TABLE OF CONTENTS




|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                              | ITEM 1. 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 5. Other Information                                                                    
|                              | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT 11                   
|Exhibit 27                   



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



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FORM 10-Q

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

For the quarterly period ended June 30, 2000

OR

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

Commission file number 0-16311

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

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

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

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

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

The number of shares outstanding of the registrants sole class of
common stock as of August 4, 2000 was 199,999,964.



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##### Table of Contents



TABLE OF CONTENTS

|                               |                                                                                          |                                                                                              |    |      |   | 
|------------------------------ | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -- | ---- | - | 
|Item                          
|Number                         |                                                                                          |                                                                                              |    | Page
|                               |                                                                                          |                                                                                              |    |     
|PART I  FINANCIAL INFORMATION
|                              
|                              
|                              
|                              
|                               | 1. Financial Statements                                                                 
|                              
|                              
|                              
|                              
|                               |                                                                                          | Consolidated Statements of Financial Condition  June 30, 2000 and December 31, 1999         |    |      | 1 | 
|                              
|                              
|                              
|                              
|                               |                                                                                          | Consolidated Statements of Income  Three months and six months ended June 30, 2000 and 1999 |    |      | 2 | 
|                              
|                              
|                              
|                              
|                               |                                                                                          | Consolidated Statements of Cash Flows  Six months ended June 30, 2000 and 1999              |    |      | 3 | 
|                              
|                              
|                              
|                              
|                               |                                                                                          | Notes to Consolidated Financial Statements                                                   |    |      | 4 | 
|                              
|                              
|                              
|                              
|                               | 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                              |    | 5    |  
|                              
|                              
|                              
|                              
|                               | 3. Quantitative and Qualitative Disclosure About Market Risk                             |                                                                                              |    | 21   |  
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION   
|                              
|                              
|                              
|                              
|                               | 5. Other Information                                                                     |                                                                                              |    | 21   |  
|                              
|                              
|                              
|                              
|                               | 6. Exhibits and Reports on Form 8-K                                                      |                                                                                              |    | 22   |  
|                              
|                              
|                              
|                              
|Signatures                     |                                                                                          |                                                                                              | 22 |     

i



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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)

|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | --------- | ---------- | ---------------------- | ---------- | ---------- | ---------- |  |  | 
|                                                      |                                                                                                                   |                                            |            |           |            | 6/30/00                |            | 12/31/99  
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |           
|                                                      |                                                                                                                   |                                            |            |           |            | (Dollars in thousands,
|                                                      |                                                                                                                   |                                            |            |           |            | except per share data)
|                                                      |                                                                                                                   |                                            |            |           |            |                       
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and deposits with banks                          |                                                                                                                   | $                                          | 531,636    |           |            | $                      | 689,082    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal funds sold and other                          |                                                                                                                   |                                            | 470        |           |            |                        | 4,450      |           
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|                                                      |                                                                                                                   | Total cash and cash equivalents            |            |           | 532,106    |                        |            |            | 693,532    | 
|                                                     
|                                                     
|                                                     
|                                                     
|Investments securities:                              
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Trading                                                                                                           |                                            |            |          |            |                        |            | 13,380     |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale, at fair value                                                                                 |                                            |            | 432,674   |            |                        |            | 482,695    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $27,875 and $52,858)                                                              |                                            |            | 28,136    |            |                        |            | 46,006     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Mortgage-backed securities:                          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale, at fair value                                                                                 |                                            |            | 3,701,980 |            |                        |            | 4,193,134  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $1,711,721 and $1,909,313)                                                        |                                            |            | 1,710,538 |            |                        |            | 1,907,246  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans and leases, net                                 |                                                                                                                   |                                            | 23,455,358 |           |            |                        | 22,276,862 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans held for sale                                   |                                                                                                                   |                                            | 31,516     |           |            |                        | 35,988     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Bank owned life insurance                             |                                                                                                                   |                                            | 724,425    |           |            |                        | 709,173    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank stock                          |                                                                                                                   |                                            | 520,288    |           |            |                        | 471,191    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Premises and equipment                                |                                                                                                                   |                                            | 322,252    |           |            |                        | 317,205    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest receivable                           |                                                                                                                   |                                            | 190,310    |           |            |                        | 156,244    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Real estate and other collateral owned                |                                                                                                                   |                                            | 29,421     |           |            |                        | 36,358     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loan servicing assets                                 |                                                                                                                   |                                            | 134,677    |           |            |                        | 118,792    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill                                              |                                                                                                                   |                                            | 180,608    |           |            |                        | 188,826    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                                                                                   |                                            | 227,973    |           |            |                        | 172,431    |           
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|                                                      |                                                                                                                   | Total assets                               |            | $         | 32,222,262 |                        |            | $          | 31,819,063 | 
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |           
|LIABILITIES AND SHAREHOLDERS EQUITY                 
|                                                     
|                                                     
|                                                     
|                                                     
|Deposits:                                            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Checking accounts                                                                                                 |                                            | $          | 3,739,100 |            |                        | $          | 3,329,743  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Money market accounts                                                                                             |                                            |            | 3,921,289 |            |                        |            | 3,170,435  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Savings accounts                                                                                                  |                                            |            | 1,553,565 |            |                        |            | 2,065,127  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Certificates of deposit                                                                                           |                                            |            | 9,355,003 |            |                        |            | 10,508,670 |           
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                                                                   | Total deposits                             |            |           | 18,568,957 |                        |            |            | 19,073,975 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank advances                       |                                                                                                                   |                                            | 10,151,761 |           |            |                        | 9,226,150  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Reverse repurchase agreements                         |                                                                                                                   |                                            | 53,087     |           |            |                        | 283,297    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other borrowings                                      |                                                                                                                   |                                            | 267,579    |           |            |                        | 232,277    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                            | 83,784     |           |            |                        | 80,309     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest payable                              |                                                                                                                   |                                            | 54,137     |           |            |                        | 95,323     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued expenses and other liabilities                |                                                                                                                   |                                            | 698,640    |           |            |                        | 430,032    |           
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  | 
|                                                      |                                                                                                                   | Total liabilities                          |            |           | 29,877,945 |                        |            |            | 29,421,363 | 
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|Shareholders equity:                                
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Preferred stock  $.01 par value per share; 20,000,000
shares authorized and unissued                             |                                            |            |          |            |                        |            |           |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Common stock  $.01 par value per share; 360,000,000
shares authorized; 212,681,105 and 212,397,685 shares issued |                                            |            | 2,127     |            |                        |            | 2,124      |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Additional paid-in capital                                                                                        |                                            |            | 1,740,020 |            |                        |            | 1,736,726  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Retained earnings                                                                                                 |                                            |            | 874,242   |            |                        |            | 734,510    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Less 10,307,140 and 3,140,000 shares of common stock held in treasury at cost                                     |                                            |            | (228,900  | )          |                        |            | (65,502    | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Borrowings of employee investment and stock ownership plan                                                        |                                            |            | (2,044    | )          |                        |            | (3,138     | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated other comprehensive income                                                                            |                                            |            | (41,128   | )          |                        |            | (7,020     | )         
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|                                                      |                                                                                                                   | Total shareholders equity                 |            |           | 2,344,317  |                        |            |            | 2,397,700  | 
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |            |            |  |  | 
|                                                      |                                                                                                                   | Total liabilities and shareholders equity |            | $         | 32,222,262 |                        |            | $          | 31,819,063 | 
|                                                      |                                                                                                                   |                                            |            |           |            |                        |            |           

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
|                                                        |                                    |                                                               |             |                                              
|                                                        |                                    |                                                               |             | 6/30/00                                       |         | 6/30/99          |             | 6/30/00 |         | 6/30/99
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |        
|                                                        |                                    |                                                               |             | (Dollars in thousands, except per share data)
|Interest income:                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Loans and leases                   |                                                               | $           | 447,109                                       |         |                  | $           | 415,076 |         |         | $           | 875,219 |           |   | $           | 836,865 |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Mortgage-backed securities:       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                    | Available for sale                                            |             |                                               | 50,065  |                  |             |         | 52,668  |         |             |         | 105,539   |   |             |         | 92,994    | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                    | Held to maturity                                              |             |                                               | 30,908  |                  |             |         | 39,758  |         |             |         | 63,262    |   |             |         | 85,830    | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Investment securities:            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                    | Trading                                                       |             |                                               |        |                  |             |         | 58      |         |             |         | 38        |   |             |         | 58        | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                    | Available for sale                                            |             |                                               | 8,202   |                  |             |         | 6,000   |         |             |         | 17,213    |   |             |         | 12,923    | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                    | Held to maturity                                              |             |                                               | 420     |                  |             |         | 561     |         |             |         | 844       |   |             |         | 1,373     | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other interest-earning assets      |                                                               |             | 8,894                                         |         |                  |             | 8,704   |         |         |             | 17,553  |           |   |             | 18,175  |          
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Total interest income                                         |             |                                               | 545,598 |                  |             |         | 522,825 |         |             |         | 1,079,668 |   |             |         | 1,048,218 | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Interest expense:                                      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deposits                           |                                                               |             | 181,668                                       |         |                  |             | 178,083 |         |         |             | 361,923 |           |   |             | 359,809 |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | FHLB advances                      |                                                               |             | 125,425                                       |         |                  |             | 102,156 |         |         |             | 239,124 |           |   |             | 196,996 |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other borrowings                   |                                                               |             | 6,472                                         |         |                  |             | 9,413   |         |         |             | 13,585  |           |   |             | 22,691  |          
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Total interest expense                                        |             |                                               | 313,565 |                  |             |         | 289,652 |         |             |         | 614,632   |   |             |         | 579,496   | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Net interest income                                           |             |                                               | 232,033 |                  |             |         | 233,173 |         |             |         | 465,036   |   |             |         | 468,722   | 
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for loan and lease losses                     |                                    |                                                               | 11,509      |                                               |         |                  | 7,843       |         |         |         | 20,107      |         |           |   | 14,613      |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Net interest income after provision for loan
and lease losses |             |                                               | 220,524 |                  |             |         | 225,330 |         |             |         | 444,929   |   |             |         | 454,109   | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Other income:                                          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retail banking                     |                                                               |             | 61,760                                        |         |                  |             | 50,825  |         |         |             | 113,498 |           |   |             | 94,416  |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Mortgage banking                   |                                                               |             | 14,238                                        |         |                  |             | 11,483  |         |         |             | 27,953  |           |   |             | 22,852  |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Leasing operations                 |                                                               |             | 10,394                                        |         |                  |             | 1,656   |         |         |             | 11,992  |           |   |             | 3,704   |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net gains                          |                                                               |             | 3,064                                         |         |                  |             | 6,989   |         |         |             | 6,611   |           |   |             | 13,806  |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other                              |                                                               |             | 9,441                                         |         |                  |             | 8,272   |         |         |             | 21,461  |           |   |             | 11,675  |          
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Total other income                                            |             |                                               | 98,897  |                  |             |         | 79,225  |         |             |         | 181,515   |   |             |         | 146,453   | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Administrative expenses:                               
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Compensation and employee benefits |                                                               |             | 71,215                                        |         |                  |             | 67,867  |         |         |             | 141,479 |           |   |             | 136,381 |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net occupancy and equipment        |                                                               |             | 25,351                                        |         |                  |             | 23,294  |         |         |             | 49,915  |           |   |             | 47,014  |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Federal deposit insurance premiums |                                                               |             | 1,001                                         |         |                  |             | 2,048   |         |         |             | 2,006   |           |   |             | 4,149   |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Merger expenses                    |                                                               |             | 20,845                                        |         |                  |             | 3,519   |         |         |             | 24,103  |           |   |             | 5,719   |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Amortization of goodwill           |                                                               |             | 4,046                                         |         |                  |             | 3,325   |         |         |             | 8,090   |           |   |             | 6,714   |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other administrative expenses      |                                                               |             | 45,071                                        |         |                  |             | 45,150  |         |         |             | 84,664  |           |   |             | 88,388  |          
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Total administrative expenses                                 |             |                                               | 167,529 |                  |             |         | 145,203 |         |             |         | 310,257   |   |             |         | 288,365   | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|
|Income before income taxes                              |                                    |                                                               | 151,892     |                                               |         |                  | 159,352     |         |         |         | 316,187     |         |           |   | 312,197     |        
|                                                       
|                                                       
|                                                       
|                                                       
|Income taxes                                            |                                    |                                                               | 48,605      |                                               |         |                  | 50,976      |         |         |         | 101,191     |         |           |   | 100,875     |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|                                                        |                                    | Net income                                                    |             | $                                             | 103,287 |                  |             | $       | 108,376 |         |             | $       | 214,996   |   |             | $       | 211,322   | 
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Basic earnings per share                                |                                    | $                                                             | .50         |                                               |         | $                | .51         |         |         | $       | 1.03        |         |           | $ | .99         |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Diluted earnings per share                              |                                    | $                                                             | .49         |                                               |         | $                | .49         |         |         | $       | 1.02        |         |           | $ | .96         |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Average common shares outstanding                       |                                    |                                                               | 207,241,293 |                                               |         |                  | 214,209,456 |         |         |         | 208,333,201 |         |           |   | 214,187,266 |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Average common and common equivalent
shares outstanding |                                    |                                                               | 211,089,502 |                                               |         |                  | 219,525,186 |         |         |         | 211,586,635 |         |           |   | 219,593,985 |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        
|Cash dividends declared per share                       |                                    | $                                                             | .18         |                                               |         | $                | .15         |         |         | $       | .34         |         |           | $ | .28         |        
|                                                        |                                    |                                                               |             |                                               |         |                  |             |         |         |         |             |         |           |   |             |        

