TABLE OF CONTENTS




|                                                                                              |                                                |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  |  | 
|ITEM 1. Financial Statements                                                                 
|                                                                                              | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|                                                                                              | CONSOLIDATED STATEMENTS OF INCOME             
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
|ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|ITEM 3. Quantitative and Qualitative Disclosure About Market Risk                            
|ITEM 5. Other Information                                                                    
|ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|Exhibit 11 - Computations for Per Share Earnings                                             



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##### Table of Contents



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

_____________________

FORM 10-Q

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

For the quarterly period ended March 31, 2001

OR

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

Commission file number 001-15495



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


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



(216) 566-5300




NOT APPLICABLE


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 May 2, 2001 was 206,721,563.





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##### Table of Contents



TABLE OF CONTENTS

|           |  |                                                                                       |                      |                               |    |                                                                                       |  |  |   | 
|---------- |  | ------------------------------------------------------------------------------------- | -------------------- | ----------------------------- | -- | ------------------------------------------------------------------------------------- |  |  | - | 
|Item      
|Number     |  |                                                                                       |                      | Page                         
|           |  |                                                                                       |                      |                              
|           |  |                                                                                       |                      | PART I  FINANCIAL STATEMENTS
|          
|          
|          
|          
|          
|1.         |  |                                                                                       | Financial Statements
|          
|          
|          
|          
|           |  |                                                                                       |                      |                               |    | Consolidated Statements of Financial Condition 
March 31, 2001 and December 31, 2000 |  |  | 1 | 
|          
|          
|          
|          
|           |  |                                                                                       |                      |                               |    | Consolidated Statements of Income 
Three months ended March 31, 2001 and 2000        |  |  | 2 | 
|          
|          
|          
|          
|           |  |                                                                                       |                      |                               |    | Consolidated Statements of Cash Flows 
Three months ended March 31, 2001 and 2000    |  |  | 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                             |                      |                               | 17 |                                                                                      
|          
|          
|          
|          
|          
|           |  |                                                                                       |                      |                               |    | PART II  OTHER INFORMATION                                                          
|          
|          
|          
|          
|          
|5.         |  | Other Information                                                                     |                      |                               | 17 |                                                                                      
|          
|          
|          
|          
|6.         |  | Exhibits and Reports on Form 8-K                                                      |                      |                               | 17 |                                                                                      
|          
|          
|          
|          
|Signatures |  |                                                                                       | 17                   |                              





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##### Table of Contents



PART I  FINANCIAL INFORMATION




ITEM 1. Financial Statements




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

|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |            |            |            | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | --------- | ---------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                                                      |                                                                                                                   |                                 |                                            |           | 3/31/01                |            | 12/31/00  
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |           
|                                                      |                                                                                                                   |                                 |                                            |           | (Dollars in thousands,
|                                                      |                                                                                                                   |                                 |                                            |           | except per share data)
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and deposits with banks                          |                                                                                                                   | $                               | 537,754                                    |           |                        | $          | 530,771    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal funds sold and other                          |                                                                                                                   |                                 | 35,494                                     |           |                        |            | 486        |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   | Total cash and cash equivalents |                                            |           | 573,248                |            |            |            | 531,257    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Investments securities:                              
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale                                                                                                |                                 |                                            | 113,242   |                        |            |            | 426,701    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $7,680 and $22,671)                                                               |                                 |                                            | 7,469     |                        |            |            | 22,514     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Mortgage-backed securities:                          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Available for sale                                                                                                |                                 |                                            | 5,385,106 |                        |            |            | 4,087,196  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Held to maturity (fair value of $1,449,207 and $1,531,525)                                                        |                                 |                                            | 1,415,280 |                        |            |            | 1,506,175  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans and leases, net                                 |                                                                                                                   |                                 | 23,807,368                                 |           |                        |            | 23,950,172 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loans held for sale                                   |                                                                                                                   |                                 | 157,762                                    |           |                        |            | 58,002     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Bank owned life insurance                             |                                                                                                                   |                                 | 753,323                                    |           |                        |            | 743,509    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank stock                          |                                                                                                                   |                                 | 577,135                                    |           |                        |            | 568,377    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Premises and equipment                                |                                                                                                                   |                                 | 331,459                                    |           |                        |            | 323,911    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest receivable                           |                                                                                                                   |                                 | 159,103                                    |           |                        |            | 165,990    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Real estate and other collateral owned                |                                                                                                                   |                                 | 36,573                                     |           |                        |            | 27,731     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Loan servicing assets                                 |                                                                                                                   |                                 | 127,301                                    |           |                        |            | 121,735    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill                                              |                                                                                                                   |                                 | 168,319                                    |           |                        |            | 172,411    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                                                                                   |                                 | 218,973                                    |           |                        |            | 265,746    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   | Total assets                    |                                            | $         | 33,831,661             |            |            | $          | 32,971,427 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|LIABILITIES AND SHAREHOLDERS EQUITY                 
|                                                     
|                                                     
|                                                     
|                                                     
|Deposits:                                            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Checking accounts                                                                                                 |                                 | $                                          | 4,365,660 |                        |            | $          | 3,941,912  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Money market accounts and savings accounts                                                                        |                                 |                                            | 6,220,615 |                        |            |            | 5,486,158  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Certificates of deposit                                                                                           |                                 |                                            | 9,834,765 |                        |            |            | 10,177,601 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total deposits                             |           |                        | 20,421,040 |            |            |            | 19,605,671 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Federal Home Loan Bank advances                       |                                                                                                                   |                                 | 9,635,622                                  |           |                        |            | 9,636,277  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Reverse repurchase agreements                         |                                                                                                                   |                                 | 56,472                                     |           |                        |            | 262,326    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other borrowings                                      |                                                                                                                   |                                 | 289,010                                    |           |                        |            | 284,808    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                 | 50,306                                     |           |                        |            | 60,761     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued interest payable                              |                                                                                                                   |                                 | 91,849                                     |           |                        |            | 54,499     |           
|                                                     
|                                                     
|                                                     
|                                                     
|Accrued expenses and other liabilities                |                                                                                                                   |                                 | 742,738                                    |           |                        |            | 610,881    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total liabilities                          |           |                        | 31,287,037 |            |            |            | 30,515,223 | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|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; 212,681,891 and 212,684,698 shares issued |                                 |                                            | 2,127     |                        |            |            | 2,127      |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Additional paid-in capital                                                                                        |                                 |                                            | 1,747,775 |                        |            |            | 1,745,232  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Retained earnings                                                                                                 |                                 |                                            | 850,961   |                        |            |            | 786,793    |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Less 4,667,371 and 4,456,293 shares of common stock held in treasury at cost                                      |                                 |                                            | (110,821  | )                      |            |            | (100,545   | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Borrowings of employee investment and stock ownership plan                                                        |                                 |                                            | (942      | )                      |            |            | (1,256     | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated other comprehensive income                                                                            |                                 |                                            | 55,524    |                        |            |            | 23,853     |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total shareholders equity                 |           |                        | 2,544,624  |            |            |            | 2,456,204  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total liabilities and shareholders equity |           | $                      | 33,831,661 |            |            | $          | 32,971,427 | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           

See Notes to Consolidated Financial Statements

1



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##### Table of Contents






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

|                                      |                                    |                                                               |         |                        |         |         |         |             |         | 
|------------------------------------- | ---------------------------------- | ------------------------------------------------------------- | ------- | ---------------------- | ------- | ------- | ------- | ----------- | ------- | 
|                                      |                                    |                                                               |         | Three Months Ended    
|                                      |                                    |                                                               |         |                       
|                                      |                                    |                                                               |         | 3/31/01                |         | 3/31/00
|                                      |                                    |                                                               |         |                        |         |        
|                                      |                                    |                                                               |         | (Dollars in thousands,
|                                      |                                    |                                                               |         | except per share data)
|Interest income:                     
|                                     
|                                     
|                                     
|                                     
|                                      | Loans and leases                   |                                                               | $       | 466,667                |         |         | $       | 428,110     |        
|                                     
|                                     
|                                     
|                                     
|                                      | Mortgage-backed securities:       
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Available for sale                                            |         |                        | 82,724  |         |         |             | 55,474  | 
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Held to maturity                                              |         |                        | 26,287  |         |         |             | 32,354  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Investment securities:            
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Trading                                                       |         |                        |        |         |         |             | 38      | 
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Available for sale                                            |         |                        | 2,836   |         |         |             | 9,011   | 
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Held to maturity                                              |         |                        | 145     |         |         |             | 424     | 
|                                     
|                                     
|                                     
|                                     
|                                      | Other interest-earning assets      |                                                               |         | 10,617                 |         |         |         | 8,659       |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Total interest income                                         |         |                        | 589,276 |         |         |             | 534,070 | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Interest expense:                    
|                                     
|                                     
|                                     
|                                     
|                                      | Deposits                           |                                                               |         | 214,457                |         |         |         | 180,255     |        
|                                     
|                                     
|                                     
|                                     
|                                      | FHLB advances                      |                                                               |         | 135,747                |         |         |         | 113,699     |        
|                                     
|                                     
|                                     
|                                     
|                                      | Other borrowings                   |                                                               |         | 9,591                  |         |         |         | 7,113       |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Total interest expense                                        |         |                        | 359,795 |         |         |             | 301,067 | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Net interest income                                           |         |                        | 229,481 |         |         |             | 233,003 | 
|                                     
|                                     
|                                     
|                                     
|Provision for loan and lease losses   |                                    |                                                               | 17,728  |                        |         |         | 8,598   |            
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Net interest income after provision for loan and lease losses |         |                        | 211,753 |         |         |             | 224,405 | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Other income:                        
|                                     
|                                     
|                                     
|                                     
|                                      | Retail banking                     |                                                               |         | 67,369                 |         |         |         | 51,738      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Mortgage banking                   |                                                               |         | 9,480                  |         |         |         | 13,715      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Leasing operations                 |                                                               |         | 1,207                  |         |         |         | 1,598       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net gains                          |                                                               |         | 16,094                 |         |         |         | 3,547       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Other                              |                                                               |         | 9,849                  |         |         |         | 12,020      |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Total other income                                            |         |                        | 103,999 |         |         |             | 82,618  | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Administrative expenses:             
|                                     
|                                     
|                                     
|                                     
|                                      | Compensation and employee benefits |                                                               |         | 68,099                 |         |         |         | 70,264      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net occupancy and equipment        |                                                               |         | 26,861                 |         |         |         | 24,564      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Federal deposit insurance premiums |                                                               |         | 916                    |         |         |         | 1,005       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Merger expenses                    |                                                               |         |                       |         |         |         | 3,258       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Amortization of goodwill           |                                                               |         | 4,039                  |         |         |         | 4,044       |        
|                                     
|                                     
|                                     
|                                     
|                                      | Other administrative expenses      |                                                               |         | 47,671                 |         |         |         | 39,593      |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Total administrative expenses                                 |         |                        | 147,586 |         |         |             | 142,728 | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Income before income taxes            |                                    |                                                               | 168,166 |                        |         |         | 164,295 |            
|                                     
|                                     
|                                     
|                                     
|Income taxes                          |                                    |                                                               | 53,376  |                        |         |         | 52,586  |            
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      |                                    | Net income                                                    |         | $                      | 114,790 |         |         | $           | 111,709 | 
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Basic earnings per share(1)           |                                    | $                                                             | .55     |                        |         | $       | .51     |            
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Diluted earnings per share(1)         |                                    | $                                                             | .54     |                        |         | $       | .50     |            
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Average common shares outstanding(1):
|                                     
|                                     
|                                     
|                                     
|                                      | Basic                              |                                                               |         | 208,427,813            |         |         |         | 219,896,363 |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|                                      | Diluted                            |                                                               |         | 213,565,740            |         |         |         | 222,687,956 |        
|                                      |                                    |                                                               |         |                        |         |         |         |            
|Cash dividends declared per share(1)  |                                    | $                                                             | .18     |                        |         | $       | .15     |            
|                                      |                                    |                                                               |         |                        |         |         |         |            



