##### 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
September 30, 2002

OR

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

Commission file number 001-15495

CHARTER ONE FINANCIAL, INC.

---

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 34-1567092                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation
or organization) |  | (I.R.S. Employer
Identification No.)

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

(216) 566-5300




(Registrants telephone number, including area code)


NOT APPLICABLE




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


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

The number of shares outstanding of the registrants sole class of common stock
as of October 31, 2002 was 225,989,503.





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TABLE OF CONTENTS



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



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##### Table of Contents



TABLE OF CONTENTS

|                              |                                                                                             |                                                                                             |    |    |   |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | -- | -- | - |  |  |  |  | 
|Item                          |                                                                                             |                                                                                             |    |    |   |  |  | 
|Number                        |                                                                                             | Page                                                                                        |    |    |   | 
|                              |                                                                                             |                                                                                             |    |    |   |  | 
|                             
|PART I  FINANCIAL STATEMENTS
|                             
|                              | 1.    Financial Statements                                                                  |                                                                                             |    |    |   |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Financial Condition 
September 30, 2002 and December 31, 2001   |    |    | 1 |  |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Income 
Three and nine months ended September 30, 2002 and 2001 |    |    | 2 |  |  |  |  | 
|                              |                                                                                             | Consolidated Statements of Cash Flows 
Nine months ended September 30, 2002 and 2001       |    |    | 3 |  |  |  |  | 
|                              |                                                                                             | Notes to Consolidated Financial Statements                                                  |    |    | 4 |  |  |  |  | 
|                              | 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                             |    | 6  |   |  |  |  | 
|                              | 3.    Quantitative and Qualitative Disclosure About Market Risk                             |                                                                                             |    | 23 |   |  |  |  | 
|                              | 4.    Controls
and Procedures                                                               |                                                                                             |    | 23 |   |  |  |  | 
|                             
|PART II  OTHER INFORMATION  
|                             
|                              | 5.    Other Information                                                                     |                                                                                             |    | 23 |   |  |  |  | 
|                              | 6.    Exhibits and Reports on Form 8-K                                                      |                                                                                             |    | 26 |   |  |  |  | 
|Signatures                    |                                                                                             |                                                                                             | 26 |    |   |  |  | 
|Certifications                |                                                                                             |                                                                                             | 27 |    |   |  |  | 





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. Financial Statements

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES




|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  |  |  |  | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | --------- | ---------------------- | ---------- |  |  |  | - | ---------- | --------- | ---------- | ---------- |  |  |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           | 9/30/02                |            |  |  |  |   | 12/31/01   |           |            |            | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            | 
|                                                      |                                                                                                                   |                                 |                                            |           | (Dollars in thousands, |            |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           | except per share data) |            |  |  | 
|                                                     
|ASSETS                                                |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|Cash Accounts                                         |                                                                                                                   | $                               | 515,897                                    |           |                        |            |  |  |  | $ | 472,658    |           |            |            |  | 
|Interest-bearing deposits with banks                  |                                                                                                                   |                                 | 9,152                                      |           |                        |            |  |  |  |   | 8,355      |           |            |            |  | 
|Federal funds sold and other                          |                                                                                                                   |                                 | 1,105,511                                  |           |                        |            |  |  |  |   | 35,507     |           |            |            |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      |                                                                                                                   | Total cash and cash equivalents |                                            |           | 1,630,560              |            |  |  |  |   |            |           | 516,520    |            |  |  |  | 
|Investment securities:                                |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      | Available for sale                                                                                                |                                 |                                            | 213,684   |                        |            |  |  |  |   |            | 129,312   |            |            |  |  | 
|                                                      | Held to maturity (fair value of $4,969 and $6,467)                                                                |                                 |                                            | 4,642     |                        |            |  |  |  |   |            | 6,274     |            |            |  |  | 
|Mortgage-backed securities:                           |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      | Available for sale                                                                                                |                                 |                                            | 8,805,687 |                        |            |  |  |  |   |            | 8,030,512 |            |            |  |  | 
|                                                      | Held to maturity (fair value of $677,054 and $1,022,658)                                                          |                                 |                                            | 648,153   |                        |            |  |  |  |   |            | 983,904   |            |            |  |  | 
|Loans and leases, net                                 |                                                                                                                   |                                 | 25,351,352                                 |           |                        |            |  |  |  |   | 25,396,071 |           |            |            |  | 
|Loans held for sale                                   |                                                                                                                   |                                 | 287,891                                    |           |                        |            |  |  |  |   | 332,629    |           |            |            |  | 
|Bank owned life insurance                             |                                                                                                                   |                                 | 819,664                                    |           |                        |            |  |  |  |   | 808,231    |           |            |            |  | 
|Federal Home Loan Bank and Federal Reserve Bank stock |                                                                                                                   |                                 | 676,927                                    |           |                        |            |  |  |  |   | 617,836    |           |            |            |  | 
|Premises and equipment                                |                                                                                                                   |                                 | 348,675                                    |           |                        |            |  |  |  |   | 352,235    |           |            |            |  | 
|Accrued interest receivable                           |                                                                                                                   |                                 | 155,543                                    |           |                        |            |  |  |  |   | 162,065    |           |            |            |  | 
|Real estate and other collateral owned                |                                                                                                                   |                                 | 42,988                                     |           |                        |            |  |  |  |   | 54,351     |           |            |            |  | 
|Loan servicing assets                                 |                                                                                                                   |                                 | 126,646                                    |           |                        |            |  |  |  |   | 139,840    |           |            |            |  | 
|Goodwill                                              |                                                                                                                   |                                 | 386,372                                    |           |                        |            |  |  |  |   | 350,839    |           |            |            |  | 
|Other assets                                          |                                                                                                                   |                                 | 351,682                                    |           |                        |            |  |  |  |   | 293,897    |           |            |            |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      |                                                                                                                   | Total assets                    |                                            | $         | 39,850,466             |            |  |  |  |   |            | $         | 38,174,516 |            |  |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|LIABILITIES
AND SHAREHOLDERS EQUITY                  |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|Deposits                                              |                                                                                                                   | $                               | 27,086,505                                 |           |                        |            |  |  |  | $ | 25,123,309 |           |            |            |  | 
|Federal Home Loan Bank advances                       |                                                                                                                   |                                 | 7,574,583                                  |           |                        |            |  |  |  |   | 8,657,238  |           |            |            |  | 
|Federal funds purchased and repurchase agreements     |                                                                                                                   |                                 | 54,347                                     |           |                        |            |  |  |  |   | 203,259    |           |            |            |  | 
|Other borrowings                                      |                                                                                                                   |                                 | 710,282                                    |           |                        |            |  |  |  |   | 304,410    |           |            |            |  | 
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                 | 47,578                                     |           |                        |            |  |  |  |   | 54,103     |           |            |            |  | 
|Accrued interest payable                              |                                                                                                                   |                                 | 66,193                                     |           |                        |            |  |  |  |   | 57,704     |           |            |            |  | 
|Accrued expenses and other liabilities                |                                                                                                                   |                                 | 1,295,185                                  |           |                        |            |  |  |  |   | 845,993    |           |            |            |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      |                                                                                                                   | Total liabilities               |                                            |           | 36,834,673             |            |  |  |  |   |            |           | 35,246,016 |            |  |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|Commitments and contingencies                         |                                                                                                                   |                                 |                                           |           |                        |            |  |  |  |   |           |           |            |            |  | 
|Shareholders equity:                                 |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      | Preferred stock  $.01 par value per share; 20,000,000
shares authorized and unissued                             |                                 |                                            |          |                        |            |  |  |  |   |            |          |            |            |  |  | 
|                                                      | Common stock  $.01 par value per share; 360,000,000
shares authorized; 227,577,813 and 224,855,827 shares issued |                                 |                                            | 2,276     |                        |            |  |  |  |   |            | 2,249     |            |            |  |  | 
|                                                      | Additional paid-in capital                                                                                        |                                 |                                            | 2,192,186 |                        |            |  |  |  |   |            | 2,091,767 |            |            |  |  | 
|                                                      | Retained earnings                                                                                                 |                                 |                                            | 732,731   |                        |            |  |  |  |   |            | 811,093   |            |            |  |  | 
|                                                      | Less 1,158,700 and 516,082 shares of common stock held in treasury at cost                                        |                                 |                                            | (35,087   | )                      |            |  |  |  |   |            | (14,586   | )          |            |  |  | 
|                                                      | Accumulated other comprehensive income                                                                            |                                 |                                            | 123,687   |                        |            |  |  |  |   |            | 37,977    |            |            |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      |                                                                                                                   |                                 | Total shareholders equity                 |           |                        | 3,015,793  |  |  |  |   |            |           |            | 2,928,500  |  |  |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 
|                                                      |                                                                                                                   |                                 | Total liabilities and shareholders equity |           | $                      | 39,850,466 |  |  |  |   |            |           | $          | 38,174,516 |  |  |  |  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |  |  |  |   |            |           |            |            |  | 

See Notes to Consolidated Financial Statements.

1



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##### Table of Contents



CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES




|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |             |           | 
|------------------------------------- | ----------------------------------- | ------------------------------------------------------------- | ------- | --------------------------------------------- | ------- | ----------------- | ------- | ----------- | ------- | ------- | ------- | ----------- | --------- | - | ------- | ----------- | --------- | 
|                                      |                                     |                                                               |         | Three Months Ended                            |         | Nine Months Ended
|                                      |                                     |                                                               |         |                                               |         |                  
|                                      |                                     |                                                               |         | 9/30/02                                       |         | 9/30/01           |         | 9/30/02     |         | 9/30/01
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |        
|                                      |                                     |                                                               |         | (Dollars in thousands, except per share data)
|Interest income:                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Loans and leases                    |                                                               | $       | 410,237                                       |         |                   | $       | 484,697     |         |         | $       | 1,253,132   |           |   | $       | 1,410,215   |          
|                                      | Mortgage-backed securities:         |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |             |          
|                                      |                                     | Available for sale                                            |         |                                               | 135,099 |                   |         |             | 89,819  |         |         |             | 388,000   |   |         |             | 257,156   | 
|                                      |                                     | Held to maturity                                              |         |                                               | 10,695  |                   |         |             | 20,141  |         |         |             | 37,756    |   |         |             | 69,711    | 
|                                      | Investment securities:              |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |             |          
|                                      |                                     | Available for sale                                            |         |                                               | 2,939   |                   |         |             | 3,387   |         |         |             | 8,526     |   |         |             | 8,439     | 
|                                      |                                     | Held to maturity                                              |         |                                               | 61      |                   |         |             | 88      |         |         |             | 192       |   |         |             | 324       | 
|                                      | Other interest-earning assets       |                                                               |         | 9,729                                         |         |                   |         | 10,850      |         |         |         | 27,119      |           |   |         | 32,355      |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total interest income                                         |         |                                               | 568,760 |                   |         |             | 608,982 |         |         |             | 1,714,725 |   |         |             | 1,778,200 | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Interest expense:                     |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Deposits                            |                                                               |         | 160,821                                       |         |                   |         | 224,811     |         |         |         | 500,798     |           |   |         | 655,595     |          
|                                      | FHLB advances                       |                                                               |         | 103,729                                       |         |                   |         | 122,214     |         |         |         | 311,372     |           |   |         | 386,147     |          
|                                      | Other borrowings                    |                                                               |         | 13,943                                        |         |                   |         | 8,633       |         |         |         | 31,324      |           |   |         | 25,982      |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total interest expense                                        |         |                                               | 278,493 |                   |         |             | 355,658 |         |         |             | 843,494   |   |         |             | 1,067,724 | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net interest income                                           |         |                                               | 290,267 |                   |         |             | 253,324 |         |         |             | 871,231   |   |         |             | 710,476   | 
|Provision for loan and lease losses   |                                     |                                                               | 47,695  |                                               |         |                   | 27,109  |             |         |         | 131,689 |             |           |   | 61,913  |            
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net interest income after provision for loan
and lease losses |         |                                               | 242,572 |                   |         |             | 226,215 |         |         |             | 739,542   |   |         |             | 648,563   | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Other income:                         |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Retail banking                      |                                                               |         | 84,175                                        |         |                   |         | 72,285      |         |         |         | 241,474     |           |   |         | 211,784     |          
|                                      | Mortgage banking                    |                                                               |         | (36,961                                       | )       |                   |         | 9,637       |         |         |         | (16,503     | )         |   |         | 27,947      |          
|                                      | Leasing operations                  |                                                               |         | 404                                           |         |                   |         | 2,230       |         |         |         | 991         |           |   |         | 3,768       |          
|                                      | Net gains                           |                                                               |         | 83,881                                        |         |                   |         | 26,302      |         |         |         | 143,448     |           |   |         | 67,976      |          
|                                      | Bank owned life insurance and other |                                                               |         | 7,582                                         |         |                   |         | 9,691       |         |         |         | 26,014      |           |   |         | 29,325      |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total other income                                            |         |                                               | 139,081 |                   |         |             | 120,145 |         |         |             | 395,424   |   |         |             | 340,800   | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Administrative expenses:              |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Compensation and employee benefits  |                                                               |         | 81,443                                        |         |                   |         | 73,951      |         |         |         | 239,340     |           |   |         | 207,488     |          
|                                      | Net occupancy and equipment         |                                                               |         | 30,288                                        |         |                   |         | 27,051      |         |         |         | 86,485      |           |   |         | 80,226      |          
|                                      | Marketing expenses                  |                                                               |         | 11,788                                        |         |                   |         | 6,554       |         |         |         | 30,629      |           |   |         | 22,246      |          
|                                      | Federal deposit insurance premiums  |                                                               |         | 1,104                                         |         |                   |         | 1,026       |         |         |         | 3,421       |           |   |         | 2,874       |          
|                                      | Amortization of goodwill(1)         |                                                               |         |                                              |         |                   |         | 4,039       |         |         |         |            |           |   |         | 12,117      |          
|                                      | Other administrative expenses       |                                                               |         | 46,683                                        |         |                   |         | 42,629      |         |         |         | 142,209     |           |   |         | 128,708     |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Total administrative expenses(1)                              |         |                                               | 171,306 |                   |         |             | 155,250 |         |         |             | 502,084   |   |         |             | 453,659   | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Income before income taxes(1)         |                                     |                                                               | 210,347 |                                               |         |                   | 191,110 |             |         |         | 632,882 |             |           |   | 535,704 |            
|Income taxes(1)                       |                                     |                                                               | 66,785  |                                               |         |                   | 60,677  |             |         |         | 200,940 |             |           |   | 170,069 |            
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      |                                     | Net income(1)                                                 |         | $                                             | 143,562 |                   |         | $           | 130,433 |         |         | $           | 431,942   |   |         | $           | 365,635   | 
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Basic earnings per share(1)(2)        |                                     | $                                                             | .63     |                                               |         | $                 | .55     |             |         | $       | 1.87    |             |           | $ | 1.58    |            
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Diluted earnings per share(1)(2)      |                                     | $                                                             | .61     |                                               |         | $                 | .54     |             |         | $       | 1.82    |             |           | $ | 1.54    |            
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|Average common shares outstanding(2): |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Basic                               |                                                               |         | 228,765,954                                   |         |                   |         | 235,945,178 |         |         |         | 230,549,330 |           |   |         | 231,479,675 |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            
|                                      | Diluted                             |                                                               |         | 235,615,457                                   |         |                   |         | 242,108,371 |         |         |         | 237,653,561 |           |   |         | 237,371,716 |          
|                                      |                                     |                                                               |         |                                               |         |                   |         |             |         |         |         |             |           |   |         |            



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|(1) |  | Effective September 30, 2002, the Company early adopted Statement of
Financial Accounting Standards (SFAS) No. 147, Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. In accordance with the transition provisions
of SFAS No. 147, the Company reversed its amortization of goodwill related
to branch acquisitions recognized in the consolidated financial statements
since the Companys adoption of SFAS No. 142, Goodwill and Other
Intangible Assets, on January 1, 2002. The amounts reversed to goodwill
were $3.9 million, before tax, for the quarter ended March 31, 2002 and
$3.8 million, before tax, for the quarter ended June 30, 2002, adding $.01
to previously reported earnings per share for each respective quarter.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Restated to reflect the 5% stock dividend issued September 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

See Notes to Consolidated Financial Statements.

