans and other loans and leases, all at market rates. Terms of the
commitments extend up to nine months, but are generally less than two months.
Additionally, there were also outstanding unfunded consumer lines of credit of
$4.1 billion and corporate banking lines of credit of $338.8 million as of June
30, 2002. 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 $88.9 million as of June 30, 2002.

Capital and Dividends

On September 12, 2001, the Company entered into an agreement with a third party
that provided the Company with an option to purchase up to $100 million of
Charter One common stock through the use of forward transactions. These
transactions could have been settled at Charter Ones election on a physical,
net cash or net share basis. On January 8, 2002, the Company settled open
forward transactions for 3.5 million shares of its common stock through
physical share settlement whereby the Company paid cash of $97.0 million, or
$27.69 per share, to a third party in exchange for the 3.5 million shares.
Common shares outstanding and shareholders equity were reduced accordingly on
the January 8, 2002 settlement date.

On April 23, 2002, the Companys Board of Directors authorized management to
repurchase up to 10% of the Companys outstanding common stock under a new
program of open market purchases or privately negotiated transactions. The
repurchased shares will be reserved in treasury for later reissue in connection
with employee benefit plans. 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 807,700 shares under the new authorization during the
second quarter of 2002 at an average cost of $33.31 per share. This brought
the total number of shares repurchased during the six months ended June 30,
2002 to 6.2 million shares at an average cost of $28.84 per share.

Charter One, a financial holding company, and Charter Michigan, a lower-tier
bank holding company, are 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. Charter One
Bank and Charter Bank are subject to various regulatory capital requirements
administered by the OCC and the Federal Deposit Insurance Corporation (FDIC),
respectively. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly discretionary, actions by each regulator that,
if undertaken, could have a direct material effect on our financial statements.
Under capital adequacy guidelines, 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, Charter Michigan, Charter One Bank and Charter 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, Charter Michigan, Charter One Bank and Charter 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:

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##### Table of Contents



Regulatory Capital(Figure 16)

|                     |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |        |  
|-------------------- | -------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  | ----------- | --------- | ----- |  |  | ----- | - |  | - | --------- |  |  |  | ------ | -
|                     |                                        |  | 6/30/02               
|                     |                                        |  |                       
|                     |                                        |  |                        |           |                   |  |                          |       |       |  | 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  |  | $                      | 3,187,389 |                   |  |                          | 12.30 | %     |  | $           | 2,073,094 |       |  |  | >8.00 | % |  | $ | 2,591,368 |  |  |  | >10.00 | %
|                     | Tier 1 capital to risk-weighted assets |  |                        | 2,522,330 |                   |  |                          | 9.73  |       |  |             | 1,036,547 |       |  |  | >4.00 |   |  |   | 1,554,821 |  |  |  | >6.00  |  
|                     | Tier 1 capital to average assets       |  |                        | 2,522,330 |                   |  |                          | 6.56  |       |  |             | 1,538,587 |       |  |  | >4.00 |   |  |   | N/A       |  |  |  | N/A    |  
|Charter Michigan(1): |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |       
|                     | Total capital to risk-weighted assets  |  |                        | 3,175,334 |                   |  |                          | 12.18 |       |  |             | 2,086,327 |       |  |  | >8.00 |   |  |   | 2,607,909 |  |  |  | >10.00 |  
|                     | Tier 1 capital to risk-weighted assets |  |                        | 1,980,275 |                   |  |                          | 7.59  |       |  |             | 1,043,163 |       |  |  | >4.00 |   |  |   | 1,564,745 |  |  |  | >6.00  |  
|                     | Tier 1 capital to average assets       |  |                        | 1,980,275 |                   |  |                          | 5.16  |       |  |             | 1,534,615 |       |  |  | >4.00 |   |  |   | N/A       |  |  |  | N/A    |  
|Charter One Bank:    |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |       
|                     | Total capital to risk-weighted assets  |  |                        | 3,117,161 |                   |  |                          | 12.07 |       |  |             | 2,066,598 |       |  |  | >8.00 |   |  |   | 2,583,248 |  |  |  | >10.00 |  
|                     | Tier 1 capital to risk-weighted assets |  |                        | 1,931,417 |                   |  |                          | 7.48  |       |  |             | 1,033,299 |       |  |  | >4.00 |   |  |   | 1,549,949 |  |  |  | >6.00  |  
|                     | Tier 1 capital to average assets       |  |                        | 1,931,417 |                   |  |                          | 5.06  |       |  |             | 1,527,817 |       |  |  | >4.00 |   |  |   | 1,909,772 |  |  |  | >5.00  |  
|Charter Bank(2):     |                                        |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |       
|                     | Total capital to risk-weighted assets  |  |                        | 26,604    |                   |  |                          | 13.04 |       |  |             | 16,316    |       |  |  | >8.00 |   |  |   | 20,395    |  |  |  | >10.00 |  
|                     | Tier 1 capital to risk-weighted assets |  |                        | 24,047    |                   |  |                          | 11.79 |       |  |             | 8,158     |       |  |  | >4.00 |   |  |   | 12,237    |  |  |  | >6.00  |  
|                     | Tier 1 capital to average assets       |  |                        | 24,047    |                   |  |                          | 8.28  |       |  |             | 11,614    |       |  |  | >4.00 |   |  |   | 14,518    |  |  |  | >5.00  |  