See Notes to Consolidated Financial Statements

2



---



##### Table of Contents



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

|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |            |           |          |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | --------------------------------------------------- | ---------- | ---------------------- | -------- | -------- | ---------- | --------- | -------- | -
|                                                   |                                                                                   |                                                                                                  |                                                     |            | Six Months Ended      
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                       
|                                                   |                                                                                   |                                                                                                  |                                                     |            | 6/30/00                |          | 6/30/99 
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |         
|                                                   |                                                                                   |                                                                                                  |                                                     |            | (Dollars in thousands)
|Cash flows from operating activities:             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                        |                                                                                                  | $                                                   | 214,996    |                        |          | $        | 211,322    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustments to reconcile net income to net cash provided by
operating activities:
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Provision for loan and lease losses                                                              |                                                     |            | 20,107                 |          |          |            | 14,613    |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Net gains                                                                                        |                                                     |            | (6,094                 | )        |          |            | (10,983   | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Accretion of discounts, amortization of premiums, amortization of
goodwill and depreciation, net |                                                     |            | 58,296                 |          |          |            | 37,152    |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Origination of real estate loans held for sale                                                   |                                                     |            | (819,016               | )        |          |            | (947,117  | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Proceeds from sale of loans held for sale                                                        |                                                     |            | 818,563                |          |          |            | 1,057,041 |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Proceeds from investment securities held for trading                                             |                                                     |            | 13,418                 |          |          |            | (18,983   | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Other                                                                                            |                                                     |            | 120,986                |          |          |            | (72,571   | )       
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|                                                   |                                                                                   |                                                                                                  | Net cash provided by operating activities           |            |                        | 421,256  |          |            |           | 270,474  |  
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|Cash flows from investing activities:             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net principal disbursed on loans and leases                                       |                                                                                                  |                                                     | (2,677,535 | )                      |          |          | (1,530,215 | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from principal repayments and maturities of:                            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities held to maturity                                                      |                                                     |            | 196,462                |          |          |            | 737,500   |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities held to maturity                                                           |                                                     |            | 3,401                  |          |          |            | 230       |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            | 126,349                |          |          |            | 374,020   |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                                     |            | 54,999                 |          |          |            | 181,365   |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from sale of:                                                           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            | 1,796,393              |          |          |            | 673,311   |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                                     |            | 12,713                 |          |          |            | 195,479   |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Federal Home Loan Bank stock                                                                     |                                                     |            | 17,624                 |          |          |            | 1,809     |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of:                                                                      |                                                                                                 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities held to maturity                                                           |                                                     |            | (635                   | )        |          |            | (725      | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            |                       |          |          |            | (210,000  | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Investment securities available for sale                                                         |                                                     |            | (10,696                | )        |          |            | (455,329  | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Loans                                                                                            |                                                     |            | (7,906                 | )        |          |            | (372,003  | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Federal Home Loan Bank stock                                                                     |                                                     |            | (50,735                | )        |          |            | (41,902   | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Loan servicing assets, including those originated                                                |                                                     |            | (16,605                | )        |          |            | (16,892   | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Bank owned life insurance                                                                        |                                                     |            |                       |          |          |            | (480,500  | )       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Other                                                                                            |                                                     |            | (20,912                | )        |          |            | (23,524   | )       
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|                                                   |                                                                                   |                                                                                                  | Net cash used in investing activities               |            |                        | (577,083 | )        |            |           | (967,376 | )
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|Cash flows from financing activities:             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in short-term borrowings                                             |                                                                                                  |                                                     | 1,159,760  |                        |          |          | 339,253    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from long-term borrowings                                                |                                                                                                  |                                                     | 555,057    |                        |          |          | 705,711    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Repayments of long-term borrowings                                                |                                                                                                  |                                                     | (983,217   | )                      |          |          | (372,573   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net decrease in deposits                                                          |                                                                                                  |                                                     | (505,309   | )                      |          |          | (214,442   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Increase (decrease) in advance payments by borrowers for taxes and
insurance      |                                                                                                  |                                                     | 3,475      |                        |          |          | (616       | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Payment of dividends on common stock                                              |                                                                                                  |                                                     | (71,005    | )                      |          |          | (65,798    | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from issuance of common stock                                            |                                                                                                  |                                                     | 9,452      |                        |          |          | 14,606     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of treasury stock                                                        |                                                                                                  |                                                     | (173,812   | )                      |          |          | (54,726    | )        
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|                                                   |                                                                                   |                                                                                                  | Net cash provided by (used in) financing activities |            |                        | (5,599   | )        |            |           | 351,415  |  
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|Net decrease in cash and cash equivalents          |                                                                                   |                                                                                                  | (161,426                                            | )          |                        |          | (345,487 | )         
|                                                  
|                                                  
|                                                  
|                                                  
|Cash and cash equivalents, beginning of the period |                                                                                   |                                                                                                  | 693,532                                             |            |                        |          | 722,260  |           
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|Cash and cash equivalents, end of the period       |                                                                                   | $                                                                                                | 532,106                                             |            |                        | $        | 376,773  |           
|                                                   |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |           
|Supplemental disclosure of cash flow information: 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for interest on deposits and borrowings                                 |                                                                                                  | $                                                   | 656,109    |                        |          | $        | 590,935    |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for income taxes                                                        |                                                                                                  |                                                     | 6,000      |                        |          |          | 21,441     |          
|                                                  
|                                                  
|                                                  
|                                                  
|Supplemental schedule of noncash activities:      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Loans exchanged for mortgage-backed securities                                    |                                                                                                  |                                                     | 1,471,076  |                        |          |          | 1,866,045  |          

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. The interim financial statements reflect all adjustments which are,
in the opinion of management, necessary for a fair presentation of the results
for the periods presented. Such adjustments are of a normal recurring nature.
The results of operations for the interim periods disclosed herein are not
necessarily indicative of the results that may be expected for a full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|2. | On October 1, 1999, Charter One completed its acquisition of St. Paul
Bancorp, Inc. (St. Paul), which was accounted for as a pooling of interests.
Headquartered in Chicago, Illinois, St. Paul was the holding company of St. Paul
Federal Bank for Savings, a $6.2 billion savings bank that operated 58 branch
offices in the metropolitan Chicago area. The merger was effected through the
issuance of .99225 shares of Charter One common stock for each share of St.
Pauls common stock, resulting in the issuance of 39,892,023 shares (as adjusted
for the 5% stock dividend issued September 30, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|3. | On November 5, 1999, the Company completed its acquisition of 14 Vermont
National Bank offices from Chittenden Corporation (Chittenden), which was
accounted for as a purchase. The acquisition was related to the branch
divestiture required by federal regulators relative to Chittendens pending
merger with Vermont Financial Services Corp., the parent company of Vermont
National Bank and United Bank in Massachusetts. Charter One acquired $84.7
million in commercial real estate and business loans and assumed $357.5 million
in deposits at fair value. The purchase resulted in $43.6 million in
tax-deductible goodwill, which will be amortized over 15 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|4. | The Company has identified one reportable segment: consumer banking. Consumer
banking includes retail banking, mortgage banking, and other related financial
services that provide a full range of deposit products, consumer loans, business
lending, and commercial real estate lending.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|5. | In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The FASB has delayed the
effective date of SFAS No. 133 for one year, to fiscal years beginning after
June 15, 2000. The delay, published as SFAS No. 137, applies to quarterly and
annual financial statements. In June 2000, the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an amendment of FASB Statement No. 133. SFAS No.138 amends the accounting and
reporting standards of SFAS No. 133 for certain derivative instruments and
certain hedging activities. It also amends SFAS No. 133 for decisions made by the
FASB relating to the Derivatives Implementation Group process. Early application
is still permitted. Management has not completed the process of evaluating SFAS
No. 133 and SFAS No. 138 and therefore has not determined the impact that adopting
these statements will have on the Companys financial position and results of
operations.
|  
|6. | Certain items in the consolidated financial statements for 1999 have been
reclassified to conform to the 2000 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

4



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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. and Charter One Commercial (formerly
ALBANK Commercial). Charter Michigan Bancorp, Inc. owns all of the outstanding
capital stock of Charter One Bank, F.S.B., a federally chartered thrift. The
primary business of 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, 2000, the Bank and its subsidiaries were doing
business through 418 full-service branches and 36 loan production offices.

Forward-Looking Statements

This document, including information included or incorporated by reference,
contains, and future filings by the Company on Form 10-K, Form 10-Q and Form 8-K
and future oral and written statements by the Company and its management may
contain, forward-looking statements about Charter One and its subsidiaries which
we believe are within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, without limitation,
statements with respect to anticipated future operating and financial
performance, 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. Forward-looking statements by the Company and its management are
based on beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions of management and are not guarantees of future
performance. The Company 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. The factors we discuss in this document and
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.

RESULTS OF OPERATIONS

Performance Overview

Charter One reported net income of $103.3 million, or $.49 per diluted share,
for the three months ended June 30, 2000. This was a $5.1 million, or 4.7%,
decrease over the results of the second quarter of 1999 when net income was
$108.4 million, or $.49 per diluted share. Both periods included merger-related
charges. Excluding the after- tax impact of merger-related charges, our net
income resulted in a return on average equity of 19.08% and a return on average
assets of 1.51% for the three months ended June 30, 2000. The comparable returns
for the second quarter of 1999 were 17.69% and 1.44%, respectively. The increase
in our operating returns was primarily attributable to increases in income from
retail banking and leasing operations.

For the six months ended June 30, 2000, Charter One reported net income of $215.0
million, or $1.02 per diluted share. This was a $3.7 million, or 1.7%, increase
over the results for the same period in 1999. Both periods included
merger-related charges. Our net income, excluding the after-tax impact of
merger-related charges, resulted in a return on average equity of 18.84% and a
return on average assets of 1.51% for the six months ended June 30, 2000. The
comparable returns for the 1999 period were 17.46% and 1.41%, respectively. The
increase in our operating returns, just as with the second quarter results, was
primarily attributable to increases in income from retail banking and leasing
operations. Additionally, the year-over-year comparison was affected by an
increase in income from our Bank Owned Life Insurance (BOLI) program.

5



---



##### Table of Contents



Figure 1 sets forth selected annualized performance ratios for the three and
six months ended June 30, 2000 and 1999, respectively. The table reflects these
ratios on both an actual and operating return basis. Operating returns are
computed using net income excluding the after-tax impact of merger-related
charges for each of the periods presented. We believe that presentation of
operating returns will provide comparability and insight into the operations of
Charter One.

Selected Ratios (Figure 1)

|           |                                                |  |                    |       |                  |  |         |       |         |  |  |       |   |  |  |       |  
|---------- | ---------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ------- | ----- | ------- |  |  | ----- | - |  |  | ----- | -
|           |                                                |  | Three Months Ended |       | Six Months Ended
|           |                                                |  |                    |       |                 
|           |                                                |  | 6/30/00            |       | 6/30/99          |  | 6/30/00 |       | 6/30/99
|           |                                                |  |                    |       |                  |  |         |       |        
|Actual:   
|          
|          
|          
|          
|           | Return on average assets                       |  |                    | 1.33  | %                |  |         | 1.41  | %       |  |  | 1.40  | % |  |  | 1.38  | %
|          
|          
|          
|          
|           | Return on average equity                       |  |                    | 16.78 |                  |  |         | 17.33 |         |  |  | 17.51 |   |  |  | 17.16 |  
|          
|          
|          
|          
|           | Average equity to average assets               |  |                    | 7.91  |                  |  |         | 8.14  |         |  |  | 8.00  |   |  |  | 8.07  |  
|          
|          
|          
|          
|           | Net interest income to administrative expenses |  |                    | 1.39  | x                |  |         | 1.61  | x       |  |  | 1.50  | x |  |  | 1.63  | x
|          
|          
|          
|          
|           | Administrative expenses to average assets      |  |                    | 2.15  | %                |  |         | 1.89  | %       |  |  | 2.02  | % |  |  | 1.89  | %
|          
|          
|          
|          
|           | Efficiency ratio                               |  |                    | 49.86 |                  |  |         | 46.46 |         |  |  | 47.22 |   |  |  | 46.83 |  
|          
|          
|          
|          
|Operating:
|          
|          
|          
|          
|           | Return on average assets                       |  |                    | 1.51  | %                |  |         | 1.44  | %       |  |  | 1.51  | % |  |  | 1.41  | %
|          
|          
|          
|          
|           | Return on average equity                       |  |                    | 19.08 |                  |  |         | 17.69 |         |  |  | 18.84 |   |  |  | 17.46 |  
|          
|          
|          
|          
|           | Net interest income to administrative expenses |  |                    | 1.58  | x                |  |         | 1.65  | x       |  |  | 1.63  | x |  |  | 1.66  | x
|          
|          
|          
|          
|           | Administrative expenses to average assets      |  |                    | 1.88  | %                |  |         | 1.84  | %       |  |  | 1.86  | % |  |  | 1.85  | %
|          
|          
|          
|          
|           | Efficiency ratio                               |  |                    | 43.50 |                  |  |         | 45.30 |         |  |  | 43.45 |   |  |  | 45.88 |  

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. Average balances are
calculated on a daily basis. 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. The cost of liabilities
includes the annualized effect of interest rate risk management instruments.