---

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

See Notes to Consolidated Financial Statements

2



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##### Table of Contents






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

|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |          |            |         | 
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | --------------------------------------------------- | ---------- | ---------------------- | -------- | -------- | -------- | ---------- | ------- | 
|                                                     |                                                                                   |                                                                                                  |                                                     |            | Three Months Ended    
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                       
|                                                     |                                                                                   |                                                                                                  |                                                     |            | 3/31/01                |          | 3/31/00 
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |         
|                                                     |                                                                                   |                                                                                                  |                                                     |            | (Dollars in thousands)
|Cash flows from operating activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                        |                                                                                                  | $                                                   | 114,790    |                        |          | $        | 111,709  |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to net cash provided by
operating activities:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Provision for loan and lease losses                                                              |                                                     |            | 17,728                 |          |          |          | 8,598      |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Net gains                                                                                        |                                                     |            | (13,854                | )        |          |          | (3,531     | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Accretion of discounts, amortization of premiums, amortization of
goodwill and depreciation, net |                                                     |            | 22,184                 |          |          |          | 21,328     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Origination of loans held for sale                                                               |                                                     |            | (293,094               | )        |          |          | (88,462    | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Proceeds from sale of loans held for sale                                                        |                                                     |            | 290,773                |          |          |          | 88,467     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Proceeds from investment securities held for trading                                             |                                                     |            |                       |          |          |          | 13,418     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Increase (decrease) in accrued interest payable                                                  |                                                     |            | 37,350                 |          |          |          | (19,828    | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Other                                                                                            |                                                     |            | 160,967                |          |          |          | (31,631    | )      
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|                                                     |                                                                                   |                                                                                                  | Net cash provided by operating activities           |            |                        | 336,844  |          |          |            | 100,068 | 
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|Cash flows from investing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net principal disbursed on loans and leases                                       |                                                                                                  |                                                     | (1,393,170 | )                      |          |          | (921,630 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from principal repayments and maturities of:                            
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Mortgage-backed securities held to maturity                                                      |                                                     |            | 90,980                 |          |          |          | 92,807     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            | 132,613                |          |          |          | 69,522     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Investment securities held to maturity                                                           |                                                     |            | 15,305                 |          |          |          | 908        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Investment securities available for sale                                                         |                                                     |            | 313,053                |          |          |          | 32,265     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale of:                                                           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            | 549,986                |          |          |          | 1,695,204  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Investment securities available for sale                                                         |                                                     |            | 5,104                  |          |          |          | 29         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Federal Home Loan Bank stock                                                                     |                                                     |            | 735                    |          |          |          | 11,750     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of:                                                                     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Mortgage-backed securities available for sale                                                    |                                                     |            | (500,000               | )        |          |          |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Investment securities available for sale                                                         |                                                     |            | (79                    | )        |          |          | (10,671    | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Loans                                                                                            |                                                     |            | (7,896                 | )        |          |          | (3,764     | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Loan servicing assets, including those originated                                                |                                                     |            | (10,524                | )        |          |          | (110       | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Other                                                                                            |                                                     |            | (35,890                | )        |          |          | (14,851    | )      
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|                                                     |                                                                                   |                                                                                                  | Net cash provided by (used in) investing activities |            |                        | (839,783 | )        |          |            | 951,459 | 
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|Cash flows from financing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net decrease in short-term borrowings                                             |                                                                                                  |                                                     | (305,855   | )                      |          |          | (335,603 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from long-term borrowings                                                |                                                                                                  |                                                     | 508,579    |                        |          |          | 51,959   |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of long-term borrowings                                                |                                                                                                  |                                                     | (404,388   | )                      |          |          | (879,019 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Increase (decrease) in deposits                                                   |                                                                                                  |                                                     | 815,404    |                        |          |          | (76,549  | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Decrease in advance payments by borrowers for taxes and
insurance                 |                                                                                                  |                                                     | (10,455    | )                      |          |          | (6,603   | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payment of dividends on common stock                                              |                                                                                                  |                                                     | (37,422    | )                      |          |          | (33,511  | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of common stock                                            |                                                                                                  |                                                     | 14,698     |                        |          |          | 3,503    |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of treasury stock                                                        |                                                                                                  |                                                     | (35,631    | )                      |          |          | (3,094   | )         
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|                                                     |                                                                                   | Net cash provided by (used in) financing activities                                              |                                                     |            | 544,930                |          |          |          | (1,278,917 | )      
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                                                                  | 41,991                                              |            |                        |          | (227,390 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of the period   |                                                                                   |                                                                                                  | 531,257                                             |            |                        |          | 693,532  |         
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|Cash and cash equivalents, end of period             |                                                                                   | $                                                                                                | 573,248                                             |            |                        | $        | 466,142  |         
|                                                     |                                                                                   |                                                                                                  |                                                     |            |                        |          |          |         
|Supplemental disclosure of cash flow information:   
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid for interest on deposits and borrowings                                 |                                                                                                  | $                                                   | 506,178    |                        |          | $        | 321,064  |           
|                                                    
|                                                    
|                                                    
|                                                    
|Supplemental schedule of noncash activities:        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loans exchanged for mortgage-backed securities                                    |                                                                                                  |                                                     | 1,422,334  |                        |          |          |         |           

See Notes to Consolidated Financial Statements

3



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##### Table of Contents






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

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. |  | These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Charter One Financial, Inc. (the Company or Charter
One) Annual Report on Form 10-K for the year ended December 31, 2000.
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 January 23, 2001, Charter One and Alliance Bancorp (Alliance), the
holding company of Liberty Federal Bank in Hinsdale, Illinois, announced
that they executed a definitive agreement for Charter One to acquire
Alliance. At March 31, 2001, Alliance had assets of $2.0 billion,
deposits of $1.3 billion and operated 19 branch offices in the
metropolitan Chicago area. The agreement provides for common shareholders
of Alliance to receive $5.25 in cash and 0.72 shares of Charter One common
stock for each Alliance share. It is expected that approximately 6.7
million shares of Charter One common stock will be issued in conjunction
with the merger. It is also expected that all outstanding Alliance
options will be exchanged for the equivalent Charter One options. This
results in an initial transaction value of approximately $272.4 million.
The merger, which will be treated as a tax-free reorganization under
Section 368 of the Internal Revenue Code and accounted for as a purchase,
is expected to close early in the third quarter of 2001. The transaction
has been approved by the Boards of Directors of both companies and is
subject to approval by the Office of Thrift Supervision, the Federal
Reserve Board, and Alliances shareholders.                                                                                                                                                                                                                                                                                                                            
|  
|  
|  
|  
|  
|3. |  | Charter One has one operating segment, consumer banking, which offers a
wide array of products and services to its customers. Pursuant to its
consumer banking strategy, emphasis is placed on building relationships
with its customers, as opposed to building specific lines of business. As
a result, Charter One prefers to work as an integrated unit to customize
solutions for its customers, with business line emphasis and product
offerings changing over time as needs and demands change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|  
|  
|  
|  
|4. |  | Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended, which requires that all
derivative instruments be reported on the statement of financial condition
at fair value and establishes criteria for designation and effectiveness
of hedging relationships. The cumulative effect of adopting SFAS No. 133
was not material to the Companys consolidated financial statements.
Management does not anticipate that SFAS No. 133 will significantly
increase the volatility of earnings or shareholders equity reported in
future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|  
|  
|  
|  
|5. |  | In September 2000, the FASB issued SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, a replacement of FASB Statement No. 125. SFAS No. 140
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are
based on consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities
when extinguished. SFAS No. 140 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. In addition to replacing SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, SFAS No. 140 rescinds SFAS No. 127
Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March
31, 2001. SFAS No. 140 is to be applied prospectively with certain
exceptions. Other than those exceptions, earlier or retroactive
application of its accounting provisions is not permitted. SFAS No. 140
is not expected to have a material impact on the Companys financial
condition or results of operations.
|  
|  
|  
|  
|  
|6. |  | Certain items in the consolidated financial statements for 2000 have been
reclassified to conform to the 2001 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. 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 March
31, 2001, the Bank and its subsidiaries were doing business through 423
full-service branches and 32 loan production offices.

Forward-Looking Statements

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

The important factors we discuss below, as well as other factors discussed
elsewhere in this document and factors identified in our filings with the
Securities and Exchange Commission and those presented elsewhere by our
management from time to time, could cause actual results to differ materially
from those indicated by the forward-looking statements made in this document.