|                           |                                          |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |        |  
|-------------------------- | ---------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  | ----------- | --------- | ----- |  |  | ----- | - |  | - | --------- |  |  |  | ------ | -
|                           |                                          |  | 12/31/01              
|                           |                                          |  |                       
|                           |                                          |  |                        |           |                   |  |                          |       |       |  | 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    |  | $                      | 2,773,390 |                   |  |                          | 10.23 | %     |  | $           | 2,168,434 |       |  |  | >8.00 | % |  | $ | 2,710,542 |  |  |  | >10.00 | %
|                           | Tier 1 capital to risk-weighted assets   |  |                        | 2,517,875 |                   |  |                          | 9.29  |       |  |             | 1,084,217 |       |  |  | >4.00 |   |  |   | 1,626,325 |  |  |  | >6.00  |  
|                           | Tier 1 capital to average assets         |  |                        | 2,517,875 |                   |  |                          | 6.81  |       |  |             | 1,479,451 |       |  |  | >4.00 |   |  |   | N/A       |  |  |  | N/A    |  
|Charter One Commercial(3): |                                          |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |       
|                           | Total capital to risk-weighted assets    |  |                        | 39,729    |                   |  |                          | 46.21 |       |  |             | 6,877     |       |  |  | >8.00 |   |  |   | 8,597     |  |  |  | >10.00 |  
|                           | Tier 1 capital to risk-weighted assets   |  |                        | 39,729    |                   |  |                          | 46.21 |       |  |             | 3,439     |       |  |  | >4.00 |   |  |   | 5,158     |  |  |  | >6.00  |  
|                           | Tier 1 capital to average assets         |  |                        | 39,729    |                   |  |                          | 13.72 |       |  |             | 11,579    |       |  |  | >4.00 |   |  |   | 14,474    |  |  |  | >5.00  |  
|Charter One Bank(4):       |                                          |  |                        |           |                   |  |                          |       |       |  |             |           |       |  |  |       |   |  |   |           |  |  |  |       
|                           | Total capital to risk-weighted assets    |  |                        | 2,659,977 |                   |  |                          | 10.01 |       |  |             | 2,125,856 |       |  |  | >8.00 |   |  |   | 2,657,320 |  |  |  | >10.00 |  
|                           | Tier 1 capital to risk-weighted assets   |  |                        | 1,910,830 |                   |  |                          | 7.19  |       |  |             | N/A       |       |  |  | N/A   |   |  |   | 1,594,392 |  |  |  | >6.00  |  
|                           | Core capital to adjusted tangible assets |  |                        | 1,932,552 |                   |  |                          | 5.12  |       |  |             | 1,509,358 |       |  |  | >4.00 |   |  |   | 1,886,698 |  |  |  | >5.00  |  
|                           | Tangible capital to tangible assets      |  |                        | 1,932,552 |                   |  |                          | 5.12  |       |  |             | 566,009   |       |  |  | >1.50 |   |  |   | N/A       |  |  |  | N/A    |  