6



---



##### Table of Contents



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

|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |      |      | 
|----------------------------------------------------------------------- | ----------------------------- | ----------------------- | ------------------------------------------ | ---------- | ------------------ | ---------- | -------- | ------- | ------- | ------- | ------- | ---- | ---------------------- | ---- | --------- | ---------- | ---------- | ---------- | ------- | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                                        |                               |                         |                                            |            | Three Months Ended
|                                                                        |                               |                         |                                            |            |                   
|                                                                        |                               |                         |                                            |            | 6/30/00            |            | 6/30/99 
|                                                                        |                               |                         |                                            |            |                    |            |         
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      | Avg.                   |      |           |            |            |            |         |         |         |         | Avg.  
|                                                                        |                               |                         |                                            |            | Average            |            |          |         |         |         | Yield/  |      | Average                |      |           |            |            |            | Yield/ 
|                                                                        |                               |                         |                                            |            | Balance            |            | Interest |         | Cost    |         | Balance |      | Interest               |      | Cost     
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |          
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      | (Dollars in thousands)
|Interest-earning assets:                                               
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans and leases              |                         | $                                          | 23,716,364 |                    |            | $        | 447,109 |         |         |         | 7.55 | %                      |      | $         | 22,398,262 |            |            | $       | 415,076 |         |         |        | 7.42 | %   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Mortgage-backed securities:  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Available for sale      |                                            |            | 2,765,608          |            |          |         | 50,065  |         |         |      | 7.24                   |      |           |            | 3,170,063  |            |         |         | 52,668  |         |        |      | 6.65 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Held to maturity        |                                            |            | 1,745,421          |            |          |         | 30,908  |         |         |      | 7.08                   |      |           |            | 2,317,263  |            |         |         | 39,758  |         |        |      | 6.86 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Investment securities:       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Trading                 |                                            |            |                   |            |          |         |        |         |         |      |                       |      |           |            | 7,680      |            |         |         | 58      |         |        |      | 3.02 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Available for sale      |                                            |            | 452,191            |            |          |         | 8,202   |         |         |      | 7.26                   |      |           |            | 424,988    |            |         |         | 6,000   |         |        |      | 5.65 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Held to maturity        |                                            |            | 29,143             |            |          |         | 420     |         |         |      | 5.77                   |      |           |            | 36,526     |            |         |         | 561     |         |        |      | 6.13 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other interest-earning assets |                         |                                            | 489,180    |                    |            |          | 8,894   |         |         |         | 7.19 |                        |      |           | 537,051    |            |            |         | 8,704   |         |         |        | 6.41 |     
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                         | Total interest-earning assets              |            |                    | 29,197,907 |          |         |         | 545,598 |         |      |                        | 7.48 |           |            |            | 28,891,833 |         |         |         | 522,825 |        |      |      | 7.24 | 
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Allowance for loan and lease losses                                     |                               |                         | (183,514                                   | )          |                    |            |          |         |         |         |         |      |                        |      | (181,778  | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Noninterest-earning assets                                              |                               |                         | 2,136,747                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,016,638 |           
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                         | Total assets                               |            | $                  | 31,151,140 |          |         |         |         |         |      |                        |      |           |            | $          | 30,726,693 |        
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|Interest-bearing liabilities:                                          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Deposits:                    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Checking accounts       |                                            | $          | 3,674,891          |            |          |         | 13,376  |         |         |      | 1.46                   | %    |           | $          | 2,974,490  |            |         |         | 7,206   |         |        |      | .97  | %   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Savings accounts        |                                            |            | 1,694,620          |            |          |         | 6,385   |         |         |      | 1.52                   |      |           |            | 2,446,915  |            |         |         | 12,197  |         |        |      | 2.00 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Money market accounts   |                                            |            | 3,792,860          |            |          |         | 35,593  |         |         |      | 3.77                   |      |           |            | 3,082,974  |            |         |         | 25,007  |         |        |      | 3.25 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Certificates of deposit |                                            |            | 9,607,596          |            |          |         | 126,314 |         |         |      | 5.29                   |      |           |            | 10,439,968 |            |         |         | 133,673 |         |        |      | 5.14 |     
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                         | Total deposits                             |            |                    | 18,769,967 |          |         |         | 181,668 |         |      |                        | 3.89 |           |            |            | 18,944,347 |         |         |         | 178,083 |        |      |      | 3.77 | 
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        | FHLB advances                 |                         |                                            | 8,959,241  |                    |            |          | 125,425 |         |         |         | 5.62 |                        |      |           | 8,166,811  |            |            |         | 102,156 |         |         |        | 5.01 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other borrowings              |                         |                                            | 309,641    |                    |            |          | 6,472   |         |         |         | 8.33 |                        |      |           | 554,400    |            |            |         | 9,413   |         |         |        | 6.76 |     
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                         | Total borrowings                           |            |                    | 9,268,882  |          |         |         | 131,897 |         |      |                        | 5.71 |           |            |            | 8,721,211  |         |         |         | 111,569 |        |      |      | 5.13 | 
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                         | Total interest-bearing liabilities         |            |                    | 28,038,849 |          |         |         | 313,565 |         |      |                        | 4.49 |           |            |            | 27,665,558 |         |         |         | 289,652 |        |      |      | 4.20 | 
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Noninterest-bearing liabilities                                         |                               |                         | 649,547                                    |            |                    |            |          |         |         |         |         |      |                        |      | 559,476   |           
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                         | Total liabilities                          |            |                    | 28,688,396 |          |         |         |         |         |      |                        |      |           |            |            | 28,225,034 |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Shareholders equity                                                    |                               |                         | 2,462,744                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,501,659 |           
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                         | Total liabilities and shareholders
equity |            | $                  | 31,151,140 |          |         |         |         |         |      |                        |      |           |            | $          | 30,726,693 |        
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|Net interest income                                                     |                               |                         |                                            |            |                    | $          | 232,033  |         |         |         |         |      |                        |      |           |            |            | $          | 233,173 |        
|                                                                        |                               |                         |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Interest rate spread                                                    |                               |                         |                                            |            |                    |            |          |         |         |         | 2.99    |      |                        |      |           |            |            |            |         |         |         |         | 3.04   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net yield on average interest-earning
assets                            |                               |                         |                                            |            |                    |            |          |         |         |         | 3.18    |      |                        |      |           |            |            |            |         |         |         |         | 3.23   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Average interest-earning assets to average
interest-bearing liabilities |                               |                         |                                            |            |                    |            |          |         |         |         | 104.13  | %    |                        |      |           |            |            |            |         |         |         |         | 104.43 | %   

7



---



##### Table of Contents



|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |         |           |      |        |      |      |  
|----------------------------------------------------------------------- | --------------------------- | ------------------------------------------ | --------- | ---------------- | ---------- | -------- | ------- | ---------------------- | --------- | ------- | ------ | -------- | ---- | ---- | ---------- | ---------- | ---------- | ------ | ------- | ------- | --------- | ---- | ------ | ---- | ---- | -
|                                                                        |                             |                                            |           | Six Months Ended
|                                                                        |                             |                                            |           |                 
|                                                                        |                             |                                            |           | 6/30/00          |            | 6/30/99 
|                                                                        |                             |                                            |           |                  |            |         
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        | Avg.     |      |      |            |            |            |        |         |         |           | Avg.
|                                                                        |                             |                                            |           | Average          |            |          |         |                        |           | Yield/  |        | Average  |      |      |            |            |            | Yield/
|                                                                        |                             |                                            |           | Balance          |            | Interest |         | Cost                   |           | Balance |        | Interest |      | Cost
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |     
|                                                                        |                             |                                            |           |                  |            |          |         | (Dollars in thousands)
|Interest-earning assets:                                               
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans and leases            |                                            | $         | 23,305,600       |            |          | $       | 875,219                |           |         |        | 7.52     | %    |      | $          | 22,507,649 |            |        | $       | 836,865 |           |      |        | 7.45 | %   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Mortgage-backed securities:
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Available for sale                         |           |                  | 2,952,867  |          |         |                        | 105,539   |         |        |          | 7.15 |      |            |            | 2,804,606  |        |         |         | 92,994    |      |        |      | 6.63 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Held to maturity                           |           |                  | 1,794,968  |          |         |                        | 63,262    |         |        |          | 7.05 |      |            |            | 2,489,173  |        |         |         | 85,830    |      |        |      | 6.90 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Investment securities:                                                 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Trading                     |                                            |           | 368              |            |          |         | 38                     |           |         |        | 20.56    |      |      |            | 3,840      |            |        |         | 58      |           |      |        | 3.02 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Available for sale          |                                            |           | 468,654          |            |          |         | 17,213                 |           |         |        | 7.35     |      |      |            | 457,416    |            |        |         | 12,923  |           |      |        | 5.65 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Held to maturity            |                                            |           | 32,412           |            |          |         | 844                    |           |         |        | 5.21     |      |      |            | 44,226     |            |        |         | 1,373   |           |      |        | 6.21 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Other interest-earning assets                                           |                             |                                            | 495,250   |                  |            |          | 17,553  |                        |           |         | 7.01   |          |      |      | 587,538    |            |            |        | 18,175  |         |           |      | 6.15   |     
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|                                                                        |                             | Total interest-earning assets              |           |                  | 29,050,119 |          |         |                        | 1,079,668 |         |        |          | 7.44 |      |            |            | 28,894,448 |        |         |         | 1,048,218 |      |        |      | 7.26 |  
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|Allowance for loan and lease losses                                     |                             |                                            | (184,330  | )                |            |          |         |                        |           |         |        |          |      |      | (182,482   | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Noninterest-earning assets                                              |                             |                                            | 1,838,397 |                  |            |          |         |                        |           |         |        |          |      |      | 1 ,820,632 |           
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |           
|                                                                        |                             | Total assets                               |           | $                | 30,704,186 |          |         |                        |           |         |        |          |      |      |            | $          | 30,532,598 |       
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |           
|Interest-bearing liabilities:                                          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Deposits:                  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Checking accounts                          |           | $                | 3,553,099  |          |         |                        | 24,962    |         |        |          | 1.41 | %    |            | $          | 2,927,410  |        |         |         | 12,321    |      |        |      | .85  | %
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Savings accounts                           |           |                  | 1,870,826  |          |         |                        | 14,328    |         |        |          | 1.54 |      |            |            | 2,505,845  |        |         |         | 25,232    |      |        |      | 2.03 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Money market accounts                      |           |                  | 3,511,241  |          |         |                        | 63,470    |         |        |          | 3.64 |      |            |            | 2,906,784  |        |         |         | 48,035    |      |        |      | 3.33 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                             | Certificates of deposit                    |           |                  | 9,942,252  |          |         |                        | 259,163   |         |        |          | 5.24 |      |            |            | 10,573,124 |        |         |         | 274,221   |      |        |      | 5.23 |  
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|                                                                        |                             | Total deposits                             |           |                  | 18,877,418 |          |         |                        | 361,923   |         |        |          | 3.86 |      |            |            | 18,913,163 |        |         |         | 359,809   |      |        |      | 3.84 |  
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|                                                                        | FHLB advances               |                                            |           | 8,754,401        |            |          |         | 239,124                |           |         |        | 5.49     |      |      |            | 7,910,712  |            |        |         | 196,996 |           |      |        | 5.02 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other borrowings            |                                            |           | 346,663          |            |          |         | 13,585                 |           |         |        | 7.81     |      |      |            | 702,253    |            |        |         | 22,691  |           |      |        | 6.44 |     
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|                                                                        |                             | Total borrowings                           |           |                  | 9,101,064  |          |         |                        | 252,709   |         |        |          | 5.57 |      |            |            | 8,612,965  |        |         |         | 219,687   |      |        |      | 5.13 |  
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|                                                                        |                             | Total interest-bearing liabilities         |           |                  | 27,978,482 |          |         |                        | 614,632   |         |        |          | 4.41 |      |            |            | 27,526,128 |        |         |         | 579,496   |      |        |      | 4.24 |  
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|Noninterest-bearing liabilities                                         |                             |                                            | 270,184   |                  |            |          |         |                        |           |         |        |          |      |      | 543,137    |           
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |           
|                                                                        |                             | Total liabilities                          |           |                  | 28,248,666 |          |         |                        |           |         |        |          |      |      |            |            | 28,069,265 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Shareholders equity                                                    |                             |                                            | 2,455,520 |                  |            |          |         |                        |           |         |        |          |      |      | 2,463,333  |           
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |           
|                                                                        |                             | Total liabilities and shareholders
equity |           | $                | 30,704,186 |          |         |                        |           |         |        |          |      |      |            | $          | 30,532,598 |       
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |           
|Net interest income                                                     |                             |                                            |           |                  |            | $        | 465,036 |                        |           |         |        |          |      |      |            |            |            | $      | 468,722 |        
|                                                                        |                             |                                            |           |                  |            |          |         |                        |           |         |        |          |      |      |            |            |            |        |         |        
|Interest rate spread                                                    |                             |                                            |           |                  |            |          |         |                        |           |         | 3.03   |          |      |      |            |            |            |        |         |         |           |      | 3.02   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net yield on average interest-earning
assets                            |                             |                                            |           |                  |            |          |         |                        |           |         | 3.20   |          |      |      |            |            |            |        |         |         |           |      | 3.24   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Average interest-earning assets to average
interest-bearing liabilities |                             |                                            |           |                  |            |          |         |                        |           |         | 103.83 | %        |      |      |            |            |            |        |         |         |           |      | 104.97 | %   