2



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##### Table of Contents



CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES




|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |            |            |            |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------------------------------- | ---------- | ---------------------- | -------- | ------- | ---------- | ---------- | ---------- | -
|                                                   |                                                                                   |                                                                                                      |                                           |            | Nine Months Ended     
|                                                   |                                                                                   |                                                                                                      |                                           |            |                       
|                                                   |                                                                                   |                                                                                                      |                                           |            | 9/30/02                |          | 9/30/01
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |        
|                                                   |                                                                                   |                                                                                                      |                                           |            | (Dollars in thousands)
|Cash flows from operating activities:              |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   | Net income                                                                        |                                                                                                      | $                                         | 431,942    |                        |          | $       | 365,635    |           
|                                                   | Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                                                      |                                           |            |                        |          |         |            |           
|                                                   |                                                                                   | Provision for loan and lease losses                                                                  |                                           |            | 131,689                |          |         |            | 61,913     |           
|                                                   |                                                                                   | Net gains                                                                                            |                                           |            | (176,184               | )        |         |            | (66,326    | )         
|                                                   |                                                                                   | Accretion of discounts, amortization of premiums, amortization of
goodwill and depreciation, net (1) |                                           |            | 131,768                |          |         |            | 82,912     |           
|                                                   |                                                                                   | Origination of loans held for sale                                                                   |                                           |            | (1,652,269             | )        |         |            | (1,159,814 | )         
|                                                   |                                                                                   | Proceeds from sale of loans held for sale                                                            |                                           |            | 1,647,746              |          |         |            | 1,158,869  |           
|                                                   |                                                                                   | Increase in accrued interest payable                                                                 |                                           |            | 8,489                  |          |         |            | 19,409     |           
|                                                   |                                                                                   | Other                                                                                                |                                           |            | 431,304                |          |         |            | 269,713    |           
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   |                                                                                   |                                                                                                      | Net cash provided by operating activities |            |                        | 954,485  |         |            |            | 732,311    |  
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|Cash flows from investing activities:              |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   | Net principal disbursed on loans and leases                                       |                                                                                                      |                                           | (4,910,650 | )                      |          |         | (5,526,718 | )         
|                                                   | Proceeds from principal repayments and maturities of:                             |                                                                                                      |                                           |            |                        |          |         |            |           
|                                                   |                                                                                   | Mortgage-backed securities held to maturity                                                          |                                           |            | 338,713                |          |         |            | 378,007    |           
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                        |                                           |            | 1,267,603              |          |         |            | 779,379    |           
|                                                   |                                                                                   | Investment securities held to maturity                                                               |                                           |            | 1,851                  |          |         |            | 15,947     |           
|                                                   |                                                                                   | Investment securities available for sale                                                             |                                           |            | 26,618                 |          |         |            | 356,869    |           
|                                                   | Proceeds from sale of:                                                            |                                                                                                      |                                           |            |                        |          |         |            |           
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                        |                                           |            | 9,054,320              |          |         |            | 2,990,729  |           
|                                                   |                                                                                   | Investment securities available for sale                                                             |                                           |            | 1,642                  |          |         |            | 9,656      |           
|                                                   |                                                                                   | Federal Home Loan Bank and Federal Reserve Bank stock                                                |                                           |            | 8,082                  |          |         |            | 15,077     |           
|                                                   | Purchase of:                                                                      |                                                                                                      |                                           |            |                        |          |         |            |           
|                                                   |                                                                                   | Mortgage-backed securities available for sale                                                        |                                           |            | (5,730,658             | )        |         |            | (1,207,803 | )         
|                                                   |                                                                                   | Investment securities available for sale                                                             |                                           |            | (76,599                | )        |         |            | (4,398     | )         
|                                                   |                                                                                   | Federal Home Loan Bank and Federal Reserve Bank stock                                                |                                           |            | (42,657                | )        |         |            |           |           
|                                                   |                                                                                   | Loans                                                                                                |                                           |            | (12,727                | )        |         |            | (54,032    | )         
|                                                   |                                                                                   | Loan servicing assets, including those originated                                                    |                                           |            | (71,453                | )        |         |            | (49,059    | )         
|                                                   | Net cash paid in connection with business combination                             |                                                                                                      |                                           | (90,425    | )                      |          |         | (50,245    | )         
|                                                   | Other                                                                             |                                                                                                      |                                           | (51,366    | )                      |          |         | 96,193     |           
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   |                                                                                   |                                                                                                      | Net cash used in investing activities     |            |                        | (287,706 | )       |            |            | (2,250,398 | )
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|Cash flows from financing activities:              |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   | Net decrease in short-term borrowings                                             |                                                                                                      |                                           | (1,238,785 | )                      |          |         | (1,044,555 | )         
|                                                   | Proceeds from long-term borrowings                                                |                                                                                                      |                                           | 424,209    |                        |          |         | 935,410    |           
|                                                   | Repayments of long-term borrowings                                                |                                                                                                      |                                           | (24,237    | )                      |          |         | (669,750   | )         
|                                                   | Increase in deposits                                                              |                                                                                                      |                                           | 1,722,959  |                        |          |         | 2,533,129  |           
|                                                   | Decrease in advance payments by borrowers for taxes and insurance                 |                                                                                                      |                                           | (6,525     | )                      |          |         | (13,073    | )         
|                                                   | Payment of dividends on common stock                                              |                                                                                                      |                                           | (141,367   | )                      |          |         | (122,098   | )         
|                                                   | Proceeds from issuance of common stock                                            |                                                                                                      |                                           | 53,747     |                        |          |         | 41,381     |           
|                                                   | Purchase of treasury stock                                                        |                                                                                                      |                                           | (342,740   | )                      |          |         | (107,155   | )         
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   |                                                                                   | Net cash provided by financing activities                                                            |                                           |            | 447,261                |          |         |            | 1,553,289  |           
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|Net increase in cash and cash equivalents          |                                                                                   |                                                                                                      | 1,114,040                                 |            |                        |          | 35,202  |           
|Cash and cash equivalents, beginning of the period |                                                                                   |                                                                                                      | 516,520                                   |            |                        |          | 531,257 |           
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|Cash and cash equivalents, end of period           |                                                                                   | $                                                                                                    | 1,630,560                                 |            |                        | $        | 566,459 |           
|                                                   |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|Supplemental disclosure of cash flow information:  |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   | Cash paid for interest on deposits and borrowings                                 |                                                                                                      | $                                         | 977,446    |                        |          | $       | 1,198,432  |           
|                                                   | Cash paid for income taxes                                                        |                                                                                                      |                                           | 4,500      |                        |          |         | 3,500      |           
|Supplemental schedule of noncash activities:       |                                                                                   |                                                                                                      |                                           |            |                        |          |         |           
|                                                   | Loans exchanged for mortgage-backed securities                                    |                                                                                                      |                                           | 5,066,120  |                        |          |         | 5,449,048  |           



---

|(1) |  | Effective September 30, 2002, the Company early adopted Statement of
Financial Accounting Standards (SFAS) No. 147, Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. In accordance with the transition provisions
of SFAS No. 147, the Company reversed its amortization of goodwill related
to branch acquisitions recognized in the consolidated financial statements
since the Companys adoption of SFAS No. 142, Goodwill and Other
Intangible Assets, on January 1, 2002. The amounts reversed to goodwill
were $3.9 million, before tax, for the quarter ended March 31, 2002 and
$3.8 million, before tax, for the quarter ended June 30, 2002, adding $.01
to previously reported earnings per share for each respective quarter.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

3



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##### Table of Contents



CHARTER ONE FINANCIAL, INC. AND
SUBSIDIARIES






|1. |  | These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Charter One Financial, Inc. (the Company or Charter
One) Annual Report on Form 10-K for the year ended December 31, 2001.
The interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results
for the periods presented. Such adjustments are of a normal recurring
nature. The results of operations for the interim periods disclosed
herein are not necessarily indicative of the results that may be expected
for a full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Charter One has one operating segment, consumer banking, which offers an
array of products and services to its customers. Pursuant to its consumer
banking strategy, emphasis is placed on building relationships and
identifying cross-sell opportunities with its customers, as opposed to
building specific lines of business. As a result, Charter One prefers to
work as an integrated unit to customize solutions for its customers, with
business line emphasis and product offerings changing over time as needs
and demands change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|3. |  | In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
These statements change the accounting for business combinations and
goodwill. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Use of
the pooling-of-interests method is prohibited. SFAS No. 142 changes the
accounting for goodwill and certain intangible assets from an amortization
method to an impairment-only approach. Any goodwill arising from business
combinations initiated after June 30, 2001 is not amortized. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, goodwill and certain intangible assets must be
tested for impairment and write-downs may be necessary. Additionally,
amortization of goodwill recorded for past business combinations ceased
upon adoption of SFAS No. 142 on January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | SFAS No. 142 requires a transitional impairment test be applied to all
goodwill within the first half of 2002 and any resulting impairment loss be
reported as a change in accounting principle. The Company has performed a
transitional impairment test on its goodwill assets as of January 1, 2002.
No impairment loss was recognized as a result of this test.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. SFAS No. 72, Accounting for Certain
Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No.
9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association
or a Similar Institution Is Acquired in a Business Combination Accounted for
by the Purchase Method, provided interpretive guidance on the application
of the purchase method to acquisitions of financial institutions. Except
for transactions between two or more mutual enterprises, SFAS No. 147
removes acquisitions of financial institutions from the scope of both SFAS
No. 72 and Interpretation 9 and requires that those transactions be
accounted for in accordance with SFAS No. 141 and SFAS No. 142. Thus, the
requirement in SFAS No. 72 to recognize (and subsequently amortize) any
excess of the fair value of liabilities assumed over the fair value of
tangible and identifiable intangible assets acquired as an unidentifiable
intangible asset no longer applies to acquisitions within the scope of SFAS
No. 147. In addition, SFAS No. 147 amends SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, to include in its scope
long-term customer-relationship intangible assets of financial institutions
such as depositor- and borrower-relationship intangible assets and credit
cardholder intangible assets. Consequently, those intangible assets are
subject to the same undiscounted cash flow recoverability test and
impairment loss recognition and measurement provisions that SFAS No. 144
requires for other long-lived assets that are held and used.
|  
|   |  | In accordance with the transition provisions of SFAS No. 147, the Company
reversed its amortization of goodwill related to branch acquisitions
recognized in the consolidated financial statements since the Companys
adoption of SFAS No. 142 on January 1, 2002. The amounts reversed to
goodwill were $3.9 million, before tax, for the quarter ended March 31, 2002
and $3.8 million, before tax, for the quarter ended June 30, 2002, adding
$.01 to previously reported earnings per share for each respective quarter.
Quarterly financial information for the periods from January 1, 2002 through
June 30, 2002, as restated for the Companys adoption of SFAS No. 147 is
being provided on a supplemental basis. See Item 5 Other Information of
this Form 10-Q for further discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The following table reconciles reported net income (restated for the early
adoption of SFAS No. 147 discussed above) to pro forma adjusted net income
for the three and nine months ended September 30, 2002 and 2001,
respectively:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

4



---



##### Table of Contents



|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |         | 
|------------------------------------- | ------------------- | - | --------------------------------------------- | ------- | ----------------- | - | ------- | ------- | ------- | - | ------- | ------- |  | - | ------- | ------- | 
|                                      |                     |   | Three Months Ended                            |         | Nine Months Ended
|                                      |                     |   |                                               |         |                  
|                                      |                     |   | 9/30/02                                       |         | 9/30/01           |   | 9/30/02 |         | 9/30/01
|                                      |                     |   |                                               |         |                   |   |         |         |        
|                                      |                     |   | (Dollars in thousands, except per share data)
|Reported net income                   |                     | $ | 143,562                                       |         |                   | $ | 130,433 |         |         | $ | 431,942 |         |  | $ | 365,635 |        
|Add: Goodwill amortization, after tax |                     |   |                                              |         |                   |   | 2,625   |         |         |   |        |         |  |   | 7,876   |        
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|                                      | Adjusted net income |   | $                                             | 143,562 |                   |   | $       | 133,058 |         |   | $       | 431,942 |  |   | $       | 373,511 | 
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|Basic earnings per share:             |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|Reported net income                   |                     | $ | .63                                           |         |                   | $ | .55     |         |         | $ | 1.87    |         |  | $ | 1.58    |        
|Add: Goodwill amortization, after tax |                     |   |                                              |         |                   |   | .01     |         |         |   |        |         |  |   | .03     |        
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|                                      | Adjusted net income |   | $                                             | .63     |                   |   | $       | .56     |         |   | $       | 1.87    |  |   | $       | 1.61    | 
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|Diluted earnings per share:           |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|Reported net income                   |                     | $ | .61                                           |         |                   | $ | .54     |         |         | $ | 1.82    |         |  | $ | 1.54    |        
|Add: Goodwill amortization, after tax |                     |   |                                              |         |                   |   | .01     |         |         |   |        |         |  |   | .03     |        
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        
|                                      | Adjusted net income |   | $                                             | .61     |                   |   | $       | .55     |         |   | $       | 1.82    |  |   | $       | 1.57    | 
|                                      |                     |   |                                               |         |                   |   |         |         |         |   |         |         |  |   |         |        



|4. |  | On January 7, 2002, Charter One Bank, F.S.B. (the Bank) filed an
application with the Office of the Comptroller of the Currency to convert
from a thrift to a national bank. The conversion was effective May 7,
2002 and resulted in changing the Banks name to Charter One Bank, N.A.
from Charter One Bank, F.S.B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | On May 24, 2002, the Company completed its acquisition of Charter
National Bancorp, Inc. (Charter National), the holding company of
Charter Bank in Wyandotte, Michigan. On May 24, 2002, Charter National had
assets of $353.2 million and deposits of $242.3 million in eight branches
located south of Detroit, Michigan. The Company paid $90.4 million in
cash consideration and recorded $34.8 million of goodwill based on a
preliminary determination of the estimated fair values of the assets and
liabilities acquired as a result of this transaction. Additionally, the
Company recorded $25.0 million as an indefinite-lived trademark name
intangible. The Company accounted for this acquisition as a purchase under
the new business combinations standards discussed in Note 3 above, and
included the results of operations of Charter National in its Consolidated
Financial Statements from the effective date of the acquisition. Pro
forma results of operations for this acquisition, had the acquisition
occurred as of January 1, 2002, are not significant and accordingly, are
not provided.
|  
|6. |  | Certain items in the consolidated financial statements for 2001 have been
reclassified to conform to the 2002 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

5



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##### Table of Contents






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

HOLDING COMPANY BUSINESS

The following financial review presents an analysis of the asset and liability
structure of Charter One Financial, Inc. and a discussion of the results of
operations for each of the periods presented.