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



| |  | the strength of the United States economy in general and the strength of the local economies in which we conduct our
operations; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting
in, among other things, a deterioration in the credit quality of our loan assets;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the
Federal Reserve Board;                                                                                                                                                                                   
| 
| |  | inflation, interest rate, market and monetary fluctuations;                                                                                                                                                                                                                                                                    
| 
| |  | the timely development of and acceptance of new products and services of Charter One and its subsidiaries and the perceived
overall value of these products and services by users, including the features, pricing and quality compared to competitors
products and services;                                                 
| 
| |  | the willingness of users to substitute competitors products and services for our products and services;                                                                                                                                                                                                                       
| 
| |  | our success in gaining regulatory approval of our products and services, when required;                                                                                                                                                                                                                                        
| 
| |  | the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and
insurance); legislative or regulatory changes may adversely affect the business in which we are engaged;                                                                                            

5



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##### Table of Contents





| |  | the impact of technological changes;                        
|- |  | ------------------------------------------------------------
| 
| |  | acquisitions;                                               
| 
| |  | changes in consumer spending and saving habits; and         
| 
| |  | our success at managing the risks involved in the foregoing.

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

RESULTS OF OPERATIONS

Performance Overview

Charter One reported net income of $114.8 million, or $.54 per diluted share,
for the three months ended March 31, 2001, compared to net income of $111.7
million, or $.50 per diluted share, for the three months ended March 31, 2000.
Our net income resulted in a return on average equity of 18.29% and a return on
average assets of 1.38% for the three months ended March 31, 2001. The
comparable returns for the first quarter of 2000 were 18.25% and 1.45%,
respectively.

Figure 1 sets forth financial results and annualized performance ratios for the
three months ended March 31, 2001 and 2000, respectively. The table reflects
these financial results and ratios on both an actual and operating return
basis. Operating earnings and returns are computed using net income excluding
the after-tax impact of merger-related charges for the three months ended March
31, 2000. Per share data has been restated to reflect the 5% stock dividend
issued September 30, 2000.

Selected Financial Results and Ratios(Figure 1)

|           |                                                |  |                        |         |         |  |   |         |  
|---------- | ---------------------------------------------- |  | ---------------------- | ------- | ------- |  | - | ------- | -
|           |                                                |  | Three Months Ended    
|           |                                                |  |                       
|           |                                                |  | 3/31/01                |         | 3/31/00
|           |                                                |  |                        |         |        
|           |                                                |  | (Dollars in thousands,
|           |                                                |  | except per share data)
|Actual:   
|          
|          
|          
|          
|           | Net income                                     |  | $                      | 114,790 |         |  | $ | 111,709 |  
|          
|          
|          
|          
|           | Diluted earnings per share                     |  |                        | .54     |         |  |   | .50     |  
|          
|          
|          
|          
|           | Return on average assets                       |  |                        | 1.38    | %       |  |   | 1.45    | %
|          
|          
|          
|          
|           | Return on average equity                       |  |                        | 18.29   |         |  |   | 18.25   |  
|          
|          
|          
|          
|           | Average equity to average assets               |  |                        | 7.52    |         |  |   | 7.93    |  
|          
|          
|          
|          
|           | Net interest income to administrative expenses |  |                        | 1.55    | x       |  |   | 1.63    | x
|          
|          
|          
|          
|           | Administrative expenses to average assets      |  |                        | 1.77    | %       |  |   | 1.85    | %
|          
|          
|          
|          
|           | Efficiency ratio                               |  |                        | 43.05   |         |  |   | 44.44   |  
|          
|          
|          
|          
|Operating:
|          
|          
|          
|          
|           | Operating earnings                             |  | $                      | 114,790 |         |  | $ | 113,827 |  
|          
|          
|          
|          
|           | Operating earnings per share                   |  |                        | .54     |         |  |   | .51     |  
|          
|          
|          
|          
|           | Return on average assets                       |  |                        | 1.38    | %       |  |   | 1.47    | %
|          
|          
|          
|          
|           | Return on average equity                       |  |                        | 18.29   |         |  |   | 18.60   |  
|          
|          
|          
|          
|           | Net interest income to administrative expenses |  |                        | 1.55    | x       |  |   | 1.67    | x
|          
|          
|          
|          
|           | Administrative expenses to average assets      |  |                        | 1.77    | %       |  |   | 1.81    | %
|          
|          
|          
|          
|           | Efficiency ratio                               |  |                        | 43.05   |         |  |   | 43.40   |  

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
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

6



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##### Table of Contents



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.

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

|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |       |      | 
|----------------------------------------------------------------------- | ----------------------------- | --------------------------------- | ------------------------------------------ | ---------- | ------------------ | ---------- | -------- | ------- | ------- | ------- | ------- | ---- | ---------------------- | ---- | --------- | ---------- | ---------- | ---------- | ------- | ------- | ------- | ------- | ------ | ---- | ----- | ---- | 
|                                                                        |                               |                                   |                                            |            | Three Months Ended
|                                                                        |                               |                                   |                                            |            |                   
|                                                                        |                               |                                   |                                            |            | 3/31/01            |            | 3/31/00 
|                                                                        |                               |                                   |                                            |            |                    |            |         
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      | Avg.                   |      |           |            |            |            |         |         |         |         | Avg.  
|                                                                        |                               |                                   |                                            |            | Average            |            |          |         |         |         | Yield/  |      | Average                |      |           |            |            |            | Yield/ 
|                                                                        |                               |                                   |                                            |            | Balance            |            | Interest |         | Cost    |         | Balance |      | Interest               |      | Cost     
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |          
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      | (Dollars in thousands)
|Interest-earning assets:                                               
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans and leases              |                                   | $                                          | 24,414,279 |                    |            | $        | 466,667 |         |         |         | 7.68 | %                      |      | $         | 22,900,394 |            |            | $       | 428,110 |         |         |        | 7.49 | %    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Mortgage-backed securities:  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Available for sale                |                                            |            | 4,650,949          |            |          |         | 82,724  |         |         |      | 7.11                   |      |           |            | 3,140,126  |            |         |         | 55,474  |         |        |      | 7.07  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Held to maturity                  |                                            |            | 1,445,936          |            |          |         | 26,287  |         |         |      | 7.27                   |      |           |            | 1,844,515  |            |         |         | 32,354  |         |        |      | 7.02  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Investment securities:       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Trading                           |                                            |            |                   |            |          |         |        |         |         |      |                       |      |           |            | 735        |            |         |         | 38      |         |        |      | 20.56 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Available for sale                |                                            |            | 145,155            |            |          |         | 2,836   |         |         |      | 7.81                   |      |           |            | 485,117    |            |         |         | 9,011   |         |        |      | 7.43  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Held to maturity                  |                                            |            | 10,492             |            |          |         | 145     |         |         |      | 5.54                   |      |           |            | 35,682     |            |         |         | 424     |         |        |      | 4.75  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other interest-earning assets |                                   |                                            | 594,483    |                    |            |          | 10,617  |         |         |         | 7.14 |                        |      |           | 501,319    |            |            |         | 8,659   |         |         |        | 6.83 |      
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                                   | Total interest-earning assets              |            |                    | 31,261,294 |          |         |         | 589,276 |         |      |                        | 7.56 |           |            |            | 28,907,888 |         |         |         | 534,070 |        |      |       | 7.40 | 
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Allowance for loan and lease losses                                     |                               |                                   | (187,665                                   | )          |                    |            |          |         |         |         |         |      |                        |      | (185,146  | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Noninterest-earning assets                                              |                               |                                   | 2,295,337                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,162,762 |           
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                                   | Total assets                               |            | $                  | 33,368,966 |          |         |         |         |         |      |                        |      |           |            | $          | 30,885,504 |        
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|Interest-bearing liabilities:                                          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Deposits:                    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Checking accounts                 |                                            | $          | 3,957,804          |            |          |         | 18,932  |         |         |      | 1.94                   | %    |           | $          | 3,429,346  |            |         |         | 11,586  |         |        |      | 1.36  | %   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Money market and savings
accounts |                                            |            | 5,861,567          |            |          |         | 52,046  |         |         |      | 3.60                   |      |           |            | 5,276,653  |            |         |         | 35,819  |         |        |      | 2.73  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                               | Certificates of deposit           |                                            |            | 9,964,579          |            |          |         | 143,479 |         |         |      | 5.84                   |      |           |            | 10,276,908 |            |         |         | 132,850 |         |        |      | 5.20  |     
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                                   | Total deposits                             |            |                    | 19,783,950 |          |         |         | 214,457 |         |      |                        | 4.40 |           |            |            | 18,982,907 |         |         |         | 180,255 |        |      |       | 3.82 | 
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        | FHLB advances                 |                                   |                                            | 9,819,816  |                    |            |          | 135,747 |         |         |         | 5.60 |                        |      |           | 8,549,562  |            |            |         | 113,699 |         |         |        | 5.34 |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other borrowings              |                                   |                                            | 531,171    |                    |            |          | 9,591   |         |         |         | 7.22 |                        |      |           | 383,685    |            |            |         | 7,113   |         |         |        | 7.39 |      
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                                   | Total borrowings                           |            |                    | 10,350,987 |          |         |         | 145,338 |         |      |                        | 5.69 |           |            |            | 8,933,247  |         |         |         | 120,812 |        |      |       | 5.43 | 
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|                                                                        |                               |                                   | Total interest-bearing liabilities         |            |                    | 30,134,937 |          |         |         | 359,795 |         |      |                        | 4.84 |           |            |            | 27,916,154 |         |         |         | 301,067 |        |      |       | 4.33 | 
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Noninterest-bearing liabilities                                         |                               |                                   | 723,044                                    |            |                    |            |          |         |         |         |         |      |                        |      | 521,055   |           
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                                   | Total liabilities                          |            |                    | 30,857,981 |          |         |         |         |         |      |                        |      |           |            |            | 28,437,209 |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Shareholders equity                                                    |                               |                                   | 2,510,985                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,448,295 |           
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|                                                                        |                               |                                   | Total liabilities and
shareholders equity |            | $                  | 33,368,966 |          |         |         |         |         |      |                        |      |           |            | $          | 30,885,504 |        
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |           
|Net interest income                                                     |                               |                                   |                                            |            |                    | $          | 229,481  |         |         |         |         |      |                        |      |           |            |            | $          | 233,003 |        
|                                                                        |                               |                                   |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |        
|Interest rate spread                                                    |                               |                                   |                                            |            |                    |            |          |         |         |         | 2.72    |      |                        |      |           |            |            |            |         |         |         |         | 3.07   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net yield on average interest-
earning assets                           |                               |                                   |                                            |            |                    |            |          |         |         |         | 2.94    |      |                        |      |           |            |            |            |         |         |         |         | 3.22   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Average interest-earning assets to
average interest-bearing liabilities |                               |                                   |                                            |            |                    |            |          |         |         |         | 103.74  | %    |                        |      |           |            |            |            |         |         |         |         | 103.55 | %   

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.