8



---



##### Table of Contents



Figure 3 sets forth 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.

Rate/Volume Analysis(Figure 3)

|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |         |         |        | 
|----------------------------- | ----------------------------- | ------------------ | ------ | ------ | --------------------------- | ------ | ------------------------- | ------- | ------- | ----- | -------------------------- | ------ | ---------------------- | ------ | ------ | ------ | ----- | ------ | ----- | ------- | ------- | ----- | ------ | ------- | ------- | ------ | 
|                              |                               |                    |        |        | Three Months Ended June 30, |        | Six Months Ended June 30,
|                              |                               |                    |        |        |                             |        |                          
|                              |                               |                    |        |        | 2000 v. 1999                |        | 2000 v. 1999             
|                              |                               |                    |        |        |                             |        |                          
|                              |                               |                    |        |        | Increase (decrease) due to  |        |                           |         |         |       | Increase (decrease) due to
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                           
|                              |                               |                    |        |        | Rate                        |        | Volume                    |         | Total   |       | Rate                       |        | Volume                 |        | Total 
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |       
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        | (Dollars in thousands)
|Interest income:             
|                             
|                             
|                             
|                             
|                              | Loans and leases              |                    | $      | 6,501  |                             |        | $                         | 25,532  |         |       | $                          | 32,033 |                        |        | $      | 6,143  |       |        | $     | 32,211  |         |       | $      | 38,354  |        
|                             
|                             
|                             
|                             
|                              | Mortgage-backed securities:  
|                             
|                             
|                             
|                             
|                              |                               | Available for sale |        |        | 4,471                       |        |                           |         | (7,074  | )     |                            |        | (2,603                 | )      |        |        | 7,474 |        |       |         | 5,071   |       |        |         | 12,545  |       
|                             
|                             
|                             
|                             
|                              |                               | Held to maturity   |        |        | 1,240                       |        |                           |         | (10,090 | )     |                            |        | (8,850                 | )      |        |        | 1,860 |        |       |         | (24,428 | )     |        |         | (22,568 | )     
|                             
|                             
|                             
|                             
|                              | Investment securities:       
|                             
|                             
|                             
|                             
|                              |                               | Trading            |        |        |                            |        |                           |         | (58     | )     |                            |        | (58                    | )      |        |        | 339   |        |       |         | (359    | )     |        |         | (20     | )     
|                             
|                             
|                             
|                             
|                              |                               | Available for sale |        |        | 1,798                       |        |                           |         | 404     |       |                            |        | 2,202                  |        |        |        | 3,965 |        |       |         | 325     |       |        |         | 4,290   |       
|                             
|                             
|                             
|                             
|                              |                               | Held to maturity   |        |        | (33                         | )      |                           |         | (108    | )     |                            |        | (141                   | )      |        |        | (199  | )      |       |         | (330    | )     |        |         | (529    | )     
|                             
|                             
|                             
|                             
|                              | Other interest-earning assets |                    |        | 1,005  |                             |        |                           | (815    | )       |       |                            | 190    |                        |        |        | 2,457  |       |        |       | (3,079  | )       |       |        | (622    | )      
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |        
|                              |                               |                    | Total  |        |                             | 14,982 |                           |         |         | 7,791 |                            |        |                        | 22,773 |        |        |       | 22,039 |       |         |         | 9,411 |        |         |         | 31,450 | 
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |        
|Interest expense:            
|                             
|                             
|                             
|                             
|                              | Checking accounts             |                    |        | 4,203  |                             |        |                           | 1,967   |         |       |                            | 6,170  |                        |        |        | 9,573  |       |        |       | 3,068   |         |       |        | 12,641  |        
|                             
|                             
|                             
|                             
|                              | Savings accounts              |                    |        | (2,576 | )                           |        |                           | (3,236  | )       |       |                            | (5,812 | )                      |        |        | (5,290 | )     |        |       | (5,614  | )       |       |        | (10,904 | )      
|                             
|                             
|                             
|                             
|                              | Money market accounts         |                    |        | 4,298  |                             |        |                           | 6,288   |         |       |                            | 10,586 |                        |        |        | 4,790  |       |        |       | 10,645  |         |       |        | 15,435  |        
|                             
|                             
|                             
|                             
|                              | Certificates of deposit       |                    |        | 3,506  |                             |        |                           | (10,865 | )       |       |                            | (7,359 | )                      |        |        | 1,384  |       |        |       | (16,442 | )       |       |        | (15,058 | )      
|                             
|                             
|                             
|                             
|                              | FHLB advances                 |                    |        | 12,457 |                             |        |                           | 10,812  |         |       |                            | 23,269 |                        |        |        | 19,480 |       |        |       | 22,648  |         |       |        | 42,128  |        
|                             
|                             
|                             
|                             
|                              | Other borrowings              |                    |        | 553    |                             |        |                           | (3,494  | )       |       |                            | (2,941 | )                      |        |        | 580    |       |        |       | (9,686  | )       |       |        | (9,106  | )      
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |        
|                              |                               |                    | Total  |        |                             | 22,441 |                           |         |         | 1,472 |                            |        |                        | 23,913 |        |        |       | 30,517 |       |         |         | 4,619 |        |         |         | 35,136 | 
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |        
|Change in net interest income |                               | $                  | (7,459 | )      |                             | $      | 6,319                     |         |         | $     | (1,140                     | )      |                        | $      | (8,478 | )      |       | $      | 4,792 |         |         | $     | (3,686 | )      
|                              |                               |                    |        |        |                             |        |                           |         |         |       |                            |        |                        |        |        |        |       |        |       |         |         |       |        |        

Our net interest income for the three months ended June 30,
2000 was $232.0
million, a decrease of $1.1 million from the three months ended June 30, 1999.
The net yield on interest-earning assets during the second quarter of 2000
declined slightly to 3.18% from 3.23% for the comparable period of 1999,
reflecting in part, our stock buyback program and the short-term impact of our
recent adjustable-rate residential and consumer loans originations at teaser
rates. Additionally, as reflected in Figure 4, the net yield on
interest-earning assets at June 30, 2000 declined to 3.02% from 3.19% at
December 31, 1999. The compression in the net yield on interest-earning assets
is primarily attributed to the fact that our liabilities have repriced more
quickly than our assets. Interest rates have risen considerably over the past
year, as evidenced by an aggregate 175 basis point increase in the federal
funds rate. This increase has been accompanied by a flattening of the yield
curve. Given this interest rate environment, management has decided to slow
balance sheet growth, with particular emphasis on accelerating the shift away
from residential loans and securities by selling more of those portfolios.
Instead, balance sheet capacity will be preserved for a more favorable interest
rate environment, and existing capital will be allocated toward our stock
buyback program. See Capital and Dividends below for further discussion
regarding our stock buyback program. Thus, in the current interest rate
environment, management expects operating earnings per share levels for the
remainder of 2000 to be approximately 10% over operating earnings per share
levels for the comparable 1999 period. This is expected to result in returns on
average assets and average equity consistent with such returns achieved in the
first half of 2000.

Our net interest income for the six months ended June 30,
2000 was $465.0
million, a decrease of $3.7 million from the six months ended June 30, 1999.
The net yield on average interest-earning assets decreased by four basis points
during the six months ended June 30, 2000 to 3.20% from 3.24% in the comparable
period of 1999. The reasons for the decrease in the net yield on average
interest-earning assets are substantially the same as for the second quarter
results discussed in the above paragraph. In addition, the year-over-year
comparison was affected by our BOLI program initiated in 1999. This asset is
classified in non-interest earning assets on the average balance sheet and the
related income is recorded in other income on the consolidated statement of
income. See Other Income below for further discussion
regarding our BOLI
program.

9



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##### Table of Contents



Figure 4 sets forth Charter Ones yields and costs at period end for the dates
indicated. The yields on leases excludes the impact of the related tax benefit.
The cost of liabilities includes the annualized effect of interest rate risk
management instruments.

Yields and Costs at End of Period (Figure 4)

|                                     |                               |                                    |      |         |      |          |      |      |      | 
|------------------------------------ | ----------------------------- | ---------------------------------- | ---- | ------- | ---- | -------- | ---- | ---- | ---- | 
|                                     |                               |                                    |      | 6/30/00 |      | 12/31/99
|                                     |                               |                                    |      |         |      |         
|Weighted average yield:             
|                                    
|                                    
|                                    
|                                    
|                                     | Real estate loans             |                                    |      | 7.36    | %    |          |      | 7.28 | %   
|                                    
|                                    
|                                    
|                                    
|                                     | Automobile loans              |                                    |      | 8.60    |      |          |      | 8.52 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Retail consumer loans         |                                    |      | 7.93    |      |          |      | 7.93 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Leases                        |                                    |      | 6.24    |      |          |      | 6.08 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Corporate banking loans       |                                    |      | 8.98    |      |          |      | 8.58 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Total loans and leases             |      |         | 7.61 |          |      |      | 7.53 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Mortgage-backed securities    |                                    |      | 7.25    |      |          |      | 7.04 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Investment securities         |                                    |      | 7.37    |      |          |      | 7.26 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Other interest-earning assets |                                    |      | 7.30    |      |          |      | 6.97 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Total interest-earning assets      |      |         | 7.53 |          |      |      | 7.41 | 
|                                    
|                                    
|                                    
|                                    
|Weighted average cost:              
|                                    
|                                    
|                                    
|                                    
|                                     | Checking                      |                                    |      | 1.54    |      |          |      | 1.27 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Money market                  |                                    |      | 3.85    |      |          |      | 3.41 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Savings                       |                                    |      | 1.54    |      |          |      | 1.61 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Certificates of deposit       |                                    |      | 5.43    |      |          |      | 5.13 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Total deposits                     |      |         | 3.99 |          |      |      | 3.79 | 
|                                    
|                                    
|                                    
|                                    
|                                     | FHLB advances                 |                                    |      | 5.83    |      |          |      | 5.32 |     
|                                    
|                                    
|                                    
|                                    
|                                     | Other borrowings              |                                    |      | 7.91    |      |          |      | 6.99 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Total interest-bearing liabilities |      |         | 4.68 |          |      |      | 4.34 | 
|                                    
|Interest rate spread                 |                               |                                    | 2.85 |         |      |          | 3.07 |     
|                                    
|Net yield on interest-earning assets |                               |                                    | 3.02 | %       |      |          | 3.19 | %   

Other Income

Other income for the three months ended June 30, 2000 was $98.9 million, an
increase of $19.7 million, or 24.8%, over the $79.2 million for the three months
ended June 30, 1999. The increase was primarily attributable to income from
retail banking and leasing operations. Retail banking income increased $10.9
million, or 21.5%, as we continued to introduce our products into new markets
acquired through mergers. Income from leasing operations increased $8.7 million,
primarily driven by residual values on underlying equipment realized upon
termination of leases.