General

Headquartered in Cleveland, Ohio, Charter One Financial, Inc., hereafter
referred to as Charter One or the Company, is a financial holding company.
Charter One is a Delaware corporation and owns all of the outstanding capital
stock of Charter One Bank, N.A., which we sometimes refer to in this document
as the Bank. The Banks primary business is providing consumer banking
services to certain major markets in Ohio, Michigan, Illinois, New York,
Vermont and in some markets of Massachusetts. As of September 30, 2002, the
Bank and its subsidiaries were doing business through 459 full-service
branches, 26 loan production offices and 920 ATMs.

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

Forward-Looking Statements

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

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

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



| |  | the strength of the United States economy in general and the strength of the local economies in which we conduct our
operations; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in,
among other things, a deterioration in the credit quality of our loan assets;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal
Reserve Board;                                                                                                                                                                                   
| 
| |  | inflation, interest rate, market and monetary fluctuations;                                                                                                                                                                                                                                                                    
| 
| |  | the timely development of and acceptance of new products and services of Charter One and the perceived overall value of these
products and services by users, including the features, pricing and quality compared to competitors products and services;                                                                      

6



---



##### Table of Contents





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

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

RESULTS OF OPERATIONS

Acquisition

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

Performance Overview

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

Selected Financial Results and
Ratios (Figure 1)

|                                                  |  |                                               |         |                   |  |         |         |         |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | --------------------------------------------- | ------- | ----------------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                  |  | Three Months Ended                            |         | Nine Months Ended
|                                                  |  |                                               |         |                  
|                                                  |  | 9/30/02                                       |         | 9/30/01           |  | 9/30/02 |         | 9/30/01
|                                                  |  |                                               |         |                   |  |         |         |        
|                                                  |  | (Dollars in thousands, except per share data)
|Net income(1)                                     |  | $                                             | 143,562 |                   |  | $       | 130,433 |         |  | $ | 431,942 |   |  | $ | 365,635 |  
|Diluted earnings per share(1)                     |  |                                               | .61     |                   |  |         | .54     |         |  |   | 1.82    |   |  |   | 1.54    |  
|Return on average assets(1)                       |  |                                               | 1.46    | %                 |  |         | 1.43    | %       |  |   | 1.50    | % |  |   | 1.39    | %
|Return on average equity(1)                       |  |                                               | 18.89   |                   |  |         | 17.81   |         |  |   | 19.47   |   |  |   | 18.05   |  
|Return on average tangible equity(1)(2)           |  |                                               | 21.70   |                   |  |         | 19.84   |         |  |   | 22.38   |   |  |   | 19.90   |  
|Average equity to average assets(1)               |  |                                               | 7.72    |                   |  |         | 8.03    |         |  |   | 7.68    |   |  |   | 7.69    |  
|Net interest income to administrative expenses(1) |  |                                               | 1.69x   |                   |  |         | 1.63x   |         |  |   | 1.74x   |   |  |   | 1.57x   |  
|Administrative expenses to average assets(1)      |  |                                               | 1.74    | %                 |  |         | 1.70    | %       |  |   | 1.74    | % |  |   | 1.72    | %
|Efficiency ratio                                  |  |                                               | 39.90   |                   |  |         | 40.49   |         |  |   | 39.64   |   |  |   | 42.00   |  



---

|(1) |  | Effective September 30, 2002, the Company early adopted Statement of
Financial Accounting Standards (SFAS) No. 147, Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. In accordance with the transition provisions
of SFAS No. 147, the Company reversed its amortization of goodwill related
to branch acquisitions recognized in the consolidated financial statements
since the Companys adoption of SFAS No. 142, Goodwill and Other
Intangible Assets, on January 1, 2002. The amounts reversed to goodwill
were $3.9 million, before tax, for the quarter ended March 31, 2002 and
$3.8 million, before tax, for the quarter ended June 30, 2002, adding $.01
to previously reported earnings per share for each respective quarter.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Computed as the ratio of net income, excluding the amortization of goodwill
and other intangible assets, to average tangible equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

7



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##### Table of Contents



Net Interest Income

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

The following table shows average balances, interest earned or paid, and
average interest rates for the periods indicated. Nonaccrual loans are
included in the average balance of loans. The mark-to-market adjustments on
securities available for sale are included in noninterest-earning assets.
Noninterest-bearing demand deposit accounts are included in noninterest-bearing
liabilities. The cost of liabilities includes the annualized effect of
interest rate risk management instruments.

Noninterest-earning assets, total assets, other noninterest-bearing
liabilities, total noninterest-bearing liabilities, total liabilities,
shareholders equity and total liabilities and shareholders equity have been
restated for 2002 to reflect the Companys early adoption of SFAS No. 147,
Acquisitions of Certain Financial Institutions, an amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9. In accordance with
the transition provisions of SFAS No. 147, the Company reversed its
amortization of goodwill related to branch acquisitions recognized in the
consolidated financial statements since the Companys adoption of SFAS No. 142,
Goodwill and Other Intangible Assets, on January 1, 2002.

8



---



##### Table of Contents



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

|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |      |      | 
|----------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------------ | ---------- | ------------------ | ---------- | -------- | ------- | ------- | ------- | ------- | ---- | ---------------------- | ---- | --------- | ---------- | ---------- | ---------- | ------- | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                                        |                                       |                                       |                                            |            | Three Months Ended
|                                                                        |                                       |                                       |                                            |            |                   
|                                                                        |                                       |                                       |                                            |            | 9/30/02            |            | 9/30/01 
|                                                                        |                                       |                                       |                                            |            |                    |            |         
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      | Avg.                   |      |           |            |            |            |         |         |         |         | Avg.  
|                                                                        |                                       |                                       |                                            |            | Average            |            |          |         |         |         | Yield/  |      | Average                |      |           |            |            |            | Yield/ 
|                                                                        |                                       |                                       |                                            |            | Balance            |            | Interest |         | Cost    |         | Balance |      | Interest               |      | Cost     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |          
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      | (Dollars in thousands) |      |           |            |            |            |         |         |        
|Interest-earning assets:                                                |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        | Loans and leases                      |                                       | $                                          | 25,460,404 |                    |            | $        | 410,237 |         |         |         | 6.43 | %                      |      | $         | 26,538,590 |            |            | $       | 484,697 |         |         |        | 7.29 | %   
|                                                                        | Mortgage-backed securities:           |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 9,364,722          |            |          |         | 135,099 |         |         |      | 5.77                   |      |           |            | 5,545,025  |            |         |         | 89,819  |         |        |      | 6.48 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 677,206            |            |          |         | 10,695  |         |         |      | 6.32                   |      |           |            | 1,176,526  |            |         |         | 20,141  |         |        |      | 6.85 |     
|                                                                        | Investment securities:                |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 181,769            |            |          |         | 2,939   |         |         |      | 6.47                   |      |           |            | 162,391    |            |         |         | 3,387   |         |        |      | 8.34 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 4,480              |            |          |         | 61      |         |         |      | 5.52                   |      |           |            | 6,926      |            |         |         | 88      |         |        |      | 5.11 |     
|                                                                        | Other interest-earning assets         |                                       |                                            | 979,454    |                    |            |          | 9,729   |         |         |         | 3.89 |                        |      |           | 642,584    |            |            |         | 10,850  |         |         |        | 6.61 |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-earning assets              |            |                    | 36,668,035 |          |         |         | 568,760 |         |      |                        | 6.19 |           |            |            | 34,072,042 |         |         |         | 608,982 |        |      |      | 7.13 | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|Allowance for loan and lease losses                                     |                                       |                                       | (267,486                                   | )          |                    |            |          |         |         |         |         |      |                        |      | (231,028  | )          |            |            |         |         |         |         |        |     
|Noninterest-earning assets                                              |                                       |                                       | 2,968,951                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,656,029 |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total assets                               |            | $                  | 39,369,500 |          |         |         |         |         |      |                        |      |           |            | $          | 36,497,043 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|Interest-bearing liabilities:                                           |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        | Deposits:                             |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |      |     
|                                                                        |                                       | Checking accounts                     |                                            | $          | 6,283,029          |            |          |         | 33,721  |         |         |      | 2.13                   |      |           | $          | 4,306,395  |            |         |         | 36,073  |         |        |      | 3.32 |     
|                                                                        |                                       | Money market and savings
accounts     |                                            |            | 8,378,267          |            |          |         | 44,790  |         |         |      | 2.12                   |      |           |            | 6,741,797  |            |         |         | 53,194  |         |        |      | 3.13 |     
|                                                                        |                                       | Certificates of deposit               |                                            |            | 9,831,050          |            |          |         | 82,310  |         |         |      | 3.32                   |      |           |            | 10,406,778 |            |         |         | 135,544 |         |        |      | 5.17 |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total deposits                             |            |                    | 24,492,346 |          |         |         | 160,821 |         |      |                        | 2.61 |           |            |            | 21,454,970 |         |         |         | 224,811 |        |      |      | 4.16 | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        | FHLB advances                         |                                       |                                            | 7,944,811  |                    |            |          | 103,729 |         |         |         | 5.18 |                        |      |           | 9,280,037  |            |            |         | 122,214 |         |         |        | 5.22 |     
|                                                                        | Other borrowings                      |                                       |                                            | 929,957    |                    |            |          | 13,943  |         |         |         | 5.97 |                        |      |           | 548,888    |            |            |         | 8,633   |         |         |        | 6.23 |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total borrowings                           |            |                    | 8,874,768  |          |         |         | 117,672 |         |      |                        | 5.26 |           |            |            | 9,828,925  |         |         |         | 130,847 |        |      |      | 5.28 | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total interest-bearing liabilities         |            |                    | 33,367,114 |          |         |         | 278,493 |         |      |                        | 3.31 |           |            |            | 31,283,895 |         |         |         | 355,658 |        |      |      | 4.51 | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|Noninterest-bearing liabilities:                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        | Demand deposit accounts               |                                       |                                            | 1,789,713  |                    |            |          |         |         |         |         |      |                        |      |           | 1,496,975  |            |            |         |         |         |         |        |      |     
|                                                                        | Other noninterest-bearing
liabilities |                                       |                                            | 1,173,108  |                    |            |          |         |         |         |         |      |                        |      |           | 787,229    |            |            |         |         |         |         |        |      |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       | Total noninterest-bearing
liabilities |                                            |            | 2,962,821          |            |          |         |         |         |         |      |                        |      |           |            | 2,284,204  |            |         |         |         |         |        |      |      |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities                          |            |                    | 36,329,935 |          |         |         |         |         |      |                        |      |           |            |            | 33,568,099 |         |         |         |         |        |      |      |      | 
|Shareholders equity                                                    |                                       |                                       | 3,039,565                                  |            |                    |            |          |         |         |         |         |      |                        |      | 2,928,944 |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|                                                                        |                                       |                                       | Total liabilities and
shareholders equity |            | $                  | 39,369,500 |          |         |         |         |         |      |                        |      |           |            | $          | 36,497,043 |         |         |         |         |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|Net interest income                                                     |                                       |                                       |                                            |            |                    | $          | 290,267  |         |         |         |         |      |                        |      |           |            |            | $          | 253,324 |         |         |         |        |     
|                                                                        |                                       |                                       |                                            |            |                    |            |          |         |         |         |         |      |                        |      |           |            |            |            |         |         |         |         |        |     
|Interest rate spread                                                    |                                       |                                       |                                            |            |                    |            |          |         |         |         | 2.88    |      |                        |      |           |            |            |            |         |         |         |         | 2.62   |     
|Net yield on average interest-
earning assets                           |                                       |                                       |                                            |            |                    |            |          |         |         |         | 3.17    |      |                        |      |           |            |            |            |         |         |         |         | 2.97   |     
|Average interest-earning assets to
average interest-bearing liabilities |                                       |                                       |                                            |            |                    |            |          |         |         |         | 109.89  | %    |                        |      |           |            |            |            |         |         |         |         | 108.91 | %   