7



---



##### Table of Contents



Rate/Volume Analysis(Figure 3)

|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |        |        |        |  | 
|----------------------------- | --------------------------------- | ------------------ | ------- | ------ | ----- | ---------------------------- | ------ | ---------------------- | ------ | ------ | ------ | ------ | ------ | ------ |  | 
|                              |                                   |                    |         |        |       | Three Months Ended March 31,
|                              |                                   |                    |         |        |       |                             
|                              |                                   |                    |         |        |       | 2001 v. 2000                
|                              |                                   |                    |         |        |       |                             
|                              |                                   |                    |         |        |       | Increase (decrease) due to  
|                              |                                   |                    |         |        |       |                             
|                              |                                   |                    |         |        |       | Rate                         |        | Volume                 |        | Total 
|                              |                                   |                    |         |        |       |                              |        |                        |        |       
|                              |                                   |                    |         |        |       |                              |        | (Dollars in thousands)
|Interest income:             
|                             
|                             
|                             
|                             
|                              | Loans and leases                  |                    | $       | 8,202  |       |                              | $      | 30,355                 |        |        | $      | 38,557 |       
|                             
|                             
|                             
|                             
|                              | Mortgage-backed securities:      
|                             
|                             
|                             
|                             
|                              |                                   | Available for sale |         |        | 381   |                              |        |                        | 26,869 |        |        |        | 27,250 |       
|                             
|                             
|                             
|                             
|                              |                                   | Held to maturity   |         |        | 1,142 |                              |        |                        | (7,209 | )      |        |        | (6,067 | )     
|                             
|                             
|                             
|                             
|                              | Investment securities:           
|                             
|                             
|                             
|                             
|                              |                                   | Trading            |         |        | (38   | )                            |        |                        |       |        |        |        | (38    | )     
|                             
|                             
|                             
|                             
|                              |                                   | Available for sale |         |        | 444   |                              |        |                        | (6,619 | )      |        |        | (6,175 | )     
|                             
|                             
|                             
|                             
|                              |                                   | Held to maturity   |         |        | 60    |                              |        |                        | (339   | )      |        |        | (279   | )     
|                             
|                             
|                             
|                             
|                              | Other interest-earning assets     |                    |         | 305    |       |                              |        | 1,653                  |        |        |        | 1,958  |       
|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |       
|                              |                                   |                    | Total   |        |       | 10,496                       |        |                        |        | 44,710 |        |        |        | 55,206 | 
|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |       
|Interest expense:            
|                             
|                             
|                             
|                             
|                              | Checking accounts                 |                    |         | 5,379  |       |                              |        | 1,967                  |        |        |        | 7,346  |       
|                             
|                             
|                             
|                             
|                              | Money market and savings accounts |                    |         | 5,880  |       |                              |        | 10,347                 |        |        |        | 16,227 |       
|                             
|                             
|                             
|                             
|                              | Certificates of deposit           |                    |         | 14,718 |       |                              |        | (4,089                 | )      |        |        | 10,629 |       
|                             
|                             
|                             
|                             
|                              | FHLB advances                     |                    |         | 4,982  |       |                              |        | 17,066                 |        |        |        | 22,048 |       
|                             
|                             
|                             
|                             
|                              | Other borrowings                  |                    |         | 256    |       |                              |        | 2,222                  |        |        |        | 2,478  |       
|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |       
|                              |                                   |                    | Total   |        |       | 31,215                       |        |                        |        | 27,513 |        |        |        | 58,728 | 
|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |       
|Change in net interest income |                                   | $                  | (20,719 | )      |       | $                            | 17,197 |                        |        | $      | (3,522 | )     
|                              |                                   |                    |         |        |       |                              |        |                        |        |        |        |       

Our net interest income for the three months ended March 31, 2001 was $229.5
million, a decrease of $3.5 million from the three months ended March 31, 2000.
The net yield on average interest-earning assets during the first quarter of
2001 declined to 2.94% from 3.22% for the comparable period of 2000, reflecting
the increase in interest rates during 2000 and the fact that that our
liabilities repriced more quickly than our assets. However, the net yield on
average interest-earning assets improved 16 basis points during the first
quarter of 2001 from 2.78% during the fourth quarter of 2000. This expansion
in net yield on average interest-earning assets was the result of the current
declining interest rate environment combined with growth in higher yielding,
shorter term consumer and commercial loans, as well as in our core deposits
(checking, money market and savings accounts). See Figure 6 for a summary of
our loan and lease originations and Figure 11 for the composition of our
deposits.

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.

8



---



##### Table of Contents



Yields and Costs at End of Period(Figure 4)

|                                     |                           |                                   |                        |                                    |      |         |      |          |      |      |      | 
|------------------------------------ | ------------------------- | --------------------------------- | ---------------------- | ---------------------------------- | ---- | ------- | ---- | -------- | ---- | ---- | ---- | 
|                                     |                           |                                   |                        |                                    |      | 3/31/01 |      | 12/31/00
|                                     |                           |                                   |                        |                                    |      |         |      |         
|                                     | Weighted average yield:  
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Real estate loans                 |                        |                                    | 7.45 | %       |      |          | 7.49 | %   
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Retail consumer loans             |                        |                                    | 7.82 |         |      |          | 7.86 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Automobile loans                  |                        |                                    | 8.63 |         |      |          | 8.67 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Consumer finance                  |                        |                                    | 8.76 |         |      |          | 8.91 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Leases(1)                         |                        |                                    | 6.27 |         |      |          | 6.33 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Corporate banking loans           |                        |                                    | 8.34 |         |      |          | 8.89 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           |                                   | Total loans and leases |                                    |      | 7.69    |      |          |      | 7.73 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Mortgage-backed securities        |                        |                                    | 7.06 |         |      |          | 7.29 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Investment securities             |                        |                                    | 7.92 |         |      |          | 7.40 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Other interest-earning assets     |                        |                                    | 7.12 |         |      |          | 7.46 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           |                                   |                        | Total interest-earning assets      |      |         | 7.54 |          |      |      | 7.64 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Weighted average cost(2):
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Checking accounts                 |                        |                                    | 1.93 |         |      |          | 1.73 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Money market and savings accounts |                        |                                    | 3.79 |         |      |          | 3.29 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           | Certificates of deposit           |                        |                                    | 5.76 |         |      |          | 5.93 |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           |                                   | Total deposits         |                                    |      | 4.34    |      |          |      | 4.35 |     
|                                    
|                                    
|                                    
|                                    
|                                     | FHLB advances             |                                   |                        | 5.51                               |      |         |      | 5.86     |     
|                                    
|                                    
|                                    
|                                    
|                                     | Other borrowings          |                                   |                        | 8.06                               |      |         |      | 7.21     |     
|                                    
|                                    
|                                    
|                                    
|                                     |                           |                                   |                        | Total interest-bearing liabilities |      |         | 4.75 |          |      |      | 4.89 | 
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|Interest rate spread                 |                           |                                   | 2.79                   |                                    |      |         | 2.75 |         
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|Net yield on interest-earning assets |                           |                                   | 2.97                   |                                    |      |         | 2.91 |         



---

|(1) |  | Excludes impact of related tax benefits.                                    
|--- |  | ----------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes the annualized effect of interest rate risk management
instruments.

Other Income

Other income for the three months ended March 31, 2001 was $104.0 million, an
increase of $21.4 million, or 25.9%, over the $82.6 million for the three
months ended March 31, 2000. The increase was primarily attributable to income
from retail banking and net gains on sales. Retail banking income increased
$15.6 million, or 30.2%, over the comparable period in 2000. Growth in income
from retail banking was attributed to successful integration of past mergers
together with ongoing franchise development initiatives. Net gains on sales
totaled $16.1 million for the first quarter of 2001, an increase of $12.5
million over the first quarter of 2000. The mortgage-backed securities sold
during the quarter were comprised primarily of seasoned one-to-four family
mortgages originated by the Bank. These increases in retail banking income and
net gains on sales were partially offset by a $4.2 million, or 30.9%, decrease
in mortgage banking income. The decline resulted primarily from reduced
servicing income following our fourth quarter 2000 sale of $3.0 billion in
mortgage servicing, and increased amortization of loan servicing assets in the
present interest rate environment.

Administrative Expenses

Administrative expenses were $147.6 million for the three months ended March
31, 2001, an increase of $4.9 million, or 3.4%, as compared to the first
quarter of 2000. The first quarter of 2000 included merger-related expenses of
$3.3 million. Excluding these merger-related charges, our administrative
expenses were $139.5 million for the three months ended March 31, 2000. The
increase in administrative expenses was primarily attributed to increased
marketing costs as we launched a variety of targeted programs geared to support
sales efforts throughout the Bank. Despite the increase, our efficiency ratio
improved to 43.05% for the three months ended March 31, 2001, compared to
43.40% for the three months ended March 31, 2000. The efficiency ratio is the
ratio of administrative expenses, excluding goodwill amortization and
merger-related charges, to net interest income and other income. See the above
discussion in Other Income regarding additional factors that contributed to
the improvement in our efficiency ratio.

Federal Income Tax

Federal income tax expense for the three months ended March 31, 2001 was $53.4
million, as compared to $52.6 million for the same period in 2000. The primary
reason for this increase in the provision for federal income taxes was an
increase in pre-tax income. The effective tax rate was 31.7% for the 2001
period and 32.0% for the comparable 2000 period.