Other income for the six months ended June 30, 2000 was $181.5 million, an
increase of $35.1 million, or 23.9%, over the $146.5 million for the six months
ended June 30, 1999. The increase was primarily attributable to income from
retail banking, leasing operations, and the BOLI program. The reasons for the
increases in income from retail banking and leasing operations are substantially
the same as for the second quarter results discussed in the above paragraph. The
increase in the line item other was attributable to the BOLI program. During
the year ended December 31, 1999, we increased our BOLI portfolio by $630.0
million. The related income on the BOLI asset is recorded in the line item
other and is the primary reason for the $9.8 million increase in the line item
other over the comparable period in 1999.

Administrative Expenses

Administrative expenses were $167.5 million for the three months ended June 30,
2000, an increase of $22.3 million, or 15.4%, as compared to the second quarter
of 1999. Each year included merger-related expenses. There were $20.8 million of
merger-related expenses recorded in the three months ended June 30, 2000, and
$3.5 million for the three months ended June 30, 1999. Excluding these
merger-related charges, our administrative expenses were $146.7 million for the
three months ended June 30, 2000 and $141.7 million for the three months ended
June

10



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##### Table of Contents



30, 1999. This resulted in a comparable ratio of administrative expenses to
average assets (excluding the merger- related charges) of 1.88% and 1.84% for
the three months ended June 30, 2000 and 1999, respectively. Our efficiency
ratio (excluding the merger-related charges) was 43.50% for the three months
ended June 30, 2000, an improvement when compared to 45.30% for the three months
ended June 30, 1999. See the above discussion in Other Income regarding
additional factors that contributed to the improvement in our efficiency ratio.

Administrative expenses were $310.3 million for the six months ended June 30,
2000, an increase of $21.9 million, or 7.6%, as compared to the six months ended
June 30, 1999. Each year included merger-related expenses. There were $24.1
million of merger-related expenses recorded in the six months ended June
30, 2000, and $5.7 million for the six months ended June 30, 1999. Excluding
these merger-related charges, our administrative expenses were $286.2 million
for the six months ended June 30, 2000 and $282.6 million for the six months
ended June 30, 1999. This resulted in a comparable ratio of administrative
expenses to average assets (excluding the merger-related charges) of 1.86% and
1.85% for the six months ended June 30, 2000 and 1999, respectively. Our
efficiency ratio (excluding the merger-related charges) was 43.45% for the six
months ended June 30, 2000, an improvement when compared to 45.88% for the six
months ended June 30, 1999. See the above discussion in Other Income regarding
additional factors that contributed to the improvement in our efficiency ratio.

Federal Income Taxes

Federal income tax expense for the three months ended June 30, 2000 was $48.6
million, as compared to $51.0 million for the same period in 1999. The primary
reason for this 4.7% decrease in the provision for federal income taxes was a
4.7% decrease in pre-tax book income. The effective tax rate was 32.0% for the
2000 and 1999 periods, respectively.

Federal income tax expense for the six months ended June 30, 2000 was $101.2
million, essentially unchanged when compared to federal income tax expense of
$100.9 million for the same period in 1999. The effective tax rates were 32.0%
and 32.3% for the 2000 and 1999 periods, respectively.

FINANCIAL CONDITION

Overview

At June 30, 2000, total assets were $32.2 billion, as compared to total assets
of $31.8 billion at December 31, 1999. Contributing to the increase in total
assets was the growth in our loan portfolio since December 31, 1999. Figure 5
illustrates our continued emphasis in originating consumer and commercial loans
due to the higher yields and shorter terms provided by these types of loans.
Additionally, the adjustable-rate portion of our one-to-four family portfolio
increased by $835.7 million, or 14.7%, since December 31, 1999.

11



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##### Table of Contents



Loans and Leases

Composition of Loans and Leases(Figure 5)

|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |            | 
|-------------------------------------- | ----------------------------------------------------------- | ----------------- | --------------------- | ---------- | --------- | ---------------------- | ---------- | ---------- | --------- | ---------- | ---------- | 
|                                       |                                                             |                   |                       |            |           | 6/30/00                |            | 12/31/99  
|                                       |                                                             |                   |                       |            |           |                        |            |           
|                                       |                                                             |                   |                       |            |           | (Dollars in thousands)
|Loan and lease portfolio, net         
|                                      
|                                      
|                                      
|                                      
|                                       | One-to-four family:                                        
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Permanent:       
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Fixed rate            |            | $         | 5,077,841              |            |            | $         | 5,755,393  |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Adjustable rate       |            |           | 6,538,729              |            |            |           | 5,703,042  |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Construction      |                       |            | 294,784   |                        |            |            | 276,172   |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       |                                                             |                   |                       |            |           |                        | 11,911,354 |            |           |            | 11,734,607 | 
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       | Commercial real estate:                                    
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Multifamily       |                       |            | 1,202,393 |                        |            |            | 1,276,004 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Other             |                       |            | 772,498   |                        |            |            | 673,972   |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       |                                                             |                   |                       |            |           |                        | 1,974,891  |            |           |            | 1,949,976  | 
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       | Consumer:                                                  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Retail            |                       |            | 5,052,418 |                        |            |            | 4,502,023 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Automobile        |                       |            | 2,697,127 |                        |            |            | 2,497,956 |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       |                                                             |                   |                       |            |           |                        | 7,749,545  |            |           |            | 6,999,979  | 
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       | Business:                                                  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Leasing           |                       |            | 1,354,663 |                        |            |            | 1,137,895 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Corporate banking |                       |            | 682,615   |                        |            |            | 676,793   |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       |                                                             |                   |                       |            |           |                        | 2,037,278  |            |           |            | 1,814,688  | 
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       | Loans and leases before allowance for loan and lease losses |                   |                       | 23,673,068 |           |                        |            | 22,499,250 |          
|                                      
|                                      
|                                      
|                                      
|                                       | Allowance for loan and lease losses                         |                   |                       | (186,194   | )         |                        |            | (186,400   | )        
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|                                       |                                                             |                   | Loans and leases, net |            | $         | 23,486,874             |            |            | $         | 22,312,850 |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           
|Portfolio of loans serviced for others |                                                             | $                 | 11,616,497            |            |           | $                      | 10,798,563 |           
|                                       |                                                             |                   |                       |            |           |                        |            |            |           |            |           

12



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##### Table of Contents



Loan and Lease Activity (Figure 6)

|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |           |           |           |           | 
|------------------------------- | ---------------------------------------------- | ------------------------------------ | ------------------------------------ | ---------------------------------- | --------- | ------------------ | --------- | ---------------- | --------- | ---------------------- | --------- | --------- | ---------- | ---------- | --------- | --------- | --------- | --------- | --------- | 
|                                |                                                |                                      |                                      |                                    |           | Three Months Ended |           | Six Months Ended
|                                |                                                |                                      |                                      |                                    |           |                    |           |                 
|                                |                                                |                                      |                                      |                                    |           | 6/30/00            |           | 6/30/99          |           | 6/30/00                |           | 6/30/99  
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           | (Dollars in thousands)
|Originations:                  
|                               
|                               
|                               
|                               
|Real estate:                   
|                               
|                               
|                               
|                               
|                                | Permanent:                                    
|                               
|                               
|                               
|                               
|                                |                                                | One-to-four family                   |                                      | $                                  | 1,394,433 |                    |           | $                | 1,314,184 |                        |           |           | $2,414,702 |            |           | $         | 2,692,622 |          
|                               
|                               
|                               
|                               
|                                |                                                | Multifamily                          |                                      |                                    | 9,374     |                    |           |                  | 45,324    |                        |           |           | 14,256     |            |           |           | 144,199   |          
|                               
|                               
|                               
|                               
|                                |                                                | Commercial                           |                                      |                                    | 52,613    |                    |           |                  | 53,394    |                        |           |           | 109,537    |            |           |           | 135,042   |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                |                                      | Total permanent loans                |                                    |           | 1,456,420          |           |                  |           | 1,412,902              |           |           |            | 2,538,495  |           |           |           | 2,971,863 |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                | Construction:                                 
|                               
|                               
|                               
|                               
|                                |                                                | One-to-four family                   |                                      |                                    | 169,119   |                    |           |                  | 158,226   |                        |           |           | 268,517    |            |           |           | 262,635   |          
|                               
|                               
|                               
|                               
|                                |                                                | Multifamily                          |                                      |                                    | 34,299    |                    |           |                  | 28,648    |                        |           |           | 43,863     |            |           |           | 41,950    |          
|                               
|                               
|                               
|                               
|                                |                                                | Commercial                           |                                      |                                    | 19,130    |                    |           |                  | 36,806    |                        |           |           | 52,784     |            |           |           | 51,358    |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                |                                      | Total construction loans             |                                    |           | 222,548            |           |                  |           | 223,680                |           |           |            | 365,164    |           |           |           | 355,943   |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                |                                      |                                      | Total real estate loans originated |           |                    | 1,678,968 |                  |           |                        | 1,636,582 |           |            |            | 2,903,659 |           |           |           | 3,327,806 | 
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|Retail consumer                 |                                                |                                      | 714,285                              |                                    |           |                    | 664,111   |                  |           |                        | 1,204,817 |           |            |            | 1,281,466 |          
|                               
|                               
|                               
|                               
|Automobile                      |                                                |                                      | 464,193                              |                                    |           |                    | 393,644   |                  |           |                        | 744,195   |           |            |            | 741,104   |          
|                               
|                               
|                               
|                               
|Leases                          |                                                |                                      | 203,137                              |                                    |           |                    | 82,253    |                  |           |                        | 307,499   |           |            |            | 132,520   |          
|                               
|                               
|                               
|                               
|Corporate banking               |                                                |                                      | 210,271                              |                                    |           |                    | 170,667   |                  |           |                        | 358,232   |           |            |            | 297,218   |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                |                                      | Total loans and leases originated    |                                    |           | 3,270,854          |           |                  |           | 2,947,257              |           |           |            | 5,518,402  |           |           |           | 5,780,114 |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|Loans purchased                 |                                                |                                      | 4,142                                |                                    |           |                    | 112,249   |                  |           |                        | 7,906     |           |            |            | 372,003   |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|Sales and principal reductions:
|                               
|                               
|                               
|                               
|                                | Loans sold                                     |                                      |                                      | 488,898                            |           |                    |           | 485,772          |           |                        |           | 819,016   |            |            |           | 1,059,742 |          
|                               
|                               
|                               
|                               
|                                | Loans exchanged for mortgage-backed securities |                                      |                                      | 1,471,076                          |           |                    |           | 717,672          |           |                        |           | 1,471,076 |            |            |           | 1,866,045 |          
|                               
|                               
|                               
|                               
|                                | Principal reductions                           |                                      |                                      | 1,006,671                          |           |                    |           | 1,491,285        |           |                        |           | 2,004,540 |            |            |           | 3,228,479 |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                | Total sales and principal reductions |                                      |                                    | 2,966,645 |                    |           |                  | 2,694,729 |                        |           |           | 4,294,632  |            |           |           | 6,154,266 |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          
|                                |                                                |                                      | Increase (decrease) before net
items |                                    | $         | 308,351            |           |                  | $         | 364,777                |           |           |            | $1,231,676 |           |           | $         | (2,149)   |          
|                                |                                                |                                      |                                      |                                    |           |                    |           |                  |           |                        |           |           |            |            |           |          

Investment Securities

Figure 7 summarizes our investment portfolios at June 30, 2000 and December 31,
1999. The amounts reflected represent the fair values of investment securities
held for trading and available for sale and the amortized cost of investment
securities held to maturity.

Investment Securities (Figure 7)

|                   |                                      |  |                                                |         |   |                        |         |          |   |         |         | 
|------------------ | ------------------------------------ |  | ---------------------------------------------- | ------- | - | ---------------------- | ------- | -------- | - | ------- | ------- | 
|                   |                                      |  |                                                |         |   | 6/30/00                |         | 12/31/99
|                   |                                      |  |                                                |         |   |                        |         |         
|                   |                                      |  |                                                |         |   | (Dollars in thousands)
|Trading           
|                  
|                  
|                  
|                  
|                   | Other                                |  | $                                              |        |   |                        | $       | 13,380   |  
|                   |                                      |  |                                                |         |   |                        |         |         
|                   |                                      |  | Total investment securities held for trading   |         |   |                       |         |          |   | 13,380  |        
|                   |                                      |  |                                                |         |   |                        |         |         
|Available for Sale
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities  |  |                                                | 331,378 |   |                        |         | 339,687  |  
|                  
|                  
|                  
|                  
|                   | Corporate notes and commercial paper |  |                                                | 66,335  |   |                        |         | 88,368   |  
|                  
|                  
|                  
|                  
|                   | Other                                |  |                                                | 34,961  |   |                        |         | 54,640   |  
|                   |                                      |  |                                                |         |   |                        |         |         
|                   |                                      |  | Total investment securities available for sale |         |   | 432,674                |         |          |   | 482,695 |        
|                   |                                      |  |                                                |         |   |                        |         |         
|Held to Maturity  
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities  |  |                                                | 15,000  |   |                        |         | 17,058   |  
|                  
|                  
|                  
|                  
|                   | Corporate notes and commercial paper |  |                                                |        |   |                        |         | 15,659   |  
|                  
|                  
|                  
|                  
|                   | Other                                |  |                                                | 13,136  |   |                        |         | 13,289   |  
|                   |                                      |  |                                                |         |   |                        |         |         
|                   |                                      |  | Total investment securities held to maturity   |         |   | 28,136                 |         |          |   | 46,006  |        
|                   |                                      |  |                                                |         |   |                        |         |         
|                   |                                      |  |                                                | Total   |   | $                      | 460,810 |          |   | $       | 542,081 | 
|                   |                                      |  |                                                |         |   |                        |         |         
|                   | Weighted average rate                |  |                                                | 7.37    | % |                        |         | 7.26     | %
|                   |                                      |  |                                                |         |   |                        |         |         

13



---



##### Table of Contents



Mortgage-Backed Securities

Figure 8 summarizes our mortgage-backed securities portfolios at June 30, 2000
and December 31, 1999. The amounts reflected represent the fair values of
mortgage-backed securities available for sale and the amortized
cost of securities held to maturity.