9



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##### Table of Contents



|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |      |      |      | 
|----------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------------ | ---------- | ----------------- | ---------- | -------- | --------- | ------- | --------- | ------- | ---- | ---------------------- | ---- | --------- | ---------- | ---------- | ---------- | ------- | --------- | ------- | --------- | ------ | ---- | ---- | ---- | 
|                                                                        |                                       |                                       |                                            |            | Nine Months Ended
|                                                                        |                                       |                                       |                                            |            |                  
|                                                                        |                                       |                                       |                                            |            | 9/30/02           |            | 9/30/01 
|                                                                        |                                       |                                       |                                            |            |                   |            |         
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      | Avg.                   |      |           |            |            |            |         |           |         |           | Avg.  
|                                                                        |                                       |                                       |                                            |            | Average           |            |          |           |         |           | Yield/  |      | Average                |      |           |            |            |            | Yield/ 
|                                                                        |                                       |                                       |                                            |            | Balance           |            | Interest |           | Cost    |           | Balance |      | Interest               |      | Cost     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |          
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      | (Dollars in thousands) |      |           |            |            |            |         |           |        
|Interest-earning assets:                                                |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        | Loans and leases                      |                                       | $                                          | 25,296,320 |                   |            | $        | 1,253,132 |         |           |         | 6.61 | %                      |      | $         | 25,398,713 |            |            | $       | 1,410,215 |         |           |        | 7.41 | %   
|                                                                        | Mortgage-backed securities:           |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 8,710,523         |            |          |           | 388,000 |           |         |      | 5.94                   |      |           |            | 5,066,129  |            |         |           | 257,156 |           |        |      | 6.77 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 771,416           |            |          |           | 37,756  |           |         |      | 6.53                   |      |           |            | 1,313,218  |            |         |           | 69,711  |           |        |      | 7.08 |     
|                                                                        | Investment securities:                |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |      |     
|                                                                        |                                       | Available for sale                    |                                            |            | 160,661           |            |          |           | 8,526   |           |         |      | 7.08                   |      |           |            | 141,016    |            |         |           | 8,439   |           |        |      | 7.98 |     
|                                                                        |                                       | Held to maturity                      |                                            |            | 4,998             |            |          |           | 192     |           |         |      | 5.13                   |      |           |            | 8,204      |            |         |           | 324     |           |        |      | 5.27 |     
|                                                                        | Other interest-earning assets         |                                       |                                            | 952,088    |                   |            |          | 27,119    |         |           |         | 3.76 |                        |      |           | 633,147    |            |            |         | 32,355    |         |           |        | 6.74 |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total interest-earning assets              |            |                   | 35,896,006 |          |           |         | 1,714,725 |         |      |                        | 6.37 |           |            |            | 32,560,427 |         |           |         | 1,778,200 |        |      |      | 7.28 | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|Allowance for loan and lease losses                                     |                                       |                                       | (260,458                                   | )          |                   |            |          |           |         |           |         |      |                        |      | (204,031  | )          |            |            |         |           |         |           |        |     
|Noninterest-earning assets                                              |                                       |                                       | 2,863,644                                  |            |                   |            |          |           |         |           |         |      |                        |      | 2,743,053 |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total assets                               |            | $                 | 38,499,192 |          |           |         |           |         |      |                        |      |           |            | $          | 35,099,449 |         |           |         |           |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|Interest-bearing liabilities:                                           |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        | Deposits:                             |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |      |     
|                                                                        |                                       | Checking accounts                     |                                            | $          | 6,102,712         |            |          |           | 100,558 |           |         |      | 2.20                   |      |           | $          | 3,393,003  |            |         |           | 79,375  |           |        |      | 3.13 |     
|                                                                        |                                       | Money market and savings
accounts     |                                            |            | 7,915,705         |            |          |           | 132,271 |           |         |      | 2.23                   |      |           |            | 6,382,528  |            |         |           | 163,390 |           |        |      | 3.42 |     
|                                                                        |                                       | Certificates of deposit               |                                            |            | 10,107,847        |            |          |           | 267,969 |           |         |      | 3.54                   |      |           |            | 10,287,201 |            |         |           | 412,830 |           |        |      | 5.37 |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total deposits                             |            |                   | 24,126,264 |          |           |         | 500,798   |         |      |                        | 2.78 |           |            |            | 20,062,732 |         |           |         | 655,595   |        |      |      | 4.37 | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        | FHLB advances                         |                                       |                                            | 7,966,061  |                   |            |          | 311,372   |         |           |         | 5.22 |                        |      |           | 9,554,422  |            |            |         | 386,147   |         |           |        | 5.40 |     
|                                                                        | Other borrowings                      |                                       |                                            | 598,769    |                   |            |          | 31,324    |         |           |         | 6.96 |                        |      |           | 502,617    |            |            |         | 25,982    |         |           |        | 6.86 |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total borrowings                           |            |                   | 8,564,830  |          |           |         | 342,696   |         |      |                        | 5.35 |           |            |            | 10,057,039 |         |           |         | 412,129   |        |      |      | 5.47 | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total interest-bearing liabilities         |            |                   | 32,691,094 |          |           |         | 843,494   |         |      |                        | 3.45 |           |            |            | 30,119,771 |         |           |         | 1,067,724 |        |      |      | 4.74 | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|Noninterest-bearing liabilities:                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        | Demand deposit accounts               |                                       |                                            | 1,745,700  |                   |            |          |           |         |           |         |      |                        |      |           | 1,435,775  |            |            |         |           |         |           |        |      |     
|                                                                        | Other noninterest-bearing
liabilities |                                       |                                            | 1,104,913  |                   |            |          |           |         |           |         |      |                        |      |           | 843,286    |            |            |         |           |         |           |        |      |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       | Total noninterest-bearing
liabilities |                                            |            | 2,850,613         |            |          |           |         |           |         |      |                        |      |           |            | 2,279,061  |            |         |           |         |           |        |      |      |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total liabilities                          |            |                   | 35,541,707 |          |           |         |           |         |      |                        |      |           |            |            | 32,398,832 |         |           |         |           |        |      |      |      | 
|Shareholders equity                                                    |                                       |                                       | 2,957,485                                  |            |                   |            |          |           |         |           |         |      |                        |      | 2,700,617 |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|                                                                        |                                       |                                       | Total liabilities and
shareholders equity |            | $                 | 38,499,192 |          |           |         |           |         |      |                        |      |           |            | $          | 35,099,449 |         |           |         |           |        |      |      |      | 
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|Net interest income                                                     |                                       |                                       |                                            |            |                   | $          | 871,231  |           |         |           |         |      |                        |      |           |            |            | $          | 710,476 |           |         |           |        |     
|                                                                        |                                       |                                       |                                            |            |                   |            |          |           |         |           |         |      |                        |      |           |            |            |            |         |           |         |           |        |     
|Interest rate spread                                                    |                                       |                                       |                                            |            |                   |            |          |           |         |           | 2.92    |      |                        |      |           |            |            |            |         |           |         |           | 2.54   |     
|Net yield on average interest-
earning assets                           |                                       |                                       |                                            |            |                   |            |          |           |         |           | 3.24    |      |                        |      |           |            |            |            |         |           |         |           | 2.91   |     
|Average interest-earning assets to
average interest-bearing liabilities |                                       |                                       |                                            |            |                   |            |          |           |         |           | 109.80  | %    |                        |      |           |            |            |            |         |           |         |           | 108.10 | %   

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Figure 3 shows the approximate relative contribution of changes in average
interest rates and volume to changes in net interest income for the periods
indicated. Changes not solely attributable to volume or rate have been
allocated in proportion to the changes due to volume and rate. Amortization of
net deferred loan costs and automobile dealer reserves included as a reduction
in interest income was $26.1 million and $74.2 million for the three and nine
months ended September 30, 2002, respectively, and $22.3 million and $58.8
million for the three and nine months ended September 30, 2001, respectively.

Rate/Volume Analysis (Figure
3)

|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |          |         |         |          |  
|----------------------------- | --------------------------------- | ------------------ | ----- | ------- | ------- | -------------------------------- | ------- | ------------------------------- | ------ | ------ | ------ | ------- | ------ | ---------------------- | ------- | -------- | ------- | -------- | -------- | ------- | ------- | ------- | ------- | -------- | ------- | ------- | -------- | -
|                              |                                   |                    |       |         |         | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                              |                                   |                    |       |         |         |                                  |         |                                
|                              |                                   |                    |       |         |         | 2002 v. 2001                     |         | 2002 v. 2001                   
|                              |                                   |                    |       |         |         |                                  |         |                                
|                              |                                   |                    |       |         |         | Increase (decrease) due to       |         | Increase (decrease) due to      |       
|                              |                                   |                    |       |         |         |                                  |         |                                 |       
|                              |                                   |                    |       |         |         | Rate                             |         | Volume                          |        | Total  |        | Rate    |        | Volume                 |         | Total   
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |         
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        | (Dollars in thousands) |         |          |         |          |          |         |         |        
|Interest income:              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|                              | Loans and leases                  |                    | $     | (57,569 | )       |                                  | $       | (16,891                         | )      |        | $      | (74,460 | )      |                        | $       | (153,693 | )       |          | $        | (3,390  | )       |         | $       | (157,083 | )      
|                              | Mortgage-backed securities:       |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |          |        
|                              |                                   | Available for sale |       |         | (10,751 | )                                |         |                                 | 56,031 |        |        |         | 45,280 |                        |         |          | (34,786 | )        |          |         | 165,630 |         |         |          | 130,844 |        
|                              |                                   | Held to maturity   |       |         | (1,458  | )                                |         |                                 | (7,988 | )      |        |         | (9,446 | )                      |         |          | (5,080  | )        |          |         | (26,875 | )       |         |          | (31,955 | )      
|                              | Investment securities:            |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |          |        
|                              |                                   | Available for sale |       |         | (820    | )                                |         |                                 | 372    |        |        |         | (448   | )                      |         |          | (1,016  | )        |          |         | 1,103   |         |         |          | 87      |        
|                              |                                   | Held to maturity   |       |         | 6       |                                  |         |                                 | (33    | )      |        |         | (27    | )                      |         |          | (9      | )        |          |         | (123    | )       |         |          | (132    | )      
|                              | Other interest-earning assets     |                    |       | (5,497  | )       |                                  |         | 4,376                           |        |        |        | (1,121  | )      |                        |         | (17,695  | )       |          |          | 12,459  |         |         |         | (5,236   | )      
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|                              |                                   |                    | Total |         |         | (76,089                          | )       |                                 |        | 35,867 |        |         |        | (40,222                | )       |          |         | (212,279 | )        |         |         | 148,804 |         |          |         | (63,475 | )       
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|Interest expense:             |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|                              | Checking accounts                 |                    |       | (15,572 | )       |                                  |         | 13,221                          |        |        |        | (2,351  | )      |                        |         | (28,529  | )       |          |          | 49,712  |         |         |         | 21,183   |        
|                              | Money market and savings accounts |                    |       | (21,476 | )       |                                  |         | 13,071                          |        |        |        | (8,405  | )      |                        |         | (71,113  | )       |          |          | 39,995  |         |         |         | (31,118  | )      
|                              | Certificates of deposit           |                    |       | (46,095 | )       |                                  |         | (7,139                          | )      |        |        | (53,234 | )      |                        |         | (137,783 | )       |          |          | (7,079  | )       |         |         | (144,862 | )      
|                              | FHLB advances                     |                    |       | (436    | )       |                                  |         | (18,049                         | )      |        |        | (18,485 | )      |                        |         | (10,567  | )       |          |          | (64,208 | )       |         |         | (74,775  | )      
|                              | Other borrowings                  |                    |       | (1,930  | )       |                                  |         | 7,240                           |        |        |        | 5,310   |        |                        |         | (4,090   | )       |          |          | 9,432   |         |         |         | 5,342    |        
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|                              |                                   |                    |       | Total   |         |                                  | (85,509 | )                               |        |        | 8,344  |         |        |                        | (77,165 | )        |         |          | (252,082 | )       |         |         | 27,852  |          |         |         | (224,230 | )
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         
|Change in net interest income |                                   | $                  | 9,420 |         |         | $                                | 27,523  |                                 |        | $      | 36,943 |         |        | $                      | 39,803  |          |         | $        | 120,952  |         |         | $       | 160,755 |         
|                              |                                   |                    |       |         |         |                                  |         |                                 |        |        |        |         |        |                        |         |          |         |          |          |         |         |         |         |         

Net interest income was $290.3 million for the three months ended September 30,
2002, up $36.9 million, or 14.6%, from the third quarter of 2001. The increase
in net interest income was primarily attributable to the reduction in the cost
of average interest-bearing liabilities from 4.51% during the third quarter of
2001 to 3.31% during the third quarter of 2002. The reduction in the cost of
average interest-bearing liabilities resulted primarily from the maturity and
repricing of higher interest rate certificates of deposit since September 30,
2001, together with the downward repricing of certain core deposit accounts.

Net interest income was $871.2 million for the nine months ended September 30,
2002, up $160.8 million, or 22.6%, from $710.5 million in the comparable 2001
period. The increase in net interest income was primarily attributable to the
reduction in the cost of average interest-bearing liabilities from 4.74% during
the nine months ended September 30, 2001 to 3.45% during the 2002 period. The
reduction in the cost of average interest-bearing liabilities resulted
primarily from the repricing of higher interest rate certificates of deposit
since September 30, 2001, together with the downward repricing of certain core
deposit accounts.

Other Income

Other income for the three months ended September 30, 2002 was $139.1 million,
an increase of $18.9 million, or 15.8%, over the $120.1 million for the three
months ended September 30, 2001. The increase was primarily attributable to
income from retail banking and net gains on sales. Retail banking income
increased $11.9 million, or 16.4%, over the comparable period in 2001. Growth
in income from retail banking was attributable to successful integration of
past mergers and branch acquisitions together with ongoing franchise
development initiatives. Net gains totaled $83.9 million for the third quarter
of 2002, an increase of $57.6 million over the third quarter of 2001. The $4.5
billion of mortgage-backed securities sold during the third quarter 2002 were
comprised primarily of seasoned, bank-originated residential mortgage products.
We did not utilize any special-purpose entities for the sale of any of our
mortgage-backed securities. Offsetting the net gains on sale of
mortgage-backed securities of $107.8 million was a $22.1 million unrealized
loss on interest rate swaps that are accounted for at fair value under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, as
amended. The $22.1 million unrealized loss was the result of the decline in
interest rates during the third quarter.

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With respect to the decline in mortgage banking income, we increased the
valuation allowance on loan servicing assets by $56.0 million in the third
quarter of 2002 to $89.3 million due to increasing prepayment speeds. Total
mortgage banking income, excluding the $56.0 million increase in the valuation
allowance, was $19.0 million in the third quarter of 2002. In the year ago
quarter, mortgage banking income totaled $13.6 million, excluding a $4.0
million increase in the valuation allowance. As a result of the strong loan
origination and securitization activity in the past 12 months, the portfolio of
loans serviced for others increased to $16.8 billion, up 21.5% since September
30, 2001. The related loan servicing asset was reduced to .75% of the
portfolio at $126.6 million at September 30, 2002. With an average servicing
spread of 35 basis points, that translates into a servicing asset valuation of
just over two times the servicing spread.

Other income for the nine months ended September 30, 2002 was $395.4 million,
an increase of $54.6 million, or 16.0%, over the $340.8 million for the nine
months ended September 30, 2001. The reasons for the net increase were
substantially the same as for the third quarter results discussed in the above
paragraphs.