9



---



##### Table of Contents



FINANCIAL CONDITION

Overview

At March 31, 2001, total assets were $33.8 billion, compared to total assets of
$33.0 billion at December 31, 2000. Contributing to the increase in total
assets was the growth in our mortgage-backed securities available for sale
portfolio since December 31, 2000. This portfolio increased primarily due to
residential loan securitizations that occurred in the first quarter of 2001.

Loans and Leases

Composition of Loans and Leases(Figure 5)

|                                       |                                                             |                   |                 |                          |           |                        |            |            |           |           |            | 
|-------------------------------------- | ----------------------------------------------------------- | ----------------- | --------------- | ------------------------ | --------- | ---------------------- | ---------- | ---------- | --------- | --------- | ---------- | 
|                                       |                                                             |                   |                 |                          |           | 3/31/01                |            | 12/31/00  
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 |                          |           | (Dollars in thousands)
|                                       | One-to-four family:                                        
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Permanent:       
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Fixed rate      |                          | $         | 4,788,565              |            |            | $         | 4,543,712 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             |                   | Adjustable rate |                          |           | 5,034,817              |            |            |           | 5,989,120 |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Construction      |                 |                          | 354,997   |                        |            |            | 345,930   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 10,178,379      |                          |           |                        | 10,878,762 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Commercial real estate:                                    
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Multifamily       |                 |                          | 1,031,704 |                        |            |            | 1,115,360 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Other             |                 |                          | 1,001,852 |                        |            |            | 855,266   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 2,033,556       |                          |           |                        | 1,970,626  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Consumer:                                                  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Retail            |                 |                          | 4,853,952 |                        |            |            | 4,631,476 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Automobile        |                 |                          | 3,308,099 |                        |            |            | 3,151,084 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Consumer finance  |                 |                          | 1,098,983 |                        |            |            | 988,879   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 9,261,034       |                          |           |                        | 8,771,439  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       | Business:                                                  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Leasing           |                 |                          | 1,869,117 |                        |            |            | 1,778,021 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                             | Corporate banking |                 |                          | 816,035   |                        |            |            | 798,942   |          
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   | 2,685,152       |                          |           |                        | 2,576,963  |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                       | Loans and leases before allowance for loan and lease losses |                   |                 | 24,158,121               |           |                        |            | 24,197,790 |          
|                                      
|                                      
|                                      
|                                      
|                                       | Allowance for loan and lease losses                         |                   |                 | (192,991                 | )         |                        |            | (189,616   | )        
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                       |                                                             |                   |                 | Loans and leases, net(1) |           | $                      | 23,965,130 |            |           | $         | 24,008,174 | 
|                                       |                                                             |                   |                 |                          |           |                        |            |           
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|Portfolio of loans serviced for others |                                                             | $                 | 10,723,836      |                          |           | $                      | 10,379,644 |           
|                                       |                                                             |                   |                 |                          |           |                        |            |           



---

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

As indicated in Figure 5, our loan and lease portfolio remains
well-diversified. At March 31, 2001, 96% of our loans and leases were
collateralized, with 63% backed by one-to-four family and multifamily real
estate.

10



---



##### Table of Contents



Loan and Lease Activity(Figure 6)

|                                |                                                |                    |                                   |                                      |           |                        |           |           |           |           |           | 
|------------------------------- | ---------------------------------------------- | ------------------ | --------------------------------- | ------------------------------------ | --------- | ---------------------- | --------- | --------- | --------- | --------- | --------- | 
|                                |                                                |                    |                                   |                                      |           | Three Months Ended    
|                                |                                                |                    |                                   |                                      |           |                       
|                                |                                                |                    |                                   |                                      |           | 3/31/01                |           | 3/31/00  
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    |                                   |                                      |           | (Dollars in thousands)
|Originations:                  
|                               
|                               
|                               
|                               
|Real estate:                   
|                               
|                               
|                               
|                               
|                                | Permanent:                                    
|                               
|                               
|                               
|                               
|                                |                                                | One-to-four family |                                   | $                                    | 1,453,923 |                        |           | $         | 1,020,269 |          
|                               
|                               
|                               
|                               
|                                |                                                | Multifamily        |                                   |                                      | 14,026    |                        |           |           | 4,882     |          
|                               
|                               
|                               
|                               
|                                |                                                | Commercial         |                                   |                                      | 60,806    |                        |           |           | 56,924    |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    | Total permanent loans             |                                      |           | 1,528,755              |           |           |           | 1,082,075 |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                | Construction:                                 
|                               
|                               
|                               
|                               
|                                |                                                | One-to-four family |                                   |                                      | 121,929   |                        |           |           | 99,398    |          
|                               
|                               
|                               
|                               
|                                |                                                | Multifamily        |                                   |                                      | 38,187    |                        |           |           | 9,564     |          
|                               
|                               
|                               
|                               
|                                |                                                | Commercial         |                                   |                                      | 86,216    |                        |           |           | 33,654    |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    | Total construction loans          |                                      |           | 246,332                |           |           |           | 142,616   |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    |                                   | Total real estate loans originated   |           |                        | 1,775,087 |           |           |           | 1,224,691 | 
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|Retail consumer                 |                                                |                    | 584,345                           |                                      |           |                        | 421,415   |          
|                               
|                               
|                               
|                               
|Automobile                      |                                                |                    | 490,625                           |                                      |           |                        | 280,002   |          
|                               
|                               
|                               
|                               
|Consumer finance                |                                                |                    | 56,705                            |                                      |           |                        | 69,117    |          
|                               
|                               
|                               
|                               
|Leases                          |                                                |                    | 144,837                           |                                      |           |                        | 104,362   |          
|                               
|                               
|                               
|                               
|Corporate banking               |                                                |                    | 213,985                           |                                      |           |                        | 147,961   |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    | Total loans and leases originated |                                      |           | 3,265,584              |           |           |           | 2,247,548 |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|Loans purchased                 |                                                |                    | 7,896                             |                                      |           |                        | 3,764     |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|Sales and principal reductions:
|                               
|                               
|                               
|                               
|                                | Loans sold                                     |                    |                                   | 293,094                              |           |                        |           | 88,462    |          
|                               
|                               
|                               
|                               
|                                | Loans exchanged for mortgage-backed securities |                    |                                   | 1,422,334                            |           |                        |           |          |          
|                               
|                               
|                               
|                               
|                                | Principal reductions                           |                    |                                   | 1,597,326                            |           |                        |           | 1,239,525 |          
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    |                                   | Total sales and principal reductions |           |                        | 3,312,754 |           |           |           | 1,327,987 | 
|                                |                                                |                    |                                   |                                      |           |                        |           |          
|                                |                                                |                    |                                   | Increase (decrease) before net items |           | $                      | (39,274   | )         |           | $         | 923,325   | 
|                                |                                                |                    |                                   |                                      |           |                        |           |          

Investment and Mortgage-Backed Securities

Figures 7 and 8 summarize our investment and mortgage-backed securities
portfolios at March 31, 2001 and December 31, 2000. The amounts reflected
represent the fair value of securities available for sale and the amortized
cost of securities held to maturity.

Investment Securities(Figure 7)

|                   |                                      |                                                |       |        |                        |         |          |         |         |         | 
|------------------ | ------------------------------------ | ---------------------------------------------- | ----- | ------ | ---------------------- | ------- | -------- | ------- | ------- | ------- | 
|                   |                                      |                                                |       |        | 3/31/01                |         | 12/31/00
|                   |                                      |                                                |       |        |                        |         |         
|                   |                                      |                                                |       |        | (Dollars in thousands)
|Available for Sale
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities  |                                                | $     | 23,514 |                        |         | $        | 333,900 |        
|                  
|                  
|                  
|                  
|                   | Corporate notes and commercial paper |                                                |       | 69,431 |                        |         |          | 65,532  |        
|                  
|                  
|                  
|                  
|                   | Other                                |                                                |       | 20,297 |                        |         |          | 27,269  |        
|                   |                                      |                                                |       |        |                        |         |          |        
|                   |                                      | Total investment securities available for sale |       |        | 113,242                |         |          |         | 426,701 |        
|                   |                                      |                                                |       |        |                        |         |          |        
|Held to Maturity  
|                  
|                  
|                  
|                  
|                   | U.S. Treasury and agency securities  |                                                |       | 261    |                        |         |          | 15,000  |        
|                  
|                  
|                  
|                  
|                   | Other                                |                                                |       | 7,208  |                        |         |          | 7,514   |        
|                   |                                      |                                                |       |        |                        |         |          |        
|                   |                                      | Total investment securities held to maturity   |       |        | 7,469                  |         |          |         | 22,514  |        
|                   |                                      |                                                |       |        |                        |         |          |        
|                   |                                      |                                                | Total |        | $                      | 120,711 |          |         | $       | 449,215 | 
|                   |                                      |                                                |       |        |                        |         |          |        
|                   | Weighted average rate                |                                                |       | 7.92   | %                      |         |          | 7.40    | %      
|                   |                                      |                                                |       |        |                        |         |          |        