Mortgage-Backed Securities(Figure 8)

|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |           | 
|------------------ | ------------------------------------ | --------------------------------------------------- | ------------------------------------------------- | ----- | --------- | ---------------------- | --------- | -------- | --------- | --------- | --------- | 
|                   |                                      |                                                     |                                                   |       |           | 6/30/00                |           | 12/31/99
|                   |                                      |                                                     |                                                   |       |           |                        |           |         
|                   |                                      |                                                     |                                                   |       |           | (Dollars in thousands)
|Available for Sale
|                  
|                  
|                  
|                  
|                   | Participation certificates:         
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:                          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FNMA                                              |       | $         | 2,585,049              |           |          | $         | 3,023,228 |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FHLMC                                             |       |           | 60,625                 |           |          |           | 95,034    |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | GNMA                                              |       |           | 2,364                  |           |          |           | 2,608     |          
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations:
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:                          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FHLMC                                             |       |           | 298,368                |           |          |           | 232,906   |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FNMA                                              |       |           | 230,457                |           |          |           | 304,018   |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | GNMA                                              |       |           | 6,673                  |           |          |           | 7,349     |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                                      |                                                   |       | 518,444   |                        |           |          | 527,991   |          
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          
|                   |                                      | Total mortgage-backed securities available for sale |                                                   |       | 3,701,980 |                        |           |          | 4,193,134 |          
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          
|                  
|                  
|                  
|                  
|Held to Maturity  
|                  
|                  
|                  
|                  
|                   | Participation certificates:         
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:                          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FNMA                                              |       |           | 490,918                |           |          |           | 549,866   |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FHLMC                                             |       |           | 175,516                |           |          |           | 196,704   |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | GNMA                                              |       |           | 93,346                 |           |          |           | 101,468   |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                                      |                                                   |       | 146,747   |                        |           |          | 162,485   |          
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations:
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:                          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FNMA                                              |       |           | 215,207                |           |          |           | 221,934   |          
|                  
|                  
|                  
|                  
|                   |                                      |                                                     | FHLMC                                             |       |           | 76,348                 |           |          |           | 82,838    |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues                                      |                                                   |       | 512,456   |                        |           |          | 591,951   |          
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          
|                   |                                      |                                                     | Total mortgage-backed securities held to maturity |       |           | 1,710,538              |           |          |           | 1,907,246 |          
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          
|                   |                                      |                                                     |                                                   | Total |           | $                      | 5,412,518 |          |           | $         | 6,100,380 | 
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          
|                   |                                      | Weighted average rate                               |                                                   |       | 7.25      | %                      |           |          | 7.04      | %        
|                   |                                      |                                                     |                                                   |       |           |                        |           |          |           |           |          

14



---



##### Table of Contents



Asset Quality

Analysis of the Allowance for Loan and Lease
Losses (Figure 9)

|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |         |         |         |         |  
|----------------------------------- | -------------------------------------------------------- | ----------------- | ----------------- | ------------------------------ | ------ | ---------------------- | ------- | ---------------- | ------ | ------- | ------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | -
|                                    |                                                          |                   |                   |                                |        | Three Months Ended     |         | Six Months Ended
|                                    |                                                          |                   |                   |                                |        |                        |         |                 
|                                    |                                                          |                   |                   |                                |        | 6/30/00                |         | 6/30/99          |        | 6/30/00 |        | 6/30/99
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |        
|                                    |                                                          |                   |                   |                                |        | (Dollars in thousands)
|Allowance for loan and lease
losses
|                                    | Balance, beginning of period                             |                   | $                 | 185,267                        |        |                        | $       | 181,584          |        |         | $      | 186,400 |         |         | $       | 184,989 |        
|                                   
|                                   
|                                   
|                                   
|                                    | Provision for loan and lease losses                      |                   |                   | 11,509                         |        |                        |         | 7,843            |        |         |        | 20,107  |         |         |         | 14,613  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Loans and leases charged off:                           
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Mortgage          |                   |                                | (1,399 | )                      |         |                  | (2,648 | )       |        |         | (3,285  | )       |         |         | (3,724  | )      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Automobile        |                   |                                | (6,786 | )                      |         |                  | (6,183 | )       |        |         | (13,881 | )       |         |         | (14,309 | )      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Retail consumer   |                   |                                | (4,664 | )                      |         |                  | (445   | )       |        |         | (7,387  | )       |         |         | (1,982  | )      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Leases            |                   |                                |       |                        |         |                  |       |         |        |         |        |         |         |         | (900    | )      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Corporate banking |                   |                                | (313   | )                      |         |                  | (86    | )       |        |         | (436    | )       |         |         | (534    | )      
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    |                                                          |                   | Total charge-offs |                                |        | (13,162                | )       |                  |        | (9,362  | )      |         |         | (24,989 | )       |         |         | (21,449 | )      
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    | Recoveries:                                             
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Mortgage          |                   |                                | 315    |                        |         |                  | 508    |         |        |         | 564     |         |         |         | 762     |        
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Automobile        |                   |                                | 1,515  |                        |         |                  | 1,681  |         |        |         | 3,100   |         |         |         | 3,054   |        
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Retail consumer   |                   |                                | 564    |                        |         |                  | 77     |         |        |         | 764     |         |         |         | 266     |        
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Leases            |                   |                                |       |                        |         |                  |       |         |        |         |        |         |         |         |        |        
|                                   
|                                   
|                                   
|                                   
|                                    |                                                          | Corporate banking |                   |                                | 186    |                        |         |                  | 18     |         |        |         | 248     |         |         |         | 114     |        
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    |                                                          |                   | Total recoveries  |                                |        | 2,580                  |         |                  |        | 2,284   |        |         |         | 4,676   |         |         |         | 4,196   |        
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    |                                                          |                   |                   | Net loan and lease charge-offs |        |                        | (10,582 | )                |        |         | (7,078 | )       |         |         | (20,313 | )       |         |         | (17,253 | )
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    | Balance, end of period                                   |                   | $                 | 186,194                        |        |                        | $       | 182,349          |        |         | $      | 186,194 |         |         | $       | 182,349 |        
|                                    |                                                          |                   |                   |                                |        |                        |         |                  |        |         |        |         |         |         |         |        
|                                    | Net charge-offs to average loans and
leases (annualized) |                   |                   | .18                            | %      |                        |         | .13              | %      |         |        | .17     | %       |         |         | .15     | %      

Figure 10 sets forth information concerning nonperforming assets and additional
information on the allowance for loan and lease losses. At June 30, 2000, we
had no outstanding commitments to lend additional funds to borrowers whose
loans were on nonaccrual or restructured status.

15



---



##### Table of Contents



Nonperforming Assets (Figure 10)

|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |          |        |        |         | 
|--------------------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------- | -------------------------- | ------------------------------------------------------------ | ------ | ---------------------- | ------- | -------- | ------ | ------ | ------- | 
|                                                                |                                                          |                                          |                            |                                                              |        | 6/30/00                |         | 12/31/99
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            |                                                              |        | (Dollars in thousands)
|Nonperforming loans and leases:                                
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Nonaccrual loans and leases:                            
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Real estate mortgage loans:             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          |                                          | One-to-four family(1)      |                                                              | $      | 68,671                 |         |          | $      | 75,682 |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          |                                          | Multifamily and commercial |                                                              |        | 6,614                  |         |          |        | 3,369  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          |                                          | Construction and land      |                                                              |        | 5,074                  |         |          |        | 1,095  |        
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Total real estate mortgage loans                             |        |                        | 80,359  |          |        |        | 80,146  | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Retail consumer                          |                            |                                                              | 49,712 |                        |         |          | 39,638 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Automobile                               |                            |                                                              | 268    |                        |         |          | 482    |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Corporate banking                        |                            |                                                              | 7,836  |                        |         |          | 6,037  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Leases                                   |                            |                                                              |       |                        |         |          |       |       
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Total nonaccrual loans and leases                            |        |                        | 138,175 |          |        |        | 126,303 | 
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                | Accruing loans and leases delinquent more than 90 days: 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Real estate mortgage loans               |                            |                                                              |       |                        |         |          |       |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Retail consumer(1)                       |                            |                                                              | 1,908  |                        |         |          | 2,562  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Automobile                               |                            |                                                              | 4,275  |                        |         |          | 4,973  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Corporate banking                        |                            |                                                              | 7,286  |                        |         |          | 2,463  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Leases                                   |                            |                                                              | 2,475  |                        |         |          |       |       
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Total accruing loans and leases delinquent more than 90 days |        |                        | 15,944  |          |        |        | 9,998   | 
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          | Restructured real estate mortgage loans  |                            |                                                              | 671    |                        |         |          | 1,009  |       
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Total nonperforming loans and leases                         |        |                        | 154,790 |          |        |        | 137,310 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Real estate acquired through foreclosure and other              |                                                          |                                          | 23,065                     |                                                              |        |                        | 24,453  |         
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Total nonperforming assets                                   |        |                        | 177,855 |          |        |        | 161,763 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          |                                          |                            | Less government guaranteed loans                             |        |                        | 20,293  |          |        |        | 18,841  | 
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|                                                                |                                                          |                                          |                            | Nonperforming assets net of government guaranteed loans      |        | $                      | 157,562 |          |        | $      | 142,922 | 
|                                                                |                                                          |                                          |                            |                                                              |        |                        |         |         
|Ratio of:                                                      
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Nonperforming loans and leases to total loans and leases |                                          |                            | .66                                                          | %      |                        |         | .62      | %     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Nonperforming assets to total assets                     |                                          |                            | .55                                                          |        |                        |         | .51      |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Allowance for loan and lease losses to:                 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Nonperforming loans and leases           |                            |                                                              | 120.29 |                        |         |          | 135.75 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Total loans and leases before allowance  |                            |                                                              | .79    |                        |         |          | .83    |       
|                                                               
|                                                               
|                                                               
|                                                               
|Ratio of (excluding government guaranteed nonperforming loans):
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Nonperforming loans and leases to total loans and leases |                                          |                            | .57                                                          |        |                        |         | .53      |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Nonperforming assets to total assets                     |                                          |                            | .49                                                          |        |                        |         | .45      |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Allowance for loan and lease losses to:                 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Nonperforming loans and leases           |                            |                                                              | 138.44 |                        |         |          | 157.34 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                          | Total loans and leases before allowances |                            |                                                              | .79    | %                      |         |          | .83    | %     



---

|(1) |  | Includes government guaranteed loans.
|--- |  | -------------------------------------

At June 30, 2000, there were $72.1 million of loans and leases not reflected in
the table above, where known information about possible credit problems of
borrowers caused management to have doubts as to the ability of the borrower to
comply with present repayment terms and that may result in disclosure of such
loans and leases in the future.

16



---



##### Table of Contents



SOURCES OF FUNDS

General

Deposits have historically been the most important source of our funds for use
in lending and for general business purposes. We also derive funds from FHLB
advances, reverse repurchase agreements and other borrowings, principal
repayments on loans and mortgage-backed securities, funds provided by
operations and proceeds from the sale of loans and loan participations.

Deposits

Deposit inflows and outflows are significantly influenced by general interest
rates, market conditions and competitive factors. We reprice our deposits
primarily based on competitive conditions. In order to decrease the volatility
of our deposits, we impose stringent early withdrawal penalties on our
certificates of deposit. Consumer and commercial deposits are attracted
principally from within our primary market areas through the offering of a
broad range of deposit instruments.