Administrative Expenses

Administrative expenses were $171.3 million for the three months ended
September 30, 2002, an increase of $16.1 million, or 10.3%, as compared to the
third quarter of 2001. The increase in administrative expenses was primarily
attributable to costs associated with the operational integration of
acquisitions completed in the last 12 months and continued investments in our
operations. Additionally, marketing expenses increased $5.2 million, as
compared to the comparable period of 2001. These higher marketing costs
occurred as we implemented various programs geared to support sales efforts
throughout the Bank. Despite the increase in administrative expenses, our
efficiency ratio improved to 39.90% for the three months ended September 30,
2002, compared to 40.49% for the three months ended September 30, 2001. See
the above discussion in Other Income regarding factors that contributed to
the improvement in our efficiency ratio.

Administrative expenses were $502.1 million for the nine months ended September
30, 2002, an increase of $48.4 million, or 10.7%, as compared to the 2001
period. The reasons for the increases in administrative expenses were
substantially the same as for the third quarter results discussed in the above
paragraph. Despite the increase in administrative expenses, our efficiency
ratio improved to 39.64% for the nine months ended September 30, 2002, compared
to 42.00% for the comparable period in 2001. See the above discussion in Other
Income regarding factors that contributed to the improvement in our efficiency
ratio.

Federal Income Tax

Federal income tax expense for the three months ended September 30, 2002 was
$66.8 million, compared to $60.7 million for the same period in 2001. The
primary reason for this increase in the provision for federal income taxes was
an increase in pre-tax income. The effective tax rate was 31.7% for both the
2002 and 2001 period.

Federal income tax expense for the nine months ended September 30, 2002 was
$200.9 million, compared to $170.1 million for the same period in 2001. The
primary reason for this increase in the provision for federal income taxes was
an increase in pre-tax income. The effective tax rate was 31.7% for the both
the 2002 and 2001 period.

FINANCIAL CONDITION

Overview

At September 30, 2002, total assets were $39.9 billion, compared to total
assets of $38.2 billion at December 31, 2001.

12



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Loans and Leases

Composition of Loans and
Leases
(Figure 4)

|                                                            |                   |                 |                          |           |                        |            |            |           |           |            | 
|----------------------------------------------------------- | ----------------- | --------------- | ------------------------ | --------- | ---------------------- | ---------- | ---------- | --------- | --------- | ---------- | 
|                                                            |                   |                 |                          |           | 9/30/02                |            | 12/31/01  
|                                                            |                   |                 |                          |           |                        |            |           
|                                                            |                   |                 |                          |           | (Dollars in thousands)
|One-to-four family:                                         |                   |                 |                          |           |                        |            |            |          
|                                                            | Permanent:        |                 |                          |           |                        |            |            |           |          
|                                                            |                   | Fixed rate      |                          | $         | 5,942,919              |            |            | $         | 6,419,819 |           
|                                                            |                   | Adjustable rate |                          |           | 2,694,956              |            |            |           | 3,350,370 |           
|                                                            | Construction      |                 |                          | 427,871   |                        |            |            | 409,369   |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|                                                            |                   |                 | 9,065,746                |           |                        |            | 10,179,558 |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|Commercial real estate:                                     |                   |                 |                          |           |                        |            |            |          
|                                                            | Multifamily       |                 |                          | 1,017,393 |                        |            |            | 1,189,777 |          
|                                                            | Other             |                 |                          | 1,313,243 |                        |            |            | 1,279,889 |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|                                                            |                   |                 | 2,330,636                |           |                        |            | 2,469,666  |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|Consumer:                                                   |                   |                 |                          |           |                        |            |            |          
|                                                            | Retail            |                 |                          | 5,008,393 |                        |            |            | 4,857,473 |          
|                                                            | Automobile        |                 |                          | 5,281,731 |                        |            |            | 4,397,425 |          
|                                                            | Consumer finance  |                 |                          | 973,981   |                        |            |            | 1,042,522 |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|                                                            |                   |                 | 11,264,105               |           |                        |            | 10,297,420 |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|Business:                                                   |                   |                 |                          |           |                        |            |            |          
|                                                            | Leasing           |                 |                          | 2,028,687 |                        |            |            | 1,994,524 |          
|                                                            | Corporate banking |                 |                          | 1,242,869 |                        |            |            | 1,043,010 |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|                                                            |                   |                 | 3,271,556                |           |                        |            | 3,037,534  |          
|                                                            |                   |                 |                          |           |                        |            |            |          
|Loans and leases before allowance for loan and lease losses |                   |                 | 25,932,043               |           |                        |            | 25,984,178 |          
|Allowance for loan and lease losses                         |                   |                 | (292,800                 | )         |                        |            | (255,478   | )        
|                                                            |                   |                 |                          |           |                        |            |            |          
|                                                            |                   |                 | Loans and leases, net(1) |           | $                      | 25,639,243 |            |           | $         | 25,728,700 | 
|                                                            |                   |                 |                          |           |                        |            |            |          
|Portfolio of loans serviced for others                      |                   | $               | 16,840,025               |           |                        | $          | 13,846,807 |          
|                                                            |                   |                 |                          |           |                        |            |            |          



---

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

13



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Loan and Lease Activity
(Figure 5)

|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |           |           |            |            | 
|---------------------------------------------------- | ---------------------------------------------- | ------------------ | --------------------------------- | ------------------------------------ | --------- | ------------------ | --------- | ----------------- | --------- | ---------------------- | --------- | --------- | --------- | ---------- | ---------- | --------- | --------- | ---------- | ---------- | 
|                                                     |                                                |                    |                                   |                                      |           | Three Months Ended |           | Nine Months Ended
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                  
|                                                     |                                                |                    |                                   |                                      |           | 9/30/02            |           | 9/30/01           |           | 9/30/02                |           | 9/30/01  
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |          
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           | (Dollars in thousands) |           |           |           |           
|Originations:                                        |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|Real estate:                                         |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     | Permanent:                                     |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |           |          
|                                                     |                                                | One-to-four family |                                   | $                                    | 2,481,022 |                    |           | $                 | 2,015,708 |                        |           | $         | 7,113,855 |            |            | $         | 5,982,597 |           
|                                                     |                                                | Multifamily        |                                   |                                      | 49,187    |                    |           |                   | 21,003    |                        |           |           | 108,885   |            |            |           | 40,679    |           
|                                                     |                                                | Commercial         |                                   |                                      | 48,601    |                    |           |                   | 19,953    |                        |           |           | 175,375   |            |            |           | 146,534   |           
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    | Total permanent loans             |                                      |           | 2,578,810          |           |                   |           | 2,056,664              |           |           |           | 7,398,115  |            |           |           | 6,169,810  |           
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     | Construction:                                  |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |           |          
|                                                     |                                                | One-to-four family |                                   |                                      | 5,748     |                    |           |                   | 16,765    |                        |           |           | 27,720    |            |            |           | 342,222   |           
|                                                     |                                                | Multifamily        |                                   |                                      | 13,950    |                    |           |                   | 60,506    |                        |           |           | 38,938    |            |            |           | 131,020   |           
|                                                     |                                                | Commercial         |                                   |                                      | 29,385    |                    |           |                   | 68,526    |                        |           |           | 111,108   |            |            |           | 173,949   |           
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    | Total construction loans          |                                      |           | 49,083             |           |                   |           | 145,797                |           |           |           | 177,766    |            |           |           | 647,191    |           
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    |                                   | Total real estate loans originated   |           |                    | 2,627,893 |                   |           |                        | 2,202,461 |           |           |            | 7,575,881  |           |           |            | 6,817,001  | 
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|Retail consumer                                      |                                                |                    | 948,632                           |                                      |           |                    | 948,975   |                   |           |                        | 2,885,687 |           |           |            | 2,668,708  |          
|Automobile                                           |                                                |                    | 1,012,926                         |                                      |           |                    | 900,593   |                   |           |                        | 2,478,734 |           |           |            | 2,079,900  |          
|Consumer finance                                     |                                                |                    | 73,931                            |                                      |           |                    | 70,161    |                   |           |                        | 185,352   |           |           |            | 195,523    |          
|Leases                                               |                                                |                    | 110,428                           |                                      |           |                    | 141,386   |                   |           |                        | 321,013   |           |           |            | 397,511    |          
|Corporate banking                                    |                                                |                    | 512,600                           |                                      |           |                    | 273,105   |                   |           |                        | 1,265,413 |           |           |            | 742,070    |          
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    | Total loans and leases originated |                                      |           | 5,286,410          |           |                   |           | 4,536,681              |           |           |           | 14,712,080 |            |           |           | 12,900,713 |           
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|Acquired through business combinations and
purchases |                                                |                    | 2,637                             |                                      |           |                    | 1,406,582 |                   |           |                        | 213,992   |           |           |            | 1,418,305  |          
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|Sales and principal reductions:                      |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     | Loans sold                                     |                    |                                   | 527,011                              |           |                    |           | 399,889           |           |                        |           | 1,652,269 |           |            |            | 1,159,814 |          
|                                                     | Loans exchanged for mortgage-backed
securities |                    |                                   | 809,167                              |           |                    |           | 2,258,523         |           |                        |           | 5,066,120 |           |            |            | 5,449,048 |          
|                                                     | Principal reductions                           |                    |                                   | 2,894,793                            |           |                    |           | 2,225,932         |           |                        |           | 8,262,966 |           |            |            | 6,129,277 |          
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    |                                   | Total sales and principal reductions |           |                    | 4,230,971 |                   |           |                        | 4,884,344 |           |           |            | 14,981,355 |           |           |            | 12,738,139 | 
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          
|                                                     |                                                |                    |                                   | Increase (decrease) before net items |           | $                  | 1,058,076 |                   |           | $                      | 1,058,919 |           |           | $          | (55,283    | )         |           | $          | 1,580,879  | 
|                                                     |                                                |                    |                                   |                                      |           |                    |           |                   |           |                        |           |           |           |            |            |          

Investment and Mortgage-Backed Securities

Figures 6 and 7 summarize our investment and mortgage-backed securities
portfolios at September 30, 2002 and December 31, 2001. The amounts reflected
represent the fair value of securities available for sale and the amortized
cost of securities held to maturity.

Investment Securities (Figure
6)

|                   |                                                      |                                                |       |         |                        |         |          |        |         |         | 
|------------------ | ---------------------------------------------------- | ---------------------------------------------- | ----- | ------- | ---------------------- | ------- | -------- | ------ | ------- | ------- | 
|                   |                                                      |                                                |       |         | 9/30/02                |         | 12/31/01
|                   |                                                      |                                                |       |         |                        |         |         
|                   |                                                      |                                                |       |         | (Dollars in thousands)
|Available
for Sale |                                                      |                                                |       |         |                        |         |          |       
|                   | U.S. Treasury and agency securities                  |                                                | $     | 91,596  |                        |         | $        | 30,929 |        
|                   | Securities of U.S. states and political subdivisions |                                                |       | 2,442   |                        |         |          | 8      |        
|                   | Corporate and other securities                       |                                                |       | 119,646 |                        |         |          | 98,375 |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      | Total investment securities available for sale |       |         | 213,684                |         |          |        | 129,312 |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|Held to Maturity   |                                                      |                                                |       |         |                        |         |          |       
|                   | U.S. Treasury and agency securities                  |                                                |       | 263     |                        |         |          |       |        
|                   | Securities of U.S. states and political subdivisions |                                                |       | 4,344   |                        |         |          | 5,839  |        
|                   | Corporate and other securities                       |                                                |       | 35      |                        |         |          | 435    |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      | Total investment securities held to maturity   |       |         | 4,642                  |         |          |        | 6,274   |        
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   |                                                      |                                                | Total |         | $                      | 218,326 |          |        | $       | 135,586 | 
|                   |                                                      |                                                |       |         |                        |         |          |       
|                   | Weighted average rate                                |                                                |       | 5.63    | %                      |         |          | 8.21   | %      
|                   |                                                      |                                                |       |         |                        |         |          |       

14



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##### Table of Contents



Mortgage-Backed
Securities
(Figure 7)

|                   |                                      |                                   |                                                     |       |           |                        |           |          |           |           |           | 
|------------------ | ------------------------------------ | --------------------------------- | --------------------------------------------------- | ----- | --------- | ---------------------- | --------- | -------- | --------- | --------- | --------- | 
|                   |                                      |                                   |                                                     |       |           | 9/30/02                |           | 12/31/01
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|                   |                                      |                                   |                                                     |       |           | (Dollars in thousands)
|Available for Sale |                                      |                                   |                                                     |       |           |                        |           |         
|                   | Participation certificates:          |                                   |                                                     |       |           |                        |           |          |          
|                   |                                      | U.S. government and agency issues |                                                     | $     | 7,915,719 |                        |           | $        | 6,950,425 |          
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |           |                        |           |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 397,578   |                        |           |          | 518,251   |          
|                   |                                      | Private issues                    |                                                     |       | 492,390   |                        |           |          | 561,836   |          
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|                   |                                      |                                   | Total mortgage-backed securities available for sale |       |           | 8,805,687              |           |          |           | 8,030,512 |          
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|Held to Maturity   |                                      |                                   |                                                     |       |           |                        |           |         
|                   | Participation certificates:          |                                   |                                                     |       |           |                        |           |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 348,157   |                        |           |          | 475,622   |          
|                   |                                      | Private issues                    |                                                     |       | 60,320    |                        |           |          | 90,203    |          
|                   | Collateralized mortgage obligations: |                                   |                                                     |       |           |                        |           |          |          
|                   |                                      | U.S. government and agency issues |                                                     |       | 119,937   |                        |           |          | 185,944   |          
|                   |                                      | Private issues                    |                                                     |       | 119,739   |                        |           |          | 232,135   |          
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|                   |                                      |                                   | Total mortgage-backed securities held to maturity   |       |           | 648,153                |           |          |           | 983,904   |          
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|                   |                                      |                                   |                                                     | Total |           | $                      | 9,453,840 |          |           | $         | 9,014,416 | 
|                   |                                      |                                   |                                                     |       |           |                        |           |         
|                   |                                      | Weighted average rate             |                                                     |       | 5.56      | %                      |           |          | 6.18      | %        
|                   |                                      |                                   |                                                     |       |           |                        |           |         

Asset Quality

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

The most significant effect of the change in charge-off policy was in the
automobile and consumer finance portfolios. Prior to the second quarter of
2002, automobile loans were charged off at the point of repossessed collateral
disposition. Beginning with the second quarter of 2002, consistent with
OCC-regulated banking practices, automobile loans going through repossession or
bankruptcies were written down to the net realizable value of the collateral at
the time of the repossession or bankruptcy discharge. Any automobile loan that
reached the 120-day delinquency point was charged off completely. Charge-offs
in the consumer finance portfolio were previously recognized at the point of
foreclosure. Beginning with the second quarter of 2002, consistent with
OCC-regulated banking practices, consumer finance loans, along with other loans
backed by single-family residential real estate collateral, were reflected at
the lower of cost or net realizable value at the earliest point of six payments
past due or foreclosure. These policy changes resulted in an additional $27.3
million of charge-offs recognized during the second quarter of 2002.