11



---



##### Table of Contents



Mortgage-Backed Securities(Figure 8)

|                   |                                      |                           |                                                     |       |         |                        |           |          |         |           |           | 
|------------------ | ------------------------------------ | ------------------------- | --------------------------------------------------- | ----- | ------- | ---------------------- | --------- | -------- | ------- | --------- | --------- | 
|                   |                                      |                           |                                                     |       |         | 3/31/01                |           | 12/31/00
|                   |                                      |                           |                                                     |       |         |                        |           |         
|                   |                                      |                           |                                                     |       |         | (Dollars in thousands)
|Available for Sale
|                  
|                  
|                  
|                  
|                   | Participation certificates:         
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:
|                  
|                  
|                  
|                  
|                   |                                      |                           | FNMA                                                |       | $       | 3,196,937              |           |          | $       | 2,985,852 |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | FHLMC                                               |       |         | 1,144,329              |           |          |         | 59,511    |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | GNMA                                                |       |         | 2,030                  |           |          |         | 2,209     |          
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations:
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:
|                  
|                  
|                  
|                  
|                   |                                      |                           | FNMA                                                |       |         | 226,705                |           |          |         | 225,747   |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | FHLMC                                               |       |         | 293,919                |           |          |         | 292,232   |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | GNMA                                                |       |         | 5,598                  |           |          |         | 6,015     |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues            |                                                     |       | 515,588 |                        |           |          | 515,630 |          
|                   |                                      |                           |                                                     |       |         |                        |           |         
|                   |                                      |                           | Total mortgage-backed securities available for sale |       |         | 5,385,106              |           |          |         | 4,087,196 |          
|                   |                                      |                           |                                                     |       |         |                        |           |         
|Held to Maturity  
|                  
|                  
|                  
|                  
|                   | Participation certificates:         
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:
|                  
|                  
|                  
|                  
|                   |                                      |                           | FNMA                                                |       |         | 408,455                |           |          |         | 433,533   |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | FHLMC                                               |       |         | 144,769                |           |          |         | 154,502   |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | GNMA                                                |       |         | 79,294                 |           |          |         | 84,603    |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues            |                                                     |       | 122,774 |                        |           |          | 128,407 |          
|                  
|                  
|                  
|                  
|                   | Collateralized mortgage obligations:
|                  
|                  
|                  
|                  
|                   |                                      | Government agency issues:
|                  
|                  
|                  
|                  
|                   |                                      |                           | FNMA                                                |       |         | 192,147                |           |          |         | 202,283   |          
|                  
|                  
|                  
|                  
|                   |                                      |                           | FHLMC                                               |       |         | 62,318                 |           |          |         | 66,292    |          
|                  
|                  
|                  
|                  
|                   |                                      | Private issues            |                                                     |       | 405,523 |                        |           |          | 436,555 |          
|                   |                                      |                           |                                                     |       |         |                        |           |         
|                   |                                      |                           | Total mortgage-backed securities held to maturity   |       |         | 1,415,280              |           |          |         | 1,506,175 |          
|                   |                                      |                           |                                                     |       |         |                        |           |         
|                   |                                      |                           |                                                     | Total |         | $                      | 6,800,386 |          |         | $         | 5,593,371 | 
|                   |                                      |                           |                                                     |       |         |                        |           |         
|                   |                                      | Weighted average rate     |                                                     |       | 7.06    | %                      |           |          | 7.29    | %        
|                   |                                      |                           |                                                     |       |         |                        |           |         

Asset Quality

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

|                                     |                                                          |                        |                   |                                |        |                        |         |         |        |         |        |  
|------------------------------------ | -------------------------------------------------------- | ---------------------- | ----------------- | ------------------------------ | ------ | ---------------------- | ------- | ------- | ------ | ------- | ------ | -
|                                     |                                                          |                        |                   |                                |        | Three Months Ended    
|                                     |                                                          |                        |                   |                                |        |                       
|                                     |                                                          |                        |                   |                                |        | 3/31/01                |         | 3/31/00
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     |                                                          |                        |                   |                                |        | (Dollars in thousands)
|Allowance for loan and lease losses:
|                                    
|                                    
|                                    
|                                    
|                                     | Balance, beginning of period                             |                        | $                 | 189,616                        |        |                        | $       | 186,400 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Provision for loan and lease losses                      |                        |                   | 17,728                         |        |                        |         | 8,598   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Loans and leases charged off:                           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | One-to-four family     |                   |                                | (1,005 | )                      |         |         | (1,707 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Commercial real estate |                   |                                | (35    | )                      |         |         | (179   | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Retail consumer        |                   |                                | (1,955 | )                      |         |         | (2,205 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Automobile             |                   |                                | (9,986 | )                      |         |         | (7,095 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Consumer finance       |                   |                                | (2,057 | )                      |         |         | (518   | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Leases                 |                   |                                |       |                        |         |         |       |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Corporate banking      |                   |                                | (1,269 | )                      |         |         | (123   | )      
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     |                                                          |                        | Total charge-offs |                                |        | (16,307                | )       |         |        | (11,827 | )     
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     | Recoveries:                                             
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | One-to-four family     |                   |                                | 24     |                        |         |         | 247    |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Commercial real estate |                   |                                | 1      |                        |         |         | 2      |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Retail consumer        |                   |                                | 421    |                        |         |         | 184    |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Automobile             |                   |                                | 1,366  |                        |         |         | 1,585  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Consumer finance       |                   |                                | 51     |                        |         |         | 16     |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Leases                 |                   |                                |       |                        |         |         |       |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                          | Corporate banking      |                   |                                | 91     |                        |         |         | 62     |        
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     |                                                          |                        | Total recoveries  |                                |        | 1,954                  |         |         |        | 2,096   |       
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     |                                                          |                        |                   | Net loan and lease charge-offs |        |                        | (14,353 | )       |        |         | (9,731 | )
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     | Balance, end of period                                   |                        | $                 | 192,991                        |        |                        | $       | 185,267 |       
|                                     |                                                          |                        |                   |                                |        |                        |         |        
|                                     | Net charge-offs to average loans and leases (annualized) |                        |                   | .24                            | %      |                        |         | .17     | %     

12



---



##### Table of Contents



Figure 10 sets forth information concerning nonperforming assets for the
periods reported. Nonperforming assets consist of (1) nonaccrual loans and
leases, (2) loans and leases past due 90 days or more as to principal or
interest, (3) restructured real estate mortgage loans and (4) real estate
acquired through foreclosure and other collateral owned.

Nonperforming Assets(Figure 10)

|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |          |        |        |         | 
|------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------- | -------------------------- | ------------------------------------------------------------ | ------ | ---------------------- | ------- | -------- | ------ | ------ | ------- | 
|                                                                    |                                                          |                                         |                            |                                                              |        | 3/31/01                |         | 12/31/00
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            |                                                              |        | (Dollars in thousands)
|Nonperforming loans and leases:                                    
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Nonaccrual loans and leases:                            
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Real estate mortgage loans:            
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | One-to-four family(1)      |                                                              | $      | 71,531                 |         |          | $      | 71,269 |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | Multifamily and commercial |                                                              |        | 8,566                  |         |          |        | 8,132  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | Construction and land      |                                                              |        | 7,683                  |         |          |        | 8,806  |        
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Total real estate mortgage loans                             |        |                        | 87,780  |          |        |        | 88,207  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Retail consumer                         |                            |                                                              | 12,924 |                        |         |          | 11,120 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Automobile                              |                            |                                                              | 56     |                        |         |          | 130    |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Consumer finance                        |                            |                                                              | 51,898 |                        |         |          | 48,673 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Leases                                  |                            |                                                              |       |                        |         |          |       |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Corporate banking                       |                            |                                                              | 16,593 |                        |         |          | 18,707 |       
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Total nonaccrual loans and leases                            |        |                        | 169,251 |          |        |        | 166,837 | 
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    | Accruing loans and leases delinquent more than 90 days: 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Real estate mortgage loans:            
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | One-to-four family         |                                                              |        |                       |         |          |        |       |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | Multifamily and commercial |                                                              |        |                       |         |          |        |       |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         | Construction and land      |                                                              |        |                       |         |          |        |       |        
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Total real estate mortgage loans                             |        |                        |        |          |        |        |        | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Retail consumer(1)                      |                            |                                                              | 2,947  |                        |         |          | 2,586  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Automobile                              |                            |                                                              | 5,887  |                        |         |          | 6,911  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Consumer finance                        |                            |                                                              |       |                        |         |          |       |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Leases                                  |                            |                                                              | 1,958  |                        |         |          | 2,956  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Corporate banking                       |                            |                                                              | 1,114  |                        |         |          | 2,086  |       
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         |                            | Total accruing loans and leases delinquent more than 90 days |        |                        | 11,906  |          |        |        | 14,539  | 
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    | Restructured real estate mortgage loans                  |                                         |                            | 662                                                          |        |                        |         | 666      |       
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Total nonperforming loans and leases                         |        |                        | 181,819 |          |        |        | 182,042 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Real estate acquired through foreclosure and other collateral owned |                                                          |                                         | 33,363                     |                                                              |        |                        | 27,523  |         
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Total nonperforming assets                                   |        |                        | 215,182 |          |        |        | 209,565 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          |                                         |                            | Total government guaranteed loans                            |        |                        | 22,878  |          |        |        | 19,225  | 
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|                                                                    |                                                          |                                         |                            | Nonperforming assets net of government guaranteed loans      |        | $                      | 192,304 |          |        | $      | 190,340 | 
|                                                                    |                                                          |                                         |                            |                                                              |        |                        |         |         
|Ratio of:                                                          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Nonperforming loans and leases to total loans and leases |                                         |                            | .76                                                          | %      |                        |         | .76      | %     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Nonperforming assets to total assets                     |                                         |                            | .64                                                          |        |                        |         | .64      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Allowance for loan and lease losses to:                 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Nonperforming loans and leases          |                            |                                                              | 106.14 |                        |         |          | 104.16 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Total loans and leases before allowance |                            |                                                              | .80    |                        |         |          | .78    |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Ratio of (excluding government guaranteed nonperforming loans):    
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Nonperforming loans and leases to total loans and leases |                                         |                            | .66                                                          |        |                        |         | .68      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Nonperforming assets to total assets                     |                                         |                            | .57                                                          |        |                        |         | .58      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Allowance for loan and lease losses to:                 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Nonperforming loans and leases          |                            |                                                              | 121.42 |                        |         |          | 116.46 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                          | Total loans and leases before allowance |                            |                                                              | .80    |                        |         |          | .78    |       



---

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

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, totaled $79.8
million and $96.8 million at March 31, 2001 and December 31, 2000,
respectively. The vast majority of these loans, as well as our nonperforming
assets, are collateralized by real estate. As such, we would anticipate that
any losses resulting from possible future charge-offs would be substantially
less than the respective loan balances.

13



---



##### Table of Contents



SOURCES OF FUNDS

General

Our principal sources of funds are deposits, advances from the Federal Home
Loan Bank (FHLB) of Cincinnati, federal funds purchased and reverse
repurchase agreements, repayments and maturities of loans and securities,
proceeds from the sale of loans and securities, and funds provided by
operations. Management also considers our interest-sensitivity profile when
deciding on sources of funds. At March 31, 2001, our one-year gap was .50% of
total assets. See Part I, Item 3 Quantitative and Qualitative Disclosure
About Market Risk, of this Form 10-Q regarding further information on our
interest rate risk profile.