---

|(1) |  | In conjunction with Charter One Banks conversion from a thrift to a
national bank on May 7, 2002, Charter Michigans structure changed to a
lower-tier bank holding company subject to various regulatory capital
requirements administered by the FRB.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | On May 24, 2002, Charter One completed its acquisition of Charter
National Bancorp, Inc., the holding company of Charter Bank. The merger
of Charter Bank into Charter One Bank was effective August 9, 2002.                                           
|   
|   
|   
|   
|(3) |  | On May 16, 2002, Charter One Commercial merged into Charter One Bank. At
December 31, 2001, Charter One Commercial was subject to various
regulatory capital requirements administered by the FDIC.                                                     
|   
|   
|   
|   
|(4) |  | On May 7, 2002, Charter One Bank converted from a thrift to a national
bank. At December 31, 2001, Charter One Bank was subject to various
regulatory capital requirements administered by the Office of Thrift
Supervision.                            

As discussed above, Charter One Bank issued $400.0 million of subordinated
notes on May 20, 2002. The total of these subordinated notes supplemented
Charter Ones, Charter Michigans and Charter One Banks Tier 2 and total
capital levels reflected above.

Management believes that, as of June 30, 2002, Charter One, Charter Michigan,
Charter One Bank and Charter 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

23



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##### Table of Contents



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 17)

|                                 |       |  |         |       |         |  |                    |       |         |  |         |       |  |  |     |       |  |  |     |       | 
|-------------------------------- | ----- |  | ------- | ----- | ------- |  | ------------------ | ----- | ------- |  | ------- | ----- |  |  | --- | ----- |  |  | --- | ----- | 
|                                 |       |  |         |       |         |  | Three Months Ended |       |         |  |        
|                                 |       |  |         |       |         |  |                    |       |         |  |        
|                                 |       |  | 6/30/02 |       | 3/31/02 |  | 12/31/01           |       | 9/30/01 |  | 6/30/01
|                                 |       |  |         |       |         |  |                    |       |         |  |        
|Market price of common stock(1): |       |  |         |       |         |  |                    |       |         |  |         |       |  |  |     |       |  |  |     |      
|                                 | High  |  | $       | 36.51 |         |  | $                  | 32.50 |         |  | $       | 29.46 |  |  | $   | 31.41 |  |  | $   | 30.38 | 
|                                 | Low   |  |         | 30.77 |         |  |                    | 26.45 |         |  |         | 24.60 |  |  |     | 23.40 |  |  |     | 25.23 | 
|                                 | Close |  |         | 34.38 |         |  |                    | 31.22 |         |  |         | 27.15 |  |  |     | 28.22 |  |  |     | 30.38 | 
|Dividends declared and paid(1)   |       |  | .22     |       |         |  | .20                |       |         |  | .20     |       |  |  | .19 |       |  |  | .19 |      



---

|(1) |  | Restated to reflect the 5% stock dividend issued September 28, 2001.
|--- |  | --------------------------------------------------------------------




ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in our December 31, 2001 Form 10-K. The assumptions used in our
model have been updated as of June 30, 2002. The table below indicates the
estimated impact on net income under the various interest rate scenarios as a
percentage of base case earnings projections.

|                   |  |                             |       |           |  |  |       |   
|------------------ |  | --------------------------- | ----- | --------- |  |  | ----- | --
|Changes in         |  | Estimated Percentage Change
|Interest Rates     |  | in Future Net Income       
|(basis points)     |  | 12 Months                   |       | 24 Months
|                   |  |                             |       |          
|+200 over one year |  |                             | (4.00 | )%        |  |  | (5.71 | )%
|+100 over one year |  |                             | (1.48 | )         |  |  | (1.45 | ) 
|-100 over one year |  |                             | 1.24  |           |  |  | (1.58 | ) 

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.