Composition of Deposits (Figure
11)

|                                                                                        |                     |                     |           |           |            |          |      |                        |      |      |            |           |            |          |      |      |      | 
|--------------------------------------------------------------------------------------- | ------------------- | ------------------- | --------- | --------- | ---------- | -------- | ---- | ---------------------- | ---- | ---- | ---------- | --------- | ---------- | -------- | ---- | ---- | ---- | 
|                                                                                        |                     |                     |           | 6/30/00   |            | 12/31/99
|                                                                                        |                     |                     |           |           |            |         
|                                                                                        |                     |                     |           |           |            |          |      | Weighted               |      |      |            |           |            | Weighted
|                                                                                        |                     |                     |           |           |            |          |      | Average                |      |      |            |           |            | Average 
|                                                                                        |                     |                     |           | Amount    |            | Rate     |      | Amount                 |      | Rate
|                                                                                        |                     |                     |           |           |            |          |      |                        |      |     
|                                                                                        |                     |                     |           |           |            |          |      | (Dollars in thousands)
|Checking accounts:                                                                     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Interest-bearing    |                     | $         | 2,357,297 |            |          |      | 2.45                   | %    |      | $          | 2,066,453 |            |          |      | 2.05 | %   
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Noninterest-bearing |                     |           | 1,381,803 |            |          |      |                       |      |      |            | 1,263,290 |            |          |      |     |     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Savings accounts                                                                        |                     |                     | 1,553,565 |           |            |          | 1.54 |                        |      |      | 2,065,127  |           |            |          | 1.61 |     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Money market accounts                                                                   |                     |                     | 3,921,289 |           |            |          | 3.85 |                        |      |      | 3,170,435  |           |            |          | 3.41 |     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Certificates of deposit                                                                 |                     |                     | 9,355,003 |           |            |          | 5.57 |                        |      |      | 10,508,670 |           |            |          | 5.31 |     
|                                                                                        |                     |                     |           |           |            |          |      |                        |      |      |            |          
|                                                                                        |                     | Total deposits, net |           | $         | 18,568,957 |          |      |                        | 4.06 |      |            | $         | 19,073,975 |          |      |      | 3.89 | 
|                                                                                        |                     |                     |           |           |            |          |      |                        |      |      |            |          
|Including the annualized effect
of applicable interest rate
risk management instruments |                     |                     |           |           |            |          | 3.99 | %                      |      |      |            |           |            |          | 3.79 | %   

Investment securities and mortgage-backed securities with a book value of
$506.2 million at June 30, 2000 and $544.4 million at December 31, 1999, were
pledged to secure public deposits and for other purposes required or permitted
by law.

Borrowings

At June 30, 2000, borrowings primarily consisted of FHLB advances. These
positions were secured by our investment in the stock of the FHLB, as well as
$11.3 billion in certain real estate loans and $2.9 billion in mortgage-backed
securities.

Federal Home Loan Bank Advances
(Figure 12)

|           |                        |   |                        |            |          |  |          |      |      |   |           |           |          |  |      |      |  
|---------- | ---------------------- | - | ---------------------- | ---------- | -------- |  | -------- | ---- | ---- | - | --------- | --------- | -------- |  | ---- | ---- | -
|           |                        |   | 6/30/00                |            | 12/31/99
|           |                        |   |                        |            |         
|           |                        |   |                        |            |          |  | Weighted |      |      |   |           |           | Weighted
|           |                        |   |                        |            |          |  | Average  |      |      |   |           |           | Average 
|           |                        |   | Amount                 |            | Rate     |  | Amount   |      | Rate
|           |                        |   |                        |            |          |  |          |      |     
|           |                        |   | (Dollars in thousands)
|Short-term |                        | $ | 5,905,248              |            |          |  | 6.21     | %    |      | $ | 4,115,000 |           |          |  | 5.43 | %   
|          
|          
|          
|          
|Long-term:
|          
|          
|          
|          
|           | Fixed-rate advances    |   |                        | 3,836,909  |          |  |          | 5.18 |      |   |           | 4,512,941 |          |  |      | 5.10 |  
|          
|          
|          
|          
|           | Variable-rate advances |   |                        | 409,604    |          |  |          | 6.55 |      |   |           | 598,209   |          |  |      | 6.21 |  
|           |                        |   |                        |            |          |  |          |      |      |   |           |          
|           | Total advances, net    |   | $                      | 10,151,761 |          |  |          | 5.83 | %    |   | $         | 9,226,150 |          |  |      | 5.32 | %
|           |                        |   |                        |            |          |  |          |      |      |   |           |           |          |  |      |     

17



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##### Table of Contents



Interest Rate Risk Management

We utilize various types of interest rate contracts in managing our interest
rate risk profile. We utilize fixed receipt swaps to convert certain of our
longer term callable certificates of deposit into short-term variable
instruments. Under these agreements we have agreed to receive interest from the
counterparty on a notional amount at a fixed rate defined in the agreement, and
to pay interest at a floating rate indexed to LIBOR. We utilize fixed payment
swaps to convert certain of our floating-rate or short-term, fixed-rate
liabilities into longer term, fixed-rate instruments. Under these agreements we
have agreed to pay interest to the counterparty on a notional principal amount
at a fixed rate defined in the agreement, and receive interest at a floating
rate indexed to LIBOR. The amounts of interest exchanged are calculated on the
basis of notional principal amounts.

Interest Rate Swaps (Figure 13)

|
|
|

|                           |                      |       |  |           |           |           |  |          |      |           |  |                        |      |          |  |   |           |  |  |  |      |      |  |  |      |     
|-------------------------- | -------------------- | ----- |  | --------- | --------- | --------- |  | -------- | ---- | --------- |  | ---------------------- | ---- | -------- |  | - | --------- |  |  |  | ---- | ---- |  |  | ---- | ----
|                           |                      |       |  | 6/30/00   |           | 12/31/99 
|                           |                      |       |  |           |           |          
|                           |                      |       |  | Notional  |           | Receiving |  | Paying   |      | Notional  |  | Receiving              |      | Paying  
|                           |                      |       |  | Principal |           | Interest  |  | Interest |      | Principal |  | Interest               |      | Interest
|                           |                      |       |  | Amount    |           | Rate      |  | Rate     |      | Amount    |  | Rate                   |      | Rate    
|                           |                      |       |  |           |           |           |  |          |      |           |  |                        |      |         
|                           |                      |       |  |           |           |           |  |          |      |           |  | (Dollars in thousands)
|Fixed Payment and Variable
|                          
|                          
|                          
|                          
|                           | Receipt Maturing in:
|                          
|                          
|                          
|                          
|                           |                      | 2002  |  | $         | 25,000    |           |  |          | 6.22 | %(1)      |  |                        | 6.44 | %        |  | $ | 25,000    |  |  |  | 5.58 | %(1) |  |  | 6.44 | %   
|                           |                      |       |  |           |           |           |  |          |      |           |  |                        |      |          |  |  
|Variable Payment and Fixed
|                          
|                          
|                          
|                          
|                           | Receipt Maturing in:
|                          
|                          
|                          
|                          
|                           |                      | 2000  |  | $         | 40,000    |           |  |          | 5.55 | %         |  |                        | 6.65 | %        |  |   | 40,000    |  |  |  | 5.55 | %    |  |  | 6.16 | %   
|                          
|                          
|                          
|                          
|                           |                      | 2001  |  |           | 420,000   |           |  |          | 6.38 |           |  |                        | 6.56 |          |  |   | 420,000   |  |  |  | 6.38 |      |  |  | 6.14 |     
|                          
|                          
|                          
|                          
|                           |                      | 2002  |  |           | 310,000   |           |  |          | 7.57 |           |  |                        | 6.67 |          |  |   |          |  |  |  |     |      |  |  |     |     
|                          
|                          
|                          
|                          
|                           |                      | 2003  |  |           | 120,000   |           |  |          | 6.14 |           |  |                        | 6.64 |          |  |   | 120,000   |  |  |  | 6.14 |      |  |  | 6.14 |     
|                          
|                          
|                          
|                          
|                           |                      | 2004  |  |           | 580,000   |           |  |          | 7.01 |           |  |                        | 6.51 |          |  |   | 580,000   |  |  |  | 7.01 |      |  |  | 6.15 |     
|                          
|                          
|                          
|                          
|                           |                      | 2005  |  |           | 395,000   |           |  |          | 7.93 |           |  |                        | 6.62 |          |  |   | 25,000    |  |  |  | 7.00 |      |  |  | 5.87 |     
|                          
|                          
|                          
|                          
|                           |                      | 2006  |  |           | 40,000    |           |  |          | 7.00 |           |  |                        | 6.52 |          |  |   | 40,000    |  |  |  | 7.00 |      |  |  | 6.37 |     
|                          
|                          
|                          
|                          
|                           |                      | 2009  |  |           | 65,000    |           |  |          | 7.32 |           |  |                        | 6.59 |          |  |   | 65,000    |  |  |  | 7.32 |      |  |  | 6.16 |     
|                           |                      |       |  |           |           |           |  |          |      |           |  |                        |      |          |  |  
|                           |                      | Total |  | $         | 1,970,000 |           |  |          | 7.08 | %         |  |                        | 6.58 | %(1)     |  | $ | 1,290,000 |  |  |  | 6.69 | %    |  |  | 6.15 | %(1)
|                           |                      |       |  |           |           |           |  |          |      |           |  |                        |      |          |  |  

(1) Rates are based upon LIBOR.

Interest rate risk management instruments reduced interest expense as follows:

Net Benefit of Interest Rate Risk
Management(Figure 14)

|                           |                               |                   |   |                    |        |                  |   |                        |        |         |   |        |        |   |   |        |        |  
|-------------------------- | ----------------------------- | ----------------- | - | ------------------ | ------ | ---------------- | - | ---------------------- | ------ | ------- | - | ------ | ------ | - | - | ------ | ------ | -
|                           |                               |                   |   | Three Months Ended |        | Six Months Ended
|                           |                               |                   |   |                    |        |                 
|                           |                               |                   |   | 6/30/00            |        | 6/30/99          |   | 6/30/00                |        | 6/30/99
|                           |                               |                   |   |                    |        |                  |   |                        |        |        
|                           |                               |                   |   |                    |        |                  |   | (Dollars in thousands)
|Interest expense (income):
|                          
|                          
|                          
|                          
|                           | Deposits                      |                   | $ | (2,691             | )      |                  | $ | (2,188                 | )      |         | $ | (5,672 | )      |   | $ | (4,307 | )     
|                          
|                          
|                          
|                          
|                           | FHLB advances                 |                   |   |                   |        |                  |   |                       |        |         |   |       |        |   |   | 86     |       
|                          
|                          
|                          
|                          
|                           | Reverse repurchase agreements |                   |   |                   |        |                  |   | (114                   | )      |         |   |       |        |   |   | (236   | )     
|                          
|                          
|                          
|                          
|                           | Other borrowings              |                   |   |                   |        |                  |   | 87                     |        |         |   |       |        |   |   | 169    |       
|                           |                               |                   |   |                    |        |                  |   |                        |        |         |   |        |        |   |   |       
|                           |                               | Total net benefit |   | $                  | (2,691 | )                |   | $                      | (2,215 | )       |   | $      | (5,672 | ) |   | $      | (4,288 | )
|                           |                               |                   |   |                    |        |                  |   |                        |        |         |   |        |        |   |   |       

Liquidity

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

18



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##### Table of Contents



FHLB advances and reverse repurchase agreements. Management also considers our
interest-sensitivity profile when deciding on alternative sources of funds. At
June 30, 2000, our one-year gap was a negative 13.33% of total assets. See Item
3 Quantitative and Qualitative Disclosure About Market Risk regarding further
information on our interest rate risk profile.

We are required by regulation to maintain specific minimum levels of liquid
investments. Regulations currently in effect require us to maintain average
liquid assets at least equal to 4.0% of the sum of the average daily balance of
net withdrawable accounts and borrowed funds due in one year or less. This
regulatory requirement may be changed from time to time to reflect current
economic conditions. Charter One Banks average regulatory liquidity ratio for
the second quarter of 2000 was 4.90%.

We anticipate that we will have sufficient funds available to meet our
commitments. At June 30, 2000, we had outstanding commitments to originate loans
and leases of $1.7 billion, unfunded consumer lines of credit totaling $2.6
billion and unfunded corporate banking lines of credit totaling $141.3 million.
We do not expect all of these lines to be used by the borrowers. Outstanding
letters of credit totaled $75.6 million as of June 30, 2000.
Certificates of deposit scheduled to mature in one year or less at June 30, 2000
totaled $7.8 billion. We believe that a significant portion of the amounts
maturing will remain with us because they are retail deposits. We believe we
have significant borrowing capacity with the FHLB and investment banking firms
to meet any need for additional borrowings and sources of funds.

Capital and Dividends

On October 20, 1999, our Board of Directors authorized a buyback to repurchase
up to 3.3 million shares of Charter One common stock in a program of open market
or privately negotiated purchases. As of March 31, 2000, we had purchased all of
the shares authorized under this buyback for a total cost of $68.6 million. The
repurchased shares are reserved in treasury for later reissue in connection with
employee benefit plans.