Deposits

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

Composition of Deposits(Figure 11)

|                                            |                     |                     |           |           |            |          |      |                        |      |      |            |           |            |          |      |      |      | 
|------------------------------------------- | ------------------- | ------------------- | --------- | --------- | ---------- | -------- | ---- | ---------------------- | ---- | ---- | ---------- | --------- | ---------- | -------- | ---- | ---- | ---- | 
|                                            |                     |                     |           | 3/31/01   |            | 12/31/00
|                                            |                     |                     |           |           |            |         
|                                            |                     |                     |           |           |            |          |      | Weighted               |      |      |            |           |            | Weighted
|                                            |                     |                     |           |           |            |          |      | Average                |      |      |            |           |            | Average 
|                                            |                     |                     |           | Amount    |            | Rate     |      | Amount                 |      | Rate
|                                            |                     |                     |           |           |            |          |      |                        |      |     
|                                            |                     |                     |           |           |            |          |      | (Dollars in thousands)
|Checking accounts:                         
|                                           
|                                           
|                                           
|                                           
|                                            | Interest-bearing    |                     | $         | 2,853,954 |            |          |      | 2.95                   | %    |      | $          | 2,547,726 |            |          |      | 2.68 | %   
|                                           
|                                           
|                                           
|                                           
|                                            | Noninterest-bearing |                     |           | 1,511,706 |            |          |      |                       |      |      |            | 1,394,186 |            |          |      |     |     
|                                           
|                                           
|                                           
|                                           
|Money market and savings accounts           |                     |                     | 6,220,615 |           |            |          | 3.79 |                        |      |      | 5,486,158  |           |            |          | 3.30 |     
|                                           
|                                           
|                                           
|                                           
|Certificates of deposit                     |                     |                     | 9,834,765 |           |            |          | 5.94 |                        |      |      | 10,177,601 |           |            |          | 5.99 |     
|                                            |                     |                     |           |           |            |          |      |                        |      |      |            |          
|                                            |                     | Total deposits, net |           | $         | 20,421,040 |          |      |                        | 4.43 |      |            | $         | 19,605,671 |          |      |      | 4.38 | 
|                                            |                     |                     |           |           |            |          |      |                        |      |      |            |          
|Including the effect of interest rate swaps |                     |                     |           |           |            |          | 4.34 | %                      |      |      |            |           |            |          | 4.35 | %   

Investment securities and mortgage-backed securities with a par value of $684.4
million at March 31, 2001 and $594.6 million at December 31, 2000, were pledged
to secure public deposits and for other purposes required or permitted by law.

Borrowings

At March 31, 2001, borrowings primarily consisted of FHLB advances. These
positions were secured by our investment in the stock of the FHLB, as well as
$13.1 billion in certain real estate loans and $1.5 billion in mortgage-backed
securities.

Federal Home Loan Bank Advances(Figure 12)

|           |                        |                     |           |           |           |          |      |                        |      |      |           |           |           |          |      |      |      |  
|---------- | ---------------------- | ------------------- | --------- | --------- | --------- | -------- | ---- | ---------------------- | ---- | ---- | --------- | --------- | --------- | -------- | ---- | ---- | ---- | -
|           |                        |                     |           | 3/31/01   |           | 12/31/00
|           |                        |                     |           |           |           |         
|           |                        |                     |           |           |           |          |      | Weighted               |      |      |           |           |           | Weighted
|           |                        |                     |           |           |           |          |      | Average                |      |      |           |           |           | Average 
|           |                        |                     |           | Amount    |           | Rate     |      | Amount                 |      | Rate
|           |                        |                     |           |           |           |          |      |                        |      |     
|           |                        |                     |           |           |           |          |      | (Dollars in thousands)
|Short-term |                        | $                   | 2,910,248 |           |           |          | 5.32 | %                      |      | $    | 3,410,248 |           |           |          | 6.09 | %   
|          
|          
|          
|          
|Long-term:
|          
|          
|          
|          
|           | Fixed-rate advances    |                     |           | 6,300,896 |           |          |      | 5.63                   |      |      |           | 5,801,551 |           |          |      | 5.68 |     
|          
|          
|          
|          
|           | Variable-rate advances |                     |           | 424,478   |           |          |      | 5.01                   |      |      |           | 424,478   |           |          |      | 6.61 |     
|           |                        |                     |           |           |           |          |      |                        |      |      |           |          
|           |                        | Total advances, net |           | $         | 9,635,622 |          |      |                        | 5.51 | %    |           | $         | 9,636,277 |          |      |      | 5.86 | %
|           |                        |                     |           |           |           |          |      |                        |      |      |           |          

Interest Rate Risk Management

We utilize fixed receipt callable interest rate 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

14



---



##### Table of Contents



counterparty on a notional amount at a fixed rate defined in the agreement,
and to pay interest at a floating rate indexed to LIBOR.

Interest Rate Swaps(Figure 13)

|                                     |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |         |           |  |  |      |      |   |  |      |      |     
|------------------------------------ | ---- | ----- | - | --------- | --------- | --------- |  | -------- | ---- | --------- |  | ---------------------- | ---- | -------- | - | ------- | --------- |  |  | ---- | ---- | - |  | ---- | ---- | ----
|                                     |      |       |   | 3/31/01   |           | 12/31/00 
|                                     |      |       |   |           |           |          
|                                     |      |       |   | Notional  |           | Receiving |  | Paying   |      | Notional  |  | Receiving              |      | Paying  
|                                     |      |       |   | Principal |           | Interest  |  | Interest |      | Principal |  | Interest               |      | Interest
|                                     |      |       |   | Amount    |           | Rate      |  | Rate     |      | Amount    |  | Rate                   |      | Rate    
|                                     |      |       |   |           |           |           |  |          |      |           |  |                        |      |         
|                                     |      |       |   |           |           |           |  |          |      |           |  | (Dollars in thousands)
|Fixed Payment and
Variable   Receipt |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |         |           |  |  |      |      |   |  |     
|                                     | 2002 |       | $ | 25,000    |           |           |  | 5.45     | %(1) |           |  | 6.44                   | %    |          | $ | 25,000  |           |  |  | 6.94 | %(1) |   |  | 6.44 | %   
|                                     |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |        
|Variable Payment and
Fixed   Receipt |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |         |           |  |  |      |      |   |  |     
|                                     | 2001 |       | $ | 190,000   |           |           |  | 6.59     | %    |           |  | 5.61                   | %    |          | $ | 420,000 |           |  |  | 6.38 | %    |   |  | 6.73 | %   
|                                    
|                                    
|                                    
|                                    
|                                     | 2002 |       |   | 135,000   |           |           |  | 6.75     |      |           |  | 5.48                   |      |          |   | 155,000 |           |  |  | 7.03 |      |   |  | 6.73 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2003 |       |   | 248,000   |           |           |  | 5.65     |      |           |  | 5.17                   |      |          |   | 120,000 |           |  |  | 6.14 |      |   |  | 6.68 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2004 |       |   | 318,000   |           |           |  | 6.65     |      |           |  | 5.75                   |      |          |   | 478,000 |           |  |  | 6.84 |      |   |  | 6.75 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2005 |       |   | 285,000   |           |           |  | 7.93     |      |           |  | 5.34                   |      |          |   | 445,000 |           |  |  | 7.89 |      |   |  | 6.68 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2006 |       |   | 270,000   |           |           |  | 6.29     |      |           |  | 5.18                   |      |          |   | 70,000  |           |  |  | 7.07 |      |   |  | 6.59 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2007 |       |   | 10,000    |           |           |  | 7.25     |      |           |  | 5.68                   |      |          |   | 10,000  |           |  |  | 7.25 |      |   |  | 6.71 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2009 |       |   | 15,000    |           |           |  | 7.15     |      |           |  | 5.26                   |      |          |   | 65,000  |           |  |  | 7.32 |      |   |  | 6.53 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2010 |       |   | 10,000    |           |           |  | 7.40     |      |           |  | 5.25                   |      |          |   | 10,000  |           |  |  | 7.50 |      |   |  | 6.65 |     
|                                    
|                                    
|                                    
|                                    
|                                     | 2011 |       |   | 35,000    |           |           |  | 6.36     |      |           |  | 5.07                   |      |          |   |        |           |  |  |     |      |   |  |     |     
|                                     |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |        
|                                     |      | Total |   | $         | 1,516,000 |           |  |          | 6.67 | %         |  |                        | 5.41 | %(1)     |   | $       | 1,773,000 |  |  |      | 7.00 | % |  |      | 6.71 | %(1)
|                                     |      |       |   |           |           |           |  |          |      |           |  |                        |      |          |   |        



---

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

Interest rate risk management reduced interest expense on deposits by $3.2
million and $3.0 million for the three months ended March 31, 2001 and 2000,
respectively.

Liquidity

We anticipate that we will have sufficient funds available to meet our
commitments. At March 31, 2001, we had outstanding commitments to originate
loans and leases of $2.0 billion, unfunded consumer lines of credit totaling
$3.2 billion and unfunded corporate banking lines of credit totaling $227.0
million. We do not expect all of these lines to be used by the borrowers.
Outstanding letters of credit totaled $108.8 million as of March 31, 2001.
Certificates of deposit scheduled to mature in one year or less at March 31,
2001 totaled $8.6 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 July 18, 2000, the Board of Directors of Charter One authorized management
to repurchase up to 10% of the Companys outstanding common stock in a program
of open market purchases or privately negotiated transactions. As of May 2,
2001, we had purchased 8.0 million shares authorized under this program for a
total cost of $196.8 million. The repurchased shares will be reserved in
treasury for later reissue in connection with employee benefit plans or
subsequent acquisitions.