24



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##### Table of Contents






PART II  OTHER INFORMATION




ITEM 4. Submission of Matters to a Vote of Security Holders

(a)  (b) (c) The Company held its annual meeting of shareholders on April 23,
2002. The following matters were voted on at the meeting:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                        |  |                                                         |  |           |  |                  |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------- |  | --------- |  | ---------------- |  |  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | For                                                                    |  | Withheld                                                |  |           |  |                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                        |  |                                                         |  |           |  |                 
|1. The election of six directors set forth
below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                        |  |                                                         |  |           |  |                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Herbert G. Chorbajian (term ending 2005) 
  Richard W. Neu (term ending 2005) 
  Victor A. Ptak (term ending 2005)  
  Melvin J. Rachal (term ending 2005)  
  Leonard S. Simon (term ending 2005) 
  Eresteen R. Williams (term ending 2005)                                                                                                                                                                                                                                                                                                                                                                           |  | 192,146,713   192,476,085192,368,744191,365,405192,223,884 190,758,192 |  | 2,555,112 2,225,7402,333,0813,336,4202,477,9413,943,633 |  |           |  |                 
|The following are the names of the directors (and remaining terms) whose terms continued after
  the meeting:
  Patrick J. Agnew (term ending 2004)
  Denise Marie Fugo (term ending 2004)
  Charles John Koch (term ending 2004)
  Ronald F. Poe (term ending 2004)
  Jerome L. Schostak (term ending 2004)
  Mark Shaevsky (term ending 2004)
  Phillip Wm. Fisher (term ending 2003)
  Mark D. Grossi (term ending 2003)
  Karen R. Hitchcock (term ending 2003)
  John D. Koch (term ending 2003)
  Michael P. Morley (term ending 2003)
  Joseph C. Scully (term ending 2003)
  John P. Tierney (term ending 2003)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | For                                                                    |  | Against                                                 |  | Abstain   |  | Broker Non-Votes
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                        |  |                                                         |  |           |  |                 
|2. Amendment of the Companys 1997
  Stock Option and Incentive Plan to
  increase the number of shares of common
  stock on which awards may be granted
  under the plan.                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 123,878,852                                                            |  | 69,081,910                                              |  | 1,741,063 |  | 0               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | For                                                                    |  | Against                                                 |  | Abstain   |  | Broker Non-Votes
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                        |  |                                                         |  |           |  |                 
|3. Ratification of the appointment of Deloitte
  & Touche LLP as the Companys
  Independent Auditors for the year ending
  December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 187,784,675                                                            |  | 5,965,003                                               |  | 952,147   |  | 0               




ITEM 5. Other Information

Cash Dividend On July 17, 2002, the Companys Board of Directors declared a
regular quarterly cash dividend of $.22 per share. The cash dividend is
payable August 20, 2002 to shareholders of record on August 6, 2002.

Stock Dividend On July 17, 2002, the Companys Board of Directors declared a
5% stock dividend to be distributed on September 30, 2002 to shareholders of
record on September 13, 2002.




ITEM 6. Exhibits and Reports on Form 8-K

(a)  Exhibits: See attached Index to Exhibits.

(b)  Reports on Form 8-K: On April 24, 2002, the Company filed a report on
Form 8-K containing its earnings release dated April 22, 2002.

25



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##### 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: August 13, 2002 |  | /s/ Charles John Koch                                                                                                                   
|                      |  |                                                                                                                                         
|                      |  | Charles John Koch
Chairman of the Board, President and Chief
Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)
|                     
|                     
|Date: August 13, 2002 |  | /s/ Richard W. Neu                                                                                                                      
|                      |  |                                                                                                                                         
|                      |  | Richard W. Neu
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)           




CERTIFICATIONS

Each of the undersigned hereby certifies in his capacity as an officer of
Charter One Financial, Inc. (the Company) that the Quarterly Report of the
Company on Form 10-Q for the period ended June 30, 2002 fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that
the information contained in such report fairly presents, in all material
respects, the consolidated financial condition of the Company at the end of
such period and the results of operations of the Company for such period.

|                      |  |                                                                                                                                         
|--------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|Date: August 13, 2002 |  | /s/ Charles John Koch                                                                                                                   
|                      |  |                                                                                                                                         
|                      |  | Charles John Koch
Chairman of the Board, President and Chief
Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)
|                     
|                     
|Date: August 13, 2002 |  | /s/ Richard W. Neu                                                                                                                      
|                      |  |                                                                                                                                         
|                      |  | Richard W. Neu
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)           