Being mindful of an economy that continues to exhibit weakness, particularly in
the non-consumer sectors, Charter One continued to strengthen its level of loan
loss reserves as shown in Figure 8 below.

15



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##### Table of Contents



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

|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |         |         |         |         |  
|------------------------------------ | -------------------------------------------------------- | ---------------------- | ----------------- | ------------------------------ | ------- | ------------------ | ------- | ----------------- | ------ | ---------------------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | ------- | ------- | -
|                                     |                                                          |                        |                   |                                |         | Three Months Ended |         | Nine Months Ended
|                                     |                                                          |                        |                   |                                |         |                    |         |                  
|                                     |                                                          |                        |                   |                                |         | 9/30/02            |         | 9/30/01           |        | 9/30/02                |         | 9/30/01
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |        
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        | (Dollars in thousands) |         |         |         |         
|Allowance for loan and lease losses: |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     | Balance, beginning of period                             |                        | $                 | 267,155                        |         |                    | $       | 198,378           |        |                        | $       | 255,478 |         |          | $       | 189,616 |        
|                                     | Provision for loan and lease losses                      |                        |                   | 47,695                         |         |                    |         | 27,109            |        |                        |         | 131,689 |         |          |         | 61,913  |        
|                                     | Acquired through business combination                    |                        |                   |                               |         |                    |         | 33,782            |        |                        |         | 3,184   |         |          |         | 33,782  |        
|                                     | Loans and leases charged off:                            |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |         |        
|                                     |                                                          | One-to-four family     |                   |                                | (643    | )                  |         |                   | (800   | )                      |         |         | (4,675  | )        |         |         | (2,162  | )      
|                                     |                                                          | Commercial real estate |                   |                                | (290    | )                  |         |                   | (26    | )                      |         |         | (1,208  | )        |         |         | (509    | )      
|                                     |                                                          | Retail consumer        |                   |                                | (2,308  | )                  |         |                   | (2,123 | )                      |         |         | (10,096 | )        |         |         | (5,772  | )      
|                                     |                                                          | Automobile             |                   |                                | (16,429 | )                  |         |                   | (8,243 | )                      |         |         | (63,024 | )        |         |         | (27,023 | )      
|                                     |                                                          | Consumer finance       |                   |                                | (5,160  | )                  |         |                   | (3,762 | )                      |         |         | (20,610 | )        |         |         | (8,356  | )      
|                                     |                                                          | Leases                 |                   |                                | (519    | )                  |         |                   | (7,234 | )                      |         |         | (2,780  | )        |         |         | (7,496  | )      
|                                     |                                                          | Corporate banking      |                   |                                | (4,776  | )                  |         |                   | (3,903 | )                      |         |         | (10,813 | )        |         |         | (5,456  | )      
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     |                                                          |                        | Total charge-offs |                                |         | (30,125            | )       |                   |        | (26,091                | )       |         |         | (113,206 | )(1)    |         |         | (56,774 | )      
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     | Recoveries:                                              |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |         |        
|                                     |                                                          | One-to-four family     |                   |                                | 881     |                    |         |                   | 74     |                        |         |         | 915     |          |         |         | 119     |        
|                                     |                                                          | Commercial real estate |                   |                                | 488     |                    |         |                   | 19     |                        |         |         | 618     |          |         |         | 24      |        
|                                     |                                                          | Retail consumer        |                   |                                | 484     |                    |         |                   | 402    |                        |         |         | 1,246   |          |         |         | 1,322   |        
|                                     |                                                          | Automobile             |                   |                                | 3,574   |                    |         |                   | 1,756  |                        |         |         | 9,105   |          |         |         | 4,800   |        
|                                     |                                                          | Consumer finance       |                   |                                | 238     |                    |         |                   | 73     |                        |         |         | 333     |          |         |         | 201     |        
|                                     |                                                          | Leases                 |                   |                                | 430     |                    |         |                   |       |                        |         |         | 430     |          |         |         | 220     |        
|                                     |                                                          | Corporate banking      |                   |                                | 1,980   |                    |         |                   | 102    |                        |         |         | 3,008   |          |         |         | 381     |        
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     |                                                          |                        | Total recoveries  |                                |         | 8,075              |         |                   |        | 2,426                  |         |         |         | 15,655   |         |         |         | 7,067   |        
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     |                                                          |                        |                   | Net loan and lease charge-offs |         |                    | (22,050 | )                 |        |                        | (23,665 | )       |         |          | (97,551 | )(1)    |         |         | (49,707 | )
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     | Balance, end of period                                   |                        | $                 | 292,800                        |         |                    | $       | 235,604           |        |                        | $       | 292,800 |         |          | $       | 235,604 |        
|                                     |                                                          |                        |                   |                                |         |                    |         |                   |        |                        |         |         |         |          |         |        
|                                     | Net charge-offs to average loans and leases
(annualized) |                        |                   | .35                            | %       |                    |         | .36               | %      |                        |         | .51     | %(1)    |          |         | .51     | %      



---

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

The provision for loan and lease losses exceeded net charge-offs by $25.6
million during the third quarter of 2002 and the ratio of the allowance for
loan and lease losses to total loans and leases before the allowance increased
to 1.13% at September 30, 2002 from .98% at December 31, 2001.

Net charge-offs during the third quarter of 2002 totaled $22.1 million, or .35%
of average loans and leases, compared to $23.7 million or .36% of average loans
and leases, during the third quarter of 2001.

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

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

16



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##### Table of Contents



Nonperforming and Underperforming Assets (Figure 9)

|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |          |        |        |         | 
|---------------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ------ | ---------------------- | ------- | -------- | ------ | ------ | ------- | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        | 9/30/02                |         | 12/31/01
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        | (Dollars in thousands)
|Nonperforming assets(1):                                   |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Nonaccrual loans and leases:                                                             |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | Real estate mortgage loans:             |                                                              |                                                                                                 |        |                        |         |          |        |       
|                                                           |                                                                                          |                                         | One-to-four family(2)                                        |                                                                                                 | $      | 31,528                 |         |          | $      | 79,394 |        
|                                                           |                                                                                          |                                         | Multifamily and commercial                                   |                                                                                                 |        | 6,621                  |         |          |        | 13,552 |        
|                                                           |                                                                                          |                                         | Construction and land                                        |                                                                                                 |        | 10,598                 |         |          |        | 10,276 |        
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total real estate mortgage loans                                                                |        |                        | 48,747  |          |        |        | 103,222 | 
|                                                           |                                                                                          | Retail consumer(2)                      |                                                              |                                                                                                 | 14,128 |                        |         |          | 16,592 |       
|                                                           |                                                                                          | Automobile(3)                           |                                                              |                                                                                                 |       |                        |         |          |       |       
|                                                           |                                                                                          | Consumer finance(2)                     |                                                              |                                                                                                 | 38,403 |                        |         |          | 68,485 |       
|                                                           |                                                                                          | Leases                                  |                                                              |                                                                                                 | 7,964  |                        |         |          | 904    |       
|                                                           |                                                                                          | Corporate banking                       |                                                              |                                                                                                 | 37,230 |                        |         |          | 10,551 |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonaccrual loans and leases                                                               |        |                        | 146,472 |          |        |        | 199,754 | 
|                                                           |                                                                                          |                                         |                                                              | Less government guaranteed loans(1)                                                             |        |                        |        |          |        |        | 19,630  | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonaccrual loans net of government guaranteed loans                                       |        |                        | 146,472 |          |        |        | 180,124 | 
|                                                           | Restructured real estate mortgage loans                                                  |                                         |                                                              | 1,149                                                                                           |        |                        |         | 653      |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonperforming loans and leases                                                            |        |                        | 147,621 |          |        |        | 180,777 | 
|                                                           | Real estate and other collateral owned(3)                                                |                                         |                                                              | 40,270                                                                                          |        |                        |         | 50,265   |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total nonperforming assets                                                                      |        | $                      | 187,891 |          |        | $      | 231,042 | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Ratio of (excluding government guaranteed loans):          |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Nonperforming loans and leases to total loans and leases                                 |                                         |                                                              | .58                                                                                             | %      |                        |         | .70      | %     
|                                                           | Nonperforming assets to total assets                                                     |                                         |                                                              | .47                                                                                             |        |                        |         | .61      |       
|                                                           | Nonperforming assets to total loans, leases and real estate and other collateral owned   |                                         |                                                              | .73                                                                                             |        |                        |         | .90      |       
|                                                           | Allowance for loan and lease losses to:                                                  |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | Nonperforming loans and leases          |                                                              |                                                                                                 | 198.35 |                        |         |          | 141.32 |       
|                                                           |                                                                                          | Total loans and leases before allowance |                                                              |                                                                                                 | 1.13   |                        |         |          | .98    |       
|Accruing loans and leases delinquent more than 90 days(1): |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Real estate mortgage loans:                                                              |                                         |                                                              |                                                                                                 |        |                        |         |          |       
|                                                           |                                                                                          | One-to-four family(2)                   |                                                              | $                                                                                               | 24,854 |                        |         | $        |       |       
|                                                           |                                                                                          | Multifamily and commercial              |                                                              |                                                                                                 |       |                        |         |          |       |       
|                                                           |                                                                                          | Construction and land                   |                                                              |                                                                                                 |       |                        |         |          |       |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         | Total real estate mortgage loans                             |                                                                                                 |        | 24,854                 |         |          |        |       |        
|                                                           | Retail consumer(2)                                                                       |                                         |                                                              | 5,630                                                                                           |        |                        |         | 4,519    |       
|                                                           | Automobile(3)                                                                            |                                         |                                                              | 2,595                                                                                           |        |                        |         | 6,000    |       
|                                                           | Consumer finance(2)                                                                      |                                         |                                                              | 25,269                                                                                          |        |                        |         |         |       
|                                                           | Leases                                                                                   |                                         |                                                              |                                                                                                |        |                        |         |         |       
|                                                           | Corporate banking                                                                        |                                         |                                                              | 1,955                                                                                           |        |                        |         | 4,691    |       
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         | Total accruing loans and leases delinquent more than 90 days |                                                                                                 |        | 60,303                 |         |          |        | 15,210 |        
|                                                           |                                                                                          |                                         | Less government guaranteed loans(1)                          |                                                                                                 |        |                       |         |          |        | 1,876  |        
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           |                                                                                          |                                         |                                                              | Total accruing loans and leases delinquent more than 90 days net of
government guaranteed loans |        | $                      | 60,303  |          |        | $      | 13,334  | 
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Total underperforming assets                               |                                                                                          | $                                       | 248,194                                                      |                                                                                                 |        | $                      | 244,376 |         
|                                                           |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|Ratio of (excluding government guaranteed loans):          |                                                                                          |                                         |                                                              |                                                                                                 |        |                        |         |         
|                                                           | Underperforming assets to total assets                                                   |                                         |                                                              | .62                                                                                             | %      |                        |         | .64      | %     
|                                                           | Underperforming assets to total loans, leases and real estate and other collateral owned |                                         |                                                              | .97                                                                                             |        |                        |         | .95      |       



---

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

17



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##### Table of Contents



Loans and leases not reflected in the table above, but where known information
about possible credit problems of borrowers causes management to have serious
doubts as to the ability of the borrower to comply with present repayment terms
and that may result in disclosure of such loans and leases as underperforming
assets in the future are commonly referred to as potential problem loans.
During the second quarter of 2002, we changed how we determine potential
problem loans to be consistent with commercial banking practice. Previously
that determination included all loans and leases classified as substandard
not already included as underperforming, without a loan-by-loan evaluation,
even though historically only a very small percentage of those loans and leases
was ultimately reflected in future charge-offs. Under the newly adopted method,
the amount included in potential problem loans results from an evaluation, on a
loan-by-loan basis, of loans classified as substandard. The amount of
potential problem loans remained was less than $25 million at September 30,
2002 and June 30, 2002, respectively. The vast majority of these loans and
leases, as well as our underperforming assets, are collateralized. As such, we
would anticipate that any losses resulting from possible future charge-offs
would be significantly less than the respective loan and lease balances.

SOURCES OF FUNDS

Management considers our interest-sensitivity profile when deciding on sources
of funds. At September 30, 2002, our one-year gap was 9.59% of total
interest-earning assets. See Part I, Item 3 Quantitative and Qualitative
Disclosure About Market Risk, of this Form 10-Q regarding further information
on our interest rate risk profile.

Deposits

Composition of Deposits (Figure 10)

|                                            |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |      |      |      | 
|------------------------------------------- | ------------------- | --------------------------- | ------------------- | --------- | ---------- | ---------- | -------- | ---- | ---------------------- | ---- | ---------- | --------- | ---------- | ---------- | -------- | ---- | ---- | ---- | 
|                                            |                     |                             |                     |           | 9/30/02    |            | 12/31/01
|                                            |                     |                             |                     |           |            |            |         
|                                            |                     |                             |                     |           |            |            |          |      | Weighted               |      |            |           |            |            | Weighted
|                                            |                     |                             |                     |           |            |            |          |      | Average                |      |            |           |            |            | Average 
|                                            |                     |                             |                     |           | Amount     |            | Rate     |      | Amount                 |      | Rate      
|                                            |                     |                             |                     |           |            |            |          |      |                        |      |           
|                                            |                     |                             |                     |           |            |            |          |      | (Dollars in thousands) |      |            |           |           
|Checking accounts:                          |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |     
|                                            | Interest-bearing    |                             | $                   | 6,588,045 |            |            |          | 2.19 | %                      |      | $          | 5,973,545 |            |            |          | 2.45 | %   
|                                            | Noninterest-bearing |                             |                     | 2,031,085 |            |            |          |     |                        |      |            | 1,856,481 |            |            |          |     |     
|                                            |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |     
|                                            |                     | Total checking accounts     |                     |           | 8,619,130  |            |          |      | 1.67                   |      |            |           | 7,830,026  |            |          |      | 1.87 |     
|Money market and savings accounts           |                     |                             | 8,248,750           |           |            |            | 2.04     |      |                        |      | 6,737,160  |           |            |            | 2.26     |     
|                                            |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |     
|                                            |                     | Total transactions accounts |                     |           | 16,867,880 |            |          |      | 1.85                   |      |            |           | 14,567,186 |            |          |      | 2.05 |     
|Certificates of deposit                     |                     |                             | 10,218,625          |           |            |            | 3.75     |      |                        |      | 10,556,123 |           |            |            | 4.43     |     
|                                            |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |     
|                                            |                     |                             | Total deposits, net |           | $          | 27,086,505 |          |      |                        | 2.57 |            |           | $          | 25,123,309 |          |      |      | 3.05 | 
|                                            |                     |                             |                     |           |            |            |          |      |                        |      |            |           |            |            |          |     
|Including the effect of interest rate swaps |                     |                             |                     |           |            |            | 2.41     | %    |                        |      |            |           |            |            | 2.88     | %   

Investment securities and mortgage-backed securities with a par value of $479.5
million at September 30, 2002 and $573.0 million at December 31, 2001, were
pledged to secure public deposits and for other purposes required or permitted
by law.