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, respectively.
Failure to meet minimum capital requirements can initiate certain mandatory,
and possibly discretionary, actions by each regulator that, if undertaken,
could have a direct material effect on our financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
specific capital guidelines must be met that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The institutions capital classification is
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

15



---



##### Table of Contents



Quantitative measures established by regulation to ensure capital adequacy
require Charter One and Charter One Commercial to individually maintain minimum
amounts and ratios (set forth in the table below) of total and tier 1 capital
to risk-weighted assets, and of tier 1 capital to average assets. Charter One
Bank, F.S.B. is required to maintain minimum amounts and ratios (also set forth
in the table below) of total and tier 1 capital to risk-weighted assets, of
core capital to adjusted tangible assets, and of tangible capital to tangible
assets. The actual regulatory capital ratios calculated for Charter One,
Charter One Commercial and Charter One Bank, F.S.B., along with the capital
amounts and ratios for capital adequacy purposes and the amounts required to be
categorized as well capitalized under the regulatory framework for prompt
corrective action are as follows:

Regulatory Capital(Figure 14)

|                          |                                          |  |         |           |                   |  |                   |       |                        |  |             |           |                         |  |  |       |   |  |                          |           |  |  |  |        |  
|------------------------- | ---------------------------------------- |  | ------- | --------- | ----------------- |  | ----------------- | ----- | ---------------------- |  | ----------- | --------- | ----------------------- |  |  | ----- | - |  | ------------------------ | --------- |  |  |  | ------ | -
|                          |                                          |  | 3/31/01
|                          |                                          |  |        
|                          |                                          |  |         |           |                   |  |                   |       |                        |  |             |           |                         |  |  |       |   |  | 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    |  | $       | 2,513,564 |                   |  |                   | 10.30 | %                      |  | $           | 1,951,402 |                         |  |  | >8.00 | % |  | $                        | 2,439,252 |  |  |  | >10.00 | %
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |         | 2,320,200 |                   |  |                   | 9.51  |                        |  |             | 975,701   |                         |  |  | >4.00 |   |  |                          | 1,463,551 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to average assets         |  |         | 2,320,200 |                   |  |                   | 6.98  |                        |  |             | 1,329,773 |                         |  |  | >4.00 |   |  |                          | 1,662,216 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Commercial:  
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |         | 37,530    |                   |  |                   | 30.25 |                        |  |             | 9,926     |                         |  |  | >8.00 |   |  |                          | 12,407    |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |         | 37,530    |                   |  |                   | 30.25 |                        |  |             | 4,963     |                         |  |  | >4.00 |   |  |                          | 7,444     |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to average assets         |  |         | 37,530    |                   |  |                   | 10.00 |                        |  |             | 15,018    |                         |  |  | >4.00 |   |  |                          | 18,772    |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Bank, F.S.B.:
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |         | 2,513,825 |                   |  |                   | 10.53 |                        |  |             | 1,909,631 |                         |  |  | >8.00 |   |  |                          | 2,387,038 |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |         | 1,808,311 |                   |  |                   | 7.58  |                        |  |             | N/A       |                         |  |  | N/A   |   |  |                          | 1,432,223 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Core capital to adjusted tangible assets |  |         | 1,825,459 |                   |  |                   | 5.45  |                        |  |             | 1,339,971 |                         |  |  | >4.00 |   |  |                          | 1,674,964 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|                          | Tangible capital to tangible assets      |  |         | 1,825,392 |                   |  |                   | 5.45  |                        |  |             | 502,488   |                         |  |  | >1.50 |   |  |                          | N/A       |  |  |  | N/A    |  

|                          |                                          |  |          |           |                   |  |                   |       |                        |  |             |           |                         |  |  |       |   |  |                          |           |  |  |  |        |  
|------------------------- | ---------------------------------------- |  | -------- | --------- | ----------------- |  | ----------------- | ----- | ---------------------- |  | ----------- | --------- | ----------------------- |  |  | ----- | - |  | ------------------------ | --------- |  |  |  | ------ | -
|                          |                                          |  | 12/31/00
|                          |                                          |  |         
|                          |                                          |  |          |           |                   |  |                   |       |                        |  |             |           |                         |  |  |       |   |  | 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    |  | $        | 2,448,962 |                   |  |                   | 10.29 | %                      |  | $           | 1,904,468 |                         |  |  | >8.00 | % |  | $                        | 2,380,585 |  |  |  | >10.00 | %
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |          | 2,259,030 |                   |  |                   | 9.49  |                        |  |             | 952,234   |                         |  |  | >4.00 |   |  |                          | 1,428,351 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to average assets         |  |          | 2,259,030 |                   |  |                   | 6.89  |                        |  |             | 1,310,915 |                         |  |  | >4.00 |   |  |                          | 1,638,643 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Commercial:  
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |          | 30,213    |                   |  |                   | 30.56 |                        |  |             | 7,910     |                         |  |  | >8.00 |   |  |                          | 9,887     |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |          | 30,213    |                   |  |                   | 30.56 |                        |  |             | 3,955     |                         |  |  | >4.00 |   |  |                          | 5,932     |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to average assets         |  |          | 30,213    |                   |  |                   | 8.67  |                        |  |             | 13,941    |                         |  |  | >4.00 |   |  |                          | 17,427    |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|Charter One Bank, F.S.B.:
|                         
|                         
|                         
|                         
|                          | Total capital to risk-weighted assets    |  |          | 2,376,443 |                   |  |                   | 10.23 |                        |  |             | 1,858,583 |                         |  |  | >8.00 |   |  |                          | 2,323,229 |  |  |  | >10.00 |  
|                         
|                         
|                         
|                         
|                          | Tier 1 capital to risk-weighted assets   |  |          | 1,673,360 |                   |  |                   | 7.20  |                        |  |             | N/A       |                         |  |  | N/A   |   |  |                          | 1,393,938 |  |  |  | >6.00  |  
|                         
|                         
|                         
|                         
|                          | Core capital to adjusted tangible assets |  |          | 1,687,568 |                   |  |                   | 5.15  |                        |  |             | 1,310,207 |                         |  |  | >4.00 |   |  |                          | 1,637,759 |  |  |  | >5.00  |  
|                         
|                         
|                         
|                         
|                          | Tangible capital to tangible assets      |  |          | 1,687,300 |                   |  |                   | 5.15  |                        |  |             | 491,324   |                         |  |  | >1.50 |   |  |                          | N/A       |  |  |  | N/A    |  

Management believes that, as of March 31, 2001, Charter One, Charter One
Commercial and Charter One Bank, F.S.B. individually met the capital adequacy
requirements to which they were subject. Events beyond managements control,
such as fluctuations in interest rates or a downturn in the economy in areas in
which the institutions loans and securities are concentrated could adversely
affect future earnings and, consequently, the institutions ability to meet its
future capital requirements.

16



---



##### Table of Contents



Quarterly Stock Prices and Dividends(Figure 15)

|                                 |       |  |                    |       |          |  |         |       |         |  |         |       |  |  |     |       |  |  |     |       | 
|-------------------------------- | ----- |  | ------------------ | ----- | -------- |  | ------- | ----- | ------- |  | ------- | ----- |  |  | --- | ----- |  |  | --- | ----- | 
|                                 |       |  | Three Months Ended
|                                 |       |  |                   
|                                 |       |  | 3/31/01            |       | 12/31/00 |  | 9/30/00 |       | 6/30/00 |  | 3/31/00
|                                 |       |  |                    |       |          |  |         |       |         |  |        
|Market price of common stock(1):
|                                
|                                
|                                
|                                
|                                 | High  |  | $                  | 29.99 |          |  | $       | 30.00 |         |  | $       | 25.13 |  |  | $   | 25.71 |  |  | $   | 20.00 | 
|                                
|                                
|                                
|                                
|                                 | Low   |  |                    | 25.40 |          |  |         | 19.88 |         |  |         | 21.06 |  |  |     | 17.27 |  |  |     | 14.52 | 
|                                
|                                
|                                
|                                
|                                 | Close |  |                    | 28.30 |          |  |         | 28.88 |         |  |         | 24.38 |  |  |     | 21.90 |  |  |     | 20.00 | 
|                                
|                                
|                                
|                                
|Dividends declared and paid(1)   |       |  | .18                |       |          |  | .18     |       |         |  | .17     |       |  |  | .17 |       |  |  | .15 |      



---

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




ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

A comprehensive qualitative and quantitative analysis regarding market risk was
disclosed in our December 31, 2000 Form 10-K. The assumptions used in our
model have been updated as of March 31, 2001. The table below indicates the
estimated impact on net income under the various interest rate scenarios as a
percentage of base case earnings projections.

|               |  |                             |                    |           |  |       |    |  |       |    |  | 
|-------------- |  | --------------------------- | ------------------ | --------- |  | ----- | -- |  | ----- | -- |  | 
|Changes in     |  | Estimated Percentage Change
|Interest Rates |  | in Future Net Income       
|(basis points) |  | 12 Months                   |                    | 24 Months
|               |  |                             |                    |           |  |       |   
|               |  |                             | +200 over one
year |           |  | (3.75 | )% |  | (3.53 | )%
|              
|              
|              
|              
|               |  |                             | +100 over one year |           |  | (1.84 | )  |  | (1.06 | ) 
|              
|              
|              
|              
|               |  |                             | -100 over one year |           |  | .78   |    |  | (1.66 | ) 
|              
|              
|              
|              
|               |  |                             | -200 over one year |           |  | 2.21  |    |  | (2.66 | ) 

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 April 18, 2001, the Companys Board of Directors declared a
regular quarterly cash dividend of $.20 per share, an increase of 11% over the
prior quarters cash dividend rate of $.18 per share. The cash dividend is
payable May 21, 2001 to shareholders of record on May 7, 2001.




ITEM 6. Exhibits and Reports on Form 8-K

|    |  |                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibit 11  Computation of Per Share Earnings                                                                                                                                                              
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|(b) |  | Report on Form 8-K: On January 29, 2001, the Company filed a report on
Form 8-K containing a press release dated January 23, 2001 announcing
earnings for the three months and year ended December 31, 2000.




SIGNATURES

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

|      |  |  |             |  |  |                                                                                                                                             
|----- |  |  | ----------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------
|      |  |  |             |  |  | CHARTER ONE FINANCIAL, INC.                                                                                                                 
|     
|Date: |  |  | May 8, 2001 |  |  | /s/ Richard W. Neu                                                                                                                          
|      |  |  |             |  |  |                                                                                                                                             
|      |  |  |             |  |  | Richard W. Neu
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)

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