26



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##### 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.                                                                                                                                                                                                                                                                                                                       
|       
|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.                                                                                                                                                                                                                                                                                                                                                
|       
|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.                                                                                                                                                                                                                                                                                                                                                         
|       
|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.                                                                                                                                                                                                                                           
|       
|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.                                                                                                                                                                                                                                                                                                                                                         
|       
|10.1    |  | Registrants Long-Term Stock Incentive Plan, filed on January 22, 1988 as Exhibit 10.1 to
Registrants Registration Statement on Form S-1 (File No. 33-16207), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                  
|       
|10.2    |  | Registrants Directors Stock Option Plan, filed on January 22, 1988 as Exhibit 10.2 to
Registrants Registration Statement on Form S-1 (File No. 33-16207), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                    
|       
|10.3    |  | Charter One Bank, F.S.B. Executive Incentive Goal Achievement Plan, filed as Exhibit 10.8
to Registrants Report on Form 10-K for the fiscal year ended December 31, 1994 (File No.
000-16311) is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                  
|       
|10.4    |  | First American Savings Bank, F.S.B. Nonqualified Retirement Plan and First Amendment
thereto, filed as Exhibit 10.17 to Registrants Report on Form 10-K for the fiscal year
ended December 31, 1993 (File No. 000-16311), are incorporated herein by reference.                                                                                                                                                                                                                                                                                                                     
|       
|10.5    |  | FirstFed Michigan Corporation 1983 Stock Option Plan, filed on November 1, 1995 as an
exhibit to Registrants Registration Statement on Form S-8 (File No. 33-61273), is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                           
|       
|10.6    |  | FirstFed Michigan Corporation 1991 Stock Option Plan, filed on November 1, 1995 as an
exhibit to Registrants Registration Statement on Form S-8 (File No. 33-61273), is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                           
|       
|10.7    |  | Amendment 1, dated May 3, 1996, to Forms of Supplemental Retirement Agreements, dated
October 31, 1995, between Charter One and Charles John Koch, Richard W. Neu, John David
Koch, Mark D. Grossi, and Robert J. Vana 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.
|       
|10.8    |  | Amended and Restated Employment Agreements, effective August 1, 1999, between Charter One
Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and
Robert J. Vana filed as Exhibit 10.8 to Registrants Report on Form 10-K for the fiscal
year ended December 31, 1999 (File No. 000-16311), is incorporated herein by reference.                                                                                                                                                                                                                   
|       
|10.9    |  | 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.                                                                                                                                                                                                                                                                                                                                       

27



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                        
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                            
|10.10   |  | Hinsdale Financial Corporation 1994 Incentive Stock Option Plan, filed as an attachment
to the proxy statement for the annual meeting of stockholders of Alliance held on
February 8, 1995 (File No. 000-20082), is incorporated herein by reference.                                                                                  
|       
|10.11   |  | 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.
|       
|10.12   |  | Charter One Financial, Inc. 1997 Stock Option and Incentive Plan, as amended and restated.                                                                                                                                                                                                                                             
|       
|10.13   |  | 1986 Stock Option Plan of RCSB Financial, Inc., filed on October 8, 1997, as an exhibit
to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33259), is
incorporated herein by reference.                                                                                                                      
|       
|10.14   |  | 1992 Stock-Based Compensation Plan of RCSB Financial, Inc., filed on October 8, 1997, as
an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No.
333-33259), is incorporated herein by reference.                                                                                                          
|       
|10.15   |  | Home Federal Savings Bank Stock Compensation Program, filed on September 29, 1997 as an
exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No.
333-33169), is incorporated herein by reference.                                                                                                              
|       
|10.16   |  | Haverfield 1995 Stock Option Plan, filed on September 29, 1997 as an exhibit to
Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33169), is
incorporated herein by reference.                                                                                                                                 
|       
|10.17   |  | 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.                                       
|       
|10.18   |  | 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.                                               
|       
|10.19   |  | 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.                                                                                          
|       
|10.20   |  | 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.                                                                
|       
|10.21   |  | 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.                                                 
|       
|10.22   |  | Charter One Financial, Inc. Top Executive Incentive Goal Achievement Plan, filed on October 1, 1998 as Annex E to the
Prospectus contained in the Registrants Registration Statement on Form S-4 (File No. 333-65137), is incorporated
herein by reference.                                                                           
|       
|11      |  | Statement Regarding Computation of Per Share Earnings                                                                                                                                                                                                                                                                                  

28