Borrowings

At September 30, 2002, borrowings consisted primarily of FHLB advances. These
positions were secured by our investment in the stock of the FHLB, as well as
$1.1 billion in certain real estate loans and $10.9 billion in mortgage-backed
securities.

Federal Home Loan Bank
Advances (Figure 11)

|                                     |                                             |                |                     |           |           |           |          |      |                        |      |           |           |           |           |          |      |      |      | 
|------------------------------------ | ------------------------------------------- | -------------- | ------------------- | --------- | --------- | --------- | -------- | ---- | ---------------------- | ---- | --------- | --------- | --------- | --------- | -------- | ---- | ---- | ---- | 
|                                     |                                             |                |                     |           | 9/30/02   |           | 12/31/01
|                                     |                                             |                |                     |           |           |           |         
|                                     |                                             |                |                     |           |           |           |          |      | Weighted               |      |           |           |           |           | Weighted
|                                     |                                             |                |                     |           |           |           |          |      | Average                |      |           |           |           |           | Average 
|                                     |                                             |                |                     |           | Amount    |           | Rate     |      | Amount                 |      | Rate     
|                                     |                                             |                |                     |           |           |           |          |      |                        |      |          
|                                     |                                             |                |                     |           |           |           |          |      | (Dollars in thousands) |      |           |           |          
|Short-term                           |                                             | $              | 150,000             |           |           |           | 6.84     | %    |                        | $    | 1,114,873 |           |           |           | 3.03     | %   
|Long-term:                           |                                             |                |                     |           |           |           |          |      |                        |      |           |           |           |           |          |     
|                                     | Fixed-rate advances                         |                |                     | 7,004,845 |           |           |          | 5.50 |                        |      |           | 7,118,827 |           |           |          | 5.52 |     
|                                     | Variable-rate advances                      |                |                     | 409,605   |           |           |          | 1.63 |                        |      |           | 409,604   |           |           |          | 1.74 |     
|                                     |                                             |                |                     |           |           |           |          |      |                        |      |           |           |           |           |          |     
|                                     |                                             | Total advances |                     |           | 7,564,450 |           |          |      | 5.32                   |      |           |           | 8,643,304 |           |          |      | 5.02 |     
|Plus unamortized premium on advances |                                             |                | 10,133              |           |           |           |         |      |                        |      | 13,934    |           |           |           |         |     
|                                     |                                             |                |                     |           |           |           |          |      |                        |      |           |           |           |           |          |     
|                                     |                                             |                | Total advances, net |           | $         | 7,574,583 |          |      |                        | 5.24 |           |           | $         | 8,657,238 |          |      |      | 4.95 | 
|                                     |                                             |                |                     |           |           |           |          |      |                        |      |           |           |           |           |          |     
|                                     | Including the effect of interest rate swaps |                |                     |           |           |           |          | 5.34 | %                      |      |           |           |           |           |          | 5.02 | %   

18



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##### Table of Contents



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

Interest Rate Swaps

We use interest rate swaps as one of the tools to manage our interest rate risk
profile (defined as the sensitivity of our earnings and economic value to
changes in interest rates). We utilize fixed receipt callable interest rate
swaps to convert certain longer-term callable certificates of deposit into
short-term variable instruments. Under certain of these agreements, Charter
One has agreed to receive interest from the counterparty on a notional amount
at a fixed rate defined in the agreement, and to pay interest at a floating
rate indexed to LIBOR during the entire term of the interest rate swap. In
other agreements, Charter One has agreed to receive interest from the
counterparty on a notional amount at a fixed rate defined in the agreement, and
to pay interest at a fixed rate, converting to floating rate indexed to LIBOR
after the first two years of the interest rate swap term. Such interest rate
swaps are designated and qualify as fair value hedges under SFAS No. 133 as of
September 30, 2002. We have assumed no ineffectiveness in the respective
hedging relationships. Any gain or loss on the interest rate swap was offset
by a gain or loss on the certificates of deposit during the period of change in
fair values.

We utilize fixed payment interest rate swaps to convert certain floating-rate
FHLB advances into fixed-rate instruments. Under these agreements, Charter One
has agreed to pay interest to the counterparty on a notional principal amount
at a fixed rate defined in the agreement, and receive interest at a floating
rate indexed to LIBOR. The amounts of interest exchanged are calculated on the
basis of notional principal amounts. Such interest rate swaps are designated
and qualify as cash flow hedges under SFAS No. 133 as of September 30, 2002.
We have assumed no ineffectiveness in the respective hedging relationships.
Any gain or loss on the interest rate swaps was offset by the expected future
cash flows on the FHLB advances during the period of change in fair values.

We utilized a fixed receipt interest rate swap to convert our $400.0 million of
subordinated notes into a variable instrument. Under this agreement Charter
One has agreed to receive interest from the counterparty on a notional amount
at a fixed rate defined in the agreement, and to pay interest at a floating
rate indexed to LIBOR. Such interest rate swap is designated and qualifies as
a fair value hedge under SFAS No. 133 as of September 30, 2002. We have
assumed no ineffectiveness in the hedging relationship. Any gain or loss on
the interest rate swap was offset by a gain or loss on the subordinated notes
during the period of change in fair values.

Additionally, on May 20, 2002, we entered into $575.0 million of fixed payment
and variable receipt interest rate swaps in which there was no hedging
designation assigned. The net unrealized loss of $30.2 million attributed to
these interest rate swaps was recognized in the Companys consolidated
statements of operations under the caption net gains. The corresponding
interest rate swap liabilities were recognized in the Companys consolidated
statement of position at September 30, 2002 under the caption accrued expenses
and other liabilities.

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

19



---



##### Table of Contents



Interest Rate Swaps
(Figure 12)

|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |      |      |     
|---------------------------------- | ---- | ----- | ------ | --------- | --------- | --------- | ---- | -------- | ---- | --------- | ---- | ---------------------- | ---- | -------- | ------- | ------- | --------- |  | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ----
|                                   |      |       |        | 9/30/02   |           | 12/31/01 
|                                   |      |       |        |           |           |          
|                                   |      |       |        | Notional  |           | Receiving |      | Paying   |      | Notional  |      | Receiving              |      | Paying  
|                                   |      |       |        | Principal |           | Interest  |      | Interest |      | Principal |      | Interest               |      | Interest
|                                   |      |       |        | Amount    |           | Rate      |      | Rate     |      | Amount    |      | Rate                   |      | Rate    
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |         
|                                   |      |       |        |           |           |           |      |          |      |           |      | (Dollars in thousands) |      |          |         |         |           |  |      |     
|Fixed Payment and Fixed
Receipt(1) |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|                                   | 2007 |       | $      | 830,000   |           |           |      | 4.38     | %    |           |      | 2.83                   | %    |          | $       |        |           |  |      |     | %    |      |      |     | %   
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|Fixed
Payment and Variable Receipt |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|                                   | 2002 | $     |       |           |           |           |     | %        |      |           |     | %                      |      | $        | 25,000  |         |           |  | 3.73 | %    |      |      | 6.44 | %   
|                                   | 2003 |       |        | 409,605   |           |           |      | 1.82     |      |           |      | 3.55                   |      |          |         | 409,605 |           |  |      | 1.94 |      |      |      | 3.55 |     
|                                   | 2004 |       |        | 375,000   |           |           |      | 1.75     |      |           |      | 3.66                   |      |          |         |        |           |  |      |     |      |      |      |     |     
|                                   | 2006 |       |        | 200,000   |           |           |      | 1.75     |      |           |      | 4.69                   |      |          |         |        |           |  |      |     |      |      |      |     |     
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|                                   |      | Total |        | $         | 984,605   |           |      |          | 1.78 | %(2)      |      |                        | 3.82 | %        |         | $       | 434,605   |  |      |      | 2.04 | %(2) |      |      | 3.71 | %   
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|Variable Payment and Fixed
Receipt |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|                                   | 2003 | $     | 50,000 |           |           |           | 3.31 | %        |      |           | 1.81 | %                      |      | $        | 255,000 |         |           |  | 4.08 | %    |      |      | 2.14 | %   
|                                   | 2004 |       |        | 260,000   |           |           |      | 3.31     |      |           |      | 1.82                   |      |          |         |        |           |  |      |     |      |      |      |     |     
|                                   | 2006 |       |        | 115,000   |           |           |      | 5.06     |      |           |      | 1.81                   |      |          |         | 930,000 |           |  |      | 5.80 |      |      |      | 2.12 |     
|                                   | 2007 |       |        | 565,000   |           |           |      | 5.54     |      |           |      | 1.81                   |      |          |         | 10,000  |           |  |      | 7.25 |      |      |      | 2.36 |     
|                                   | 2010 |       |        |          |           |           |      |         |      |           |      |                       |      |          |         | 10,000  |           |  |      | 7.40 |      |      |      | 2.06 |     
|                                   | 2011 |       |        | 10,000    |           |           |      | 6.25     |      |           |      | 1.76                   |      |          |         | 45,000  |           |  |      | 6.33 |      |      |      | 1.94 |     
|                                   | 2012 |       |        | 400,000   |           |           |      | 5.76     |      |           |      | 1.75                   |      |          |         |        |           |  |      |     |      |      |      |     |     
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     
|                                   |      | Total |        | $         | 1,400,000 |           |      |          | 5.08 | %         |      |                        | 1.80 | %(2)     |         | $       | 1,250,000 |  |      |      | 5.49 | %    |      |      | 2.12 | %(2)
|                                   |      |       |        |           |           |           |      |          |      |           |      |                        |      |          |         |         |           |  |      |      |      |      |      |     



---

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

The fair value of the Companys interest rate swap contracts is estimated as
the difference in the present value of future cash flows between the Companys
existing agreements and current market rate agreements of the same duration.
Information on the fair values of the interest rate swaps is as follows:

Fair Value of Interest Rate Swaps (Figure 13)

|                        |                              |                  |   |                        |        |      |   |        |        | 
|----------------------- | ---------------------------- | ---------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | 
|                        |                              |                  |   | September 30,         
|                        |                              |                  |   |                       
|                        |                              |                  |   | 2002                   |        | 2001
|                        |                              |                  |   |                        |        |     
|                        |                              |                  |   | (Dollars in thousands)
|Unrealized gain (loss): |                              |                  |   |                        |        |      |   |       
|                        | Fair value hedges            |                  | $ | 90,667                 |        |      | $ | 26,443 |       
|                        | Cash flow hedges             |                  |   | (7,828                 | )      |      |   | (817   | )     
|                        | Unhedged interest rate swaps |                  |   | (30,227                | )      |      |   |       |       
|                        |                              |                  |   |                        |        |      |   |       
|                        |                              | Total fair value |   | $                      | 52,612 |      |   | $      | 25,626 | 
|                        |                              |                  |   |                        |        |      |   |       

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

Net Benefit of Interest Risk
Management (Figure 14)

|                           |                              |                   |   |                    |         |                   |   |                        |        |         |   |         |         |   |   |         |         |  
|-------------------------- | ---------------------------- | ----------------- | - | ------------------ | ------- | ----------------- | - | ---------------------- | ------ | ------- | - | ------- | ------- | - | - | ------- | ------- | -
|                           |                              |                   |   | Three Months Ended |         | Nine Months Ended
|                           |                              |                   |   |                    |         |                  
|                           |                              |                   |   | 9/30/02            |         | 9/30/01           |   | 9/30/02                |        | 9/30/01
|                           |                              |                   |   |                    |         |                   |   |                        |        |        
|                           |                              |                   |   |                    |         |                   |   | (Dollars in thousands) |        |         |   |        
|Interest expense (income): |                              |                   |   |                    |         |                   |   |                        |        |         |   |         |         |   |   |        
|                           | Deposits                     |                   | $ | (11,003            | )       |                   | $ | (5,633                 | )      |         | $ | (34,386 | )       |   | $ | (13,641 | )      
|                           | FHLB advances                |                   |   | 1,808              |         |                   |   | 42                     |        |         |   | 5,294   |         |   |   | 42      |        
|                           | Subordinated notes           |                   |   | (3,898             | )       |                   |   |                       |        |         |   | (5,635  | )       |   |   |        |        
|                           | Unhedged interest rate swaps |                   |   | 3,089              |         |                   |   |                       |        |         |   | 4,441   |         |   |   |        |        
|                           |                              |                   |   |                    |         |                   |   |                        |        |         |   |         |         |   |   |        
|                           |                              | Total net benefit |   | $                  | (10,004 | )                 |   | $                      | (5,591 | )       |   | $       | (30,286 | ) |   | $       | (13,599 | )
|                           |                              |                   |   |                    |         |                   |   |                        |        |         |   |         |         |   |   |        

Liquidity

Our principal sources of funds are deposits, advances from the FHLB of
Cincinnati, federal funds purchased and repurchase agreements, repayments and
maturities of loans and securities, proceeds from the sale of loans and

20



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##### Table of Contents



securities, and funds provided by operations. While scheduled loan, security
and interest-bearing deposit amortization and maturity are relatively
predictable sources of funds, deposit flows and loan and mortgage-backed
securities repayments are greatly influenced by economic conditions, the
general level of interest rates and competition. We utilize particular sources
of funds based on comparative costs and availability. We generally manage the
pricing of deposits to maintain a steady deposit balance, but from time to time
may decide not to pay rates on deposits as high as our competition and, when
necessary, to supplement deposits with longer term and/or lower cost
alternative sources of funds such as FHLB advances and federal funds purchased
and repurchase agreements. Conversely, we may, from time to time, decide to
price deposits aggressively due to strategic reasons which may result in
significant deposit inflows.

In the ordinary course of business, we enter into off-balance-sheet financial
instruments consisting of commitments to extend credit, commercial letters of
credit, standby letters of credit and commitments to purchase or sell assets.
Such financial instruments are recorded in the financial statements when they
are funded or the related fees are incurred or received. We anticipate that we
will have sufficient funds available to meet our commitments. As of September
30, 2002, there were outstanding commitments to originate $2.3 billion of
mortgage loans and other loans and leases, all at market rates. Terms of the
commitments extend up to nine months, but are generally less than two months.
Additionally, there were also outstanding unfunded consumer lines of credit of
$4.2 billion and corporate banking lines of credit of $344.3 million as of
September 30, 2002. Substantially all of the consumer loans, including
consumer lines of credit, are secured by equity in the borrowers residences.
The Company does not expect all of these lines to be used by the borrowers.
Outstanding letters of credit totaled $87.4 million as of September 30, 2002.