On April 26, 2000, our Board of Directors authorized a new buyback to repurchase
up to 7.5 million shares of Charter One common stock in a program of open market
purchases or privately negotiated transactions. The repurchased shares will be
reserved in treasury for later reissue in connection with future stock dividends
as well as employee benefit plans. As of June 30, 2000, we had purchased all of
the shares authorized under this buyback for a total cost of $170.7 million.

On July 18, 2000, the Board of Directors of Charter One authorized management to
repurchase up to 10% of the Companys outstanding common stock in a buyback
program. The repurchased shares will be reserved in treasury for later reissue
in connection with future stock dividends as well as employee benefit plans. As
of August 4, 2000, we had purchased 2,854,400 shares authorized under this
buyback for a total cost of $62.5 million.

As a financial holding company, Charter One is subject to regulation by the
Federal Reserve Board (FRB) under the Bank Holding Company Act of 1956 as
amended, and the regulations of the FRB, including various capital requirements.
Charter One Commercial and Charter One Bank, F.S.B. are subject to various
regulatory capital requirements administered by the Federal Deposit Insurance
Corporation and the Office of Thrift Supervision (OTS), respectively. Failure
to meet minimum capital requirements can initiate certain mandatory, and
possibly discretionary, actions by each regulator that, if undertaken, could
have a direct material effect on our financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
specific capital guidelines must be met that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices.

Quantitative measures established by regulation to ensure capital adequacy
require Charter One and Charter One Commercial to individually maintain minimum
amounts and ratios (set forth in the table below) of total and Tier 1 capital to
risk-weighted assets, and of Tier 1 capital to average assets. Charter One Bank,
F.S.B. is required to maintain minimum amounts and ratios (also set forth in the
table below) of total and Tier 1 capital to risk-weighted assets, of core
capital to adjusted tangible assets, and of tangible capital to tangible assets.

Each regulator of Charter One requires the institution to meet specific capital
adequacy guidelines and the regulatory framework for prompt corrective action
that involve quantitative measures of an institutions 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,

19



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##### Table of Contents



and other factors.

The actual regulatory capital ratios calculated for Charter One, Charter One
Commercial and Charter One Bank, F.S.B., along with the capital amounts and
ratios for capital adequacy purposes and the amounts required to be categorized
as well capitalized under the regulatory framework for prompt corrective action
are as follows:

Regulatory Capital (Figure 15)

|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                         |  |  |       |   |  |                          |           |  |  |  |        |  
|------------------------- | ---------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ----------------- | ----- | ----- |  | ----------- | --------- | ----------------------- |  |  | ----- | - |  | ------------------------ | --------- |  |  |  | ------ | -
|                          |                                          |  | 6/30/00               
|                          |                                          |  |                       
|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                         |  |  |       |   |  | To Be
Well Capitalized
|                          |                                          |  |                        |           |                   |  |                   |       |       |  | For Capital |           | Under Prompt Corrective
|                          |                                          |  | Actual                 |           | Adequacy Purposes |  | Action Provisions
|                          |                                          |  |                        |           |                   |  |                  
|                          |                                          |  | Amount                 |           | Ratio             |  | Amount            |       | Ratio |  | Amount      |           | Ratio                  
|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                        
|                          |                                          |  | (Dollars in thousands)
|Charter One:             
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  | $                      | 2,392,320 |                   |  |                   | 10.23 | %     |  | $           | 1,870,205 |                         |  |  | >8.00 | % |  | $                        | 2,337,756 |  |  |  | >10.00 | %
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |                        | 2,203,264 |                   |  |                   | 9.42  |       |  |             | 935,103   |                         |  |  | >4.00 |   |  |                          | 1,402,654 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to average assets         |  |                        | 2,203,264 |                   |  |                   | 7.10  |       |  |             | 1,240,594 |                         |  |  | >4.00 |   |  |                          | 1,550,742 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Commercial:  
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |                        | 42,614    |                   |  |                   | 46.96 |       |  |             | 7,259     |                         |  |  | >8.00 |   |  |                          | 9,074     |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to risk-weighted assets   |  |                        | 42,614    |                   |  |                   | 46.96 |       |  |             | 3,630     |                         |  |  | >4.00 |   |  |                          | 5,445     |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to average assets         |  |                        | 42,614    |                   |  |                   | 12.67 |       |  |             | 13,449    |                         |  |  | >4.00 |   |  |                          | 16,812    |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Bank, F.S.B.:
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |                        | 2,317,316 |                   |  |                   | 10.38 |       |  |             | 1,785,514 |                         |  |  | >8.00 |   |  |                          | 2,231,893 |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to risk-weighted assets   |  |                        | 1,814,089 |                   |  |                   | 8.13  |       |  |             | N/A       |                         |  |  | N/A   |   |  |                          | 1,339,136 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Core capital to adjusted tangible assets |  |                        | 1,832,567 |                   |  |                   | 5.72  |       |  |             | 1,281,917 |                         |  |  | >4.00 |   |  |                          | 1,602,396 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|                          | Tangible capital to tangible assets      |  |                        | 1,831,897 |                   |  |                   | 5.72  |       |  |             | 480,709   |                         |  |  | >1.50 |   |  |                          | N/A       |  |  |  | N/A    |  

|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                         |  |  |       |   |  |                          |           |  |  |  |        |  
|------------------------- | ---------------------------------------- |  | ---------------------- | --------- | ----------------- |  | ----------------- | ----- | ----- |  | ----------- | --------- | ----------------------- |  |  | ----- | - |  | ------------------------ | --------- |  |  |  | ------ | -
|                          |                                          |  | 12/31/99              
|                          |                                          |  |                       
|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                         |  |  |       |   |  | To Be
Well Capitalized
|                          |                                          |  |                        |           |                   |  |                   |       |       |  | For Capital |           | Under Prompt Corrective
|                          |                                          |  | Actual                 |           | Adequacy Purposes |  | Action Provisions
|                          |                                          |  |                        |           |                   |  |                  
|                          |                                          |  | Amount                 |           | Ratio             |  | Amount            |       | Ratio |  | Amount      |           | Ratio                  
|                          |                                          |  |                        |           |                   |  |                   |       |       |  |             |           |                        
|                          |                                          |  | (Dollars in thousands)
|Charter One:             
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  | $                      | 2,404,336 |                   |  |                   | 11.16 | %     |  | $           | 1,722,825 |                         |  |  | >8.00 | % |  | $                        | 2,153,532 |  |  |  | >10.00 | %
|                         
|                         
|                         
|                         
|                          | Tier I capital to risk-weighted assets   |  |                        | 2,213,534 |                   |  |                   | 10.28 |       |  |             | 861,413   |                         |  |  | >4.00 |   |  |                          | 1,292,119 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to average assets         |  |                        | 2,213,534 |                   |  |                   | 7.05  |       |  |             | 1,255,645 |                         |  |  | >4.00 |   |  |                          | 1,569,567 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Commercial:  
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |                        | 41,337    |                   |  |                   | 40.92 |       |  |             | 8,081     |                         |  |  | >8.00 |   |  |                          | 10,101    |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to risk-weighted assets   |  |                        | 41,337    |                   |  |                   | 40.92 |       |  |             | 4,040     |                         |  |  | >4.00 |   |  |                          | 6,061     |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to average assets         |  |                        | 41,337    |                   |  |                   | 13.66 |       |  |             | 12,104    |                         |  |  | >4.00 |   |  |                          | 15,129    |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Bank, F.S.B.:
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |                        | 2,115,163 |                   |  |                   | 10.00 |       |  |             | 1,691,462 |                         |  |  | >8.00 |   |  |                          | 2,114,327 |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier I capital to risk-weighted assets   |  |                        | 1,605,506 |                   |  |                   | 7.59  |       |  |             | N/A       |                         |  |  | N/A   |   |  |                          | 1,268,596 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Core capital to adjusted tangible assets |  |                        | 1,619,927 |                   |  |                   | 5.10  |       |  |             | 1,270,858 |                         |  |  | >4.00 |   |  |                          | 1,588,572 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|                          | Tangible capital to tangible assets      |  |                        | 1,618,856 |                   |  |                   | 5.10  |       |  |             | 476,566   |                         |  |  | >1.50 |   |  |                          | N/A       |  |  |  | N/A    |  

As of December 31, 1999, the most recent notification from the OTS categorized
Charter One Bank, F.S.B. as well capitalized under the regulatory framework
for Prompt Corrective Action. As of December 31, 1999, the most recent
notification from the FRB categorized Charter One as well capitalized under
the regulatory framework for Prompt Corrective Action. To be categorized as
well capitalized, Charter One and Charter One Bank, F.S.B. must maintain
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the table above. There are no conditions or events since that
notification that have changed Charter Ones or Charter One Bank, F.S.B.s
respective category. Charter One Commercials capital ratios exceed the minimum
required to be well capitalized. Management does not know of any reasons why
Charter One Commercial would not be considered well capitalized; however, as of
June 30, 2000, Charter One Commercial had not received a classification from
its respective regulator.

20



---



##### Table of Contents



Management believes that, as of June 30, 2000, Charter One, Charter One
Commercial and Charter One Bank, F.S.B., individually met all capital adequacy
requirements to which they were subject. Events beyond managements control,
such as fluctuations in interest rates or a downturn in the economy in areas in
which the institutions loans and securities are concentrated could adversely
affect future earnings and, consequently, the institutions ability to meet its
future capital requirements.

Quarterly Stock Prices and Dividends(Figure 16)

|                              |       |  |                    |       |         |  |          |       |         |  |         |       |  |  |     |       |  |  |     |       | 
|----------------------------- | ----- |  | ------------------ | ----- | ------- |  | -------- | ----- | ------- |  | ------- | ----- |  |  | --- | ----- |  |  | --- | ----- | 
|                              |       |  | Three Months Ended
|                              |       |  |                   
|                              |       |  | 6/30/00            |       | 3/31/00 |  | 12/31/99 |       | 9/30/99 |  | 6/30/99
|                              |       |  |                    |       |         |  |          |       |         |  |        
|Market price of common stock:
|                             
|                             
|                             
|                             
|                              | High  |  | $                  | 27.00 |         |  | $        | 21.00 |         |  | $       | 26.44 |  |  | $   | 26.91 |  |  | $   | 30.60 | 
|                             
|                             
|                             
|                             
|                              | Low   |  |                    | 18.13 |         |  |          | 15.25 |         |  |         | 17.50 |  |  |     | 21.08 |  |  |     | 25.18 | 
|                             
|                             
|                             
|                             
|                              | Close |  |                    | 23.00 |         |  |          | 21.00 |         |  |         | 19.13 |  |  |     | 23.13 |  |  |     | 26.49 | 
|                             
|                             
|                             
|                             
|Dividends declared and paid   |       |  | .18                |       |         |  | .16      |       |         |  | .16     |       |  |  | .16 |       |  |  | .15 |      




ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in our December 31, 1999 Form 10-K. The assumptions used in our model
have been updated as of June 30, 2000. 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
|               |                    |                             |  |          
|Base Case     
|              
|              
|              
|              
|               | +200 Over one year |                             |  | (11.78    | )% |  |  | (15.64 | )%
|              
|              
|              
|              
|               | +100 Over one year |                             |  | (5.89     | )  |  |  | (7.61  | ) 
|              
|              
|              
|              
|               | -100 Over one year |                             |  | 5.62      |    |  |  | 7.11   |   
|              
|              
|              
|              
|               | -200 Over one year |                             |  | 10.22     |    |  |  | 12.07  |   

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.




PART II  OTHER INFORMATION




ITEM 5. Other Information

Cash Dividend

On July 18, 2000, the Board of Directors of Charter One declared a regular
quarterly cash dividend of 18 cents per common share. The dividend is payable
August 21, 2000 to shareholders of record as of August 7, 2000.

Stock Dividend

On July 18, 2000, the Board of Directors of Charter One declared a 5% stock
dividend which will be distributed September 30, 2000 to shareholders of record
on September 14, 2000.

Share Repurchase

On July 18, 2000, the Board of Directors of Charter One authorized management to
repurchase up to 10% of the Companys outstanding common stock in a buyback
program. The repurchased shares will be reserved in treasury for later reissue
in connection with future stock dividends as well as employee benefit plans.

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##### Table of Contents






ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibit 11  Computation of Per Share Earnings

Exhibit 27  Financial Data Schedule

(b) Reports on Form 8-K  None




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 9, 2000 |  | /s/ Richard W. Neu                                  
|                     |  |                                                     
|                     |  | Richard W. Neu                                      
|                    
|                    
|                    
|                    
|                     |  | Executive Vice President and Chief Financial Officer
|                    
|                    
|                    
|                    
|                     |  | (Duly Authorized Officer and Principal              
|                    
|                    
|                    
|                    
|                     |  | Financial Officer)                                  

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