Capital and Dividends

On September 12, 2001, the Company entered into an agreement with a third party
that provided the Company with an option to purchase up to $100 million of
Charter One common stock through the use of forward transactions. These
transactions could have been settled at Charter Ones election on a physical,
net cash or net share basis. On January 8, 2002, the Company settled open
forward transactions for 3.5 million shares of its common stock through
physical share settlement whereby the Company paid cash of $97.0 million, or
$27.69 per share, to a third party in exchange for the 3.5 million shares.
Common shares outstanding and shareholders equity were reduced accordingly on
the January 8, 2002 settlement date. Shares and per share data discussed above
have not been restated to reflect the 5% stock dividend issued September 30,
2002.

On April 23, 2002, the Companys Board of Directors authorized management to
repurchase up to 10% of the Companys outstanding common stock under a new
program of open market purchases or privately negotiated transactions. This
program replaced the repurchase program that had been in effect since July 18,
2000 and under which the Company repurchased approximately 15.0 million shares
for a total cost of $394.8 million. The Company repurchased 5.2 million shares
under the new authorization during the third quarter of 2002 at an average cost
of $31.24 per share. This brought the total number of shares repurchased
during the nine months ended September 30, 2002 to 11.4 million shares at an
average cost of $29.94 per share. Shares and per share data discussed above
have not been restated to reflect the 5% stock dividend issued September 30,
2002.

Charter One, a financial holding company, is subject to regulation by the
Federal Reserve Board (FRB) under the Bank Holding Company Act of 1956 as
amended, and the regulations of the FRB, including various capital
requirements. The Bank is subject to various regulatory capital requirements
administered by the OCC. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly discretionary, actions by each
regulator that, if undertaken, could have a direct material effect on our
financial statements. Under capital adequacy guidelines, specific capital
guidelines must be met that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The institutions capital classification is also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require Charter One and the Bank to individually maintain minimum amounts and
ratios (set forth in the table below) of total and tier 1 capital to
risk-weighted assets, and of tier 1 capital to average assets. The actual
regulatory capital ratios calculated for Charter One and the Bank, along with
the capital amounts and ratios for capital adequacy purposes and the amounts
required to be categorized as well capitalized are as follows:

21



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##### Table of Contents



Regulatory Capital (Figure
15)

|                        |                                        |  |         |           |                   |  |                          |       |       |  |                        |           |       |  |  |       |   |  |  |           |  |  |  |        |  
|----------------------- | -------------------------------------- |  | ------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  | ---------------------- | --------- | ----- |  |  | ----- | - |  |  | --------- |  |  |  | ------ | -
|                        |                                        |  | 9/30/02
|                        |                                        |  |        
|                        |                                        |  |         |           |                   |  |                          |       |       |  | For Capital            |           |       |  |  |       |   |  | 
|                        |                                        |  | Actual  |           | Adequacy Purposes |  | To Be "Well Capitalized"
|                        |                                        |  |         |           |                   |  |                         
|                        |                                        |  | Amount  |           | Ratio             |  | Amount                   |       | Ratio |  | Amount                 |           | Ratio
|                        |                                        |  |         |           |                   |  |                          |       |       |  |                        |           |      
|                        |                                        |  |         |           |                   |  |                          |       |       |  | (Dollars in thousands) |           |       |  | 
|Charter One:            |                                        |  |         |           |                   |  |                          |       |       |  |                        |           |       |  |  |       |   |  |  |           |  |  |  |       
|                        | Total capital to risk-weighted assets  |  | $       | 3,154,169 |                   |  |                          | 11.76 | %     |  |                        | 2,145,877 |       |  |  | >8.00 | % |  |  | 2,682,346 |  |  |  | >10.00 | %
|                        | Tier 1 capital to risk-weighted assets |  |         | 2,463,412 |                   |  |                          | 9.18  |       |  |                        | 1,072,938 |       |  |  | >4.00 |   |  |  | 1,609,407 |  |  |  | >6.00  |  
|                        | Tier 1 capital to average assets       |  |         | 2,463,412 |                   |  |                          | 6.31  |       |  |                        | 1,560,806 |       |  |  | >4.00 |   |  |  | N/A       |  |  |  | N/A    |  
|Charter One Bank(1)(2): |                                        |  |         |           |                   |  |                          |       |       |  |                        |           |       |  |  |       |   |  |  |           |  |  |  |       
|                        | Total capital to risk-weighted assets  |  |         | 3,195,360 |                   |  |                          | 11.94 |       |  |                        | 2,140,785 |       |  |  | >8.00 |   |  |  | 2,675,982 |  |  |  | >10.00 |  
|                        | Tier 1 capital to risk-weighted assets |  |         | 2,170,428 |                   |  |                          | 8.11  |       |  |                        | 1,070,393 |       |  |  | >4.00 |   |  |  | 1,605,589 |  |  |  | >6.00  |  
|                        | Tier 1 capital to average assets       |  |         | 2,170,428 |                   |  |                          | 5.59  |       |  |                        | 1,553,946 |       |  |  | >4.00 |   |  |  | 1,942,433 |  |  |  | >5.00  |  

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



---

|(1) |  | On May 16, 2002, Charter One Commercial merged into Charter One Bank. At
December 31, 2001, Charter One Commercial was subject to various
regulatory capital requirements administered by the FDIC.                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | On May 7, 2002, Charter One Bank converted from a thrift to a national
bank. At December 31, 2001, Charter One Bank was subject to various
regulatory capital requirements administered by the Office of Thrift
Supervision.

Management believes that, as of September 30, 2002, Charter One and the Bank
individually met the capital adequacy requirements to which they were subject.
Events beyond managements control, such as fluctuations in interest rates or a
downturn in the economy in areas in which the institutions loans and
securities are concentrated could adversely affect future earnings and,
consequently, the institutions ability to meet its future capital
requirements.

Quarterly Stock Prices and Dividends (Figure 16)

|                                            |       |  |                    |       |         |  |         |       |          |  |         |       |  |  |     |       |  |  |     |       | 
|------------------------------------------- | ----- |  | ------------------ | ----- | ------- |  | ------- | ----- | -------- |  | ------- | ----- |  |  | --- | ----- |  |  | --- | ----- | 
|                                            |       |  | Three Months Ended
|                                            |       |  |                   
|                                            |       |  | 9/30/02            |       | 6/30/02 |  | 3/31/02 |       | 12/31/01 |  | 9/30/01
|                                            |       |  |                    |       |         |  |         |       |          |  |        
|Market price of common stock (NYSE: CF)(1): |       |  |                    |       |         |  |         |       |          |  |         |       |  |  |     |       |  |  |     |      
|                                            | High  |  | $                  | 33.42 |         |  | $       | 34.77 |          |  | $       | 30.95 |  |  | $   | 28.06 |  |  | $   | 29.91 | 
|                                            | Low   |  |                    | 25.81 |         |  |         | 29.30 |          |  |         | 25.19 |  |  |     | 23.43 |  |  |     | 22.29 | 
|                                            | Close |  |                    | 29.72 |         |  |         | 32.74 |          |  |         | 29.73 |  |  |     | 25.86 |  |  |     | 26.88 | 
|Dividends declared and paid(1)              |       |  | .21                |       |         |  | .21     |       |          |  | .19     |       |  |  | .19 |       |  |  | .18 |      



---

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

Legal Proceedings

On September 4, 2002, Charter One announced that it has filed a stipulation of
dismissal regarding three of five claims asserted in two previously disclosed
court cases related to its supervisory goodwill litigation, which have

22



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##### Table of Contents



been outstanding since 1995. As outlined in previous Securities and Exchange
Commission filings on Form 10-K, Charter One and various predecessors had
asserted five separate claims against the United States of America for breach
of certain agreements involving supervisory goodwill and capital credits. Based
on the outcome of similar cases and related damages, Charter One has determined
that the cost of further litigation of the three dismissed claims would likely
exceed the potential benefits. The economics of the two remaining cases are
still being evaluated, but in any event they would not likely have a material
effect on the business, operations or prospects of the Company.




ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

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

|                    |  |                             |      |           |  |  |      |   |  |  |  | 
|------------------- |  | --------------------------- | ---- | --------- |  |  | ---- | - |  |  |  | 
|Changes in          |  | Estimated Percentage Change
|Interest Rates      |  | in Future Net Income       
|(basis points)      |  | 12 Months                   |      | 24 Months
|                    |  |                             |      |          
|+200 over one year  |  |                             | 1.16 | %         |  |  | 2.19 | %
|+100 over one year  |  |                             | 2.49 |           |  |  | 4.27 |  
|- 100 over one year |  |                             | 1.21 |           |  |  | (.86 | )

Actual results will differ from simulated results due to timing, magnitude, and
frequency of interest rate changes, as well as changes in market conditions and
management strategies.




ITEM 4. Controls and Procedures

(a) 
Evaluation of Disclosure Controls and Procedures: An evaluation of the
Companys disclosure controls and procedures (as defined in Section 13(a)-14(c)
of the Securities Exchange Act of 1934 (the Act)) was carried out under the
supervision and with the participation of the Registrants Chief Executive
Officer, Chief Financial Officer and several other members of the Companys
senior management within the 90-day period preceding the filing date of this
quarterly report. The Companys Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures as
currently in effect are effective in ensuring that the information required to
be disclosed by the Company in the reports it files or submits under the Act is
(i) accumulated and communicated to the Companys management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and
(ii) recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms.

(b)  Changes
in Internal Controls: In the quarter ended September 30,
2002, the Company did not make any significant changes in, nor take any
corrective actions regarding, its internal controls or other factors that could
significantly affect these controls.




PART II  OTHER INFORMATION




ITEM 5. Other Information

Cash Dividend On October 23, 2002, the Company declared a regular quarterly
cash dividend of $.22 per share. The cash dividend is payable November 20, 2002
to shareholders of record on November 6, 2002.

Restatement of Prior Period Financial Information  Quarterly information for
the periods from January 1, 2002 through June 30, 2002, as restated for the
Companys adoption of SFAS No. 147, Acquisition of Certain Financial
Institutions, an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9, is being provided on a supplemental basis. See Note 3
to the Consolidated Financial Statements for further discussion.

23



---



##### Table of Contents



CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
RESTATED FOR ADOPTION OF SFAS NO. 147,ACQUISITION OF CERTAIN FINANCIAL
INSTITUTIONS, AN AMENDMENT OF FASB STATEMENTS NO. 72 AND 144 AND FASB
INTERPRETATION NO. 9
(unaudited)

|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |            |            |            | 
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | --------- | ---------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                                                      |                                                                                                                   |                                 |                                            |           | 6/30/02                |            | 3/31/02   
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |           
|                                                      |                                                                                                                   |                                 |                                            |           | (Dollars in thousands,
|                                                      |                                                                                                                   |                                 |                                            |           | except per share data)
|                                                      |                                                                                                                   |                                 |                                            |           |                        |           
|ASSETS                                                |                                                                                                                   |                                 |                                            |           |                        |            |            |            |           
|Cash and deposits with banks                          |                                                                                                                   | $                               | 592,571                                    |           |                        | $          | 539,846    |           
|Federal funds sold and other                          |                                                                                                                   |                                 | 800,509                                    |           |                        |            | 815,509    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   | Total cash and cash equivalents |                                            |           | 1,393,080              |            |            |            | 1,355,355  |           
|Investments securities:                               |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      | Available for sale                                                                                                |                                 |                                            | 169,203   |                        |            |            | 133,509    |           
|                                                      | Held to maturity                                                                                                  |                                 |                                            | 4,381     |                        |            |            | 5,043      |           
|Mortgage-backed securities:                           |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      | Available for sale                                                                                                |                                 |                                            | 9,634,674 |                        |            |            | 8,067,946  |           
|                                                      | Held to maturity                                                                                                  |                                 |                                            | 728,003   |                        |            |            | 830,032    |           
|Loans and leases, net                                 |                                                                                                                   |                                 | 24,382,986                                 |           |                        |            | 24,355,261 |           
|Loans held for sale                                   |                                                                                                                   |                                 | 161,438                                    |           |                        |            | 160,805    |           
|Bank owned life insurance                             |                                                                                                                   |                                 | 814,429                                    |           |                        |            | 809,356    |           
|Federal Home Loan Bank stock                          |                                                                                                                   |                                 | 668,905                                    |           |                        |            | 618,969    |           
|Premises and equipment                                |                                                                                                                   |                                 | 362,909                                    |           |                        |            | 357,915    |           
|Accrued interest receivable                           |                                                                                                                   |                                 | 165,262                                    |           |                        |            | 155,479    |           
|Real estate and other collateral owned                |                                                                                                                   |                                 | 44,511                                     |           |                        |            | 57,417     |           
|Loan servicing assets                                 |                                                                                                                   |                                 | 175,650                                    |           |                        |            | 164,789    |           
|Goodwill                                              |                                                                                                                   |                                 | 385,808                                    |           |                        |            | 351,040    |           
|Other assets                                          |                                                                                                                   |                                 | 299,303                                    |           |                        |            | 285,366    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   | Total assets                    |                                            | $         | 39,390,542             |            |            | $          | 37,708,282 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|LIABILITIES
AND SHAREHOLDERS' EQUITY                  |                                                                                                                   |                                 |                                            |           |                        |            |            |            |           
|Deposits:                                             |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      | Checking
accounts                                                                                                 |                                 | $                                          | 7,737,558 |                        |            | $          | 7,934,769  |           
|                                                      | Money market and savings accounts                                                                                 |                                 |                                            | 8,893,253 |                        |            |            | 7,644,542  |           
|                                                      | Certificates of deposit                                                                                           |                                 |                                            | 9,926,504 |                        |            |            | 10,057,421 |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total deposits                             |           |                        | 26,557,315 |            |            |            | 25,636,732 | 
|Federal Home Loan Bank advances                       |                                                                                                                   |                                 | 7,841,524                                  |           |                        |            | 7,830,065  |           
|Federal funds purchased and repurchase agreements     |                                                                                                                   |                                 | 53,089                                     |           |                        |            | 57,228     |           
|Other borrowings                                      |                                                                                                                   |                                 | 720,133                                    |           |                        |            | 325,505    |           
|Advance payments by borrowers for taxes and insurance |                                                                                                                   |                                 | 51,822                                     |           |                        |            | 44,693     |           
|Accrued interest payable                              |                                                                                                                   |                                 | 38,029                                     |           |                        |            | 59,813     |           
|Accrued expenses and other liabilities                |                                                                                                                   |                                 | 1,089,899                                  |           |                        |            | 894,327    |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total liabilities                          |           |                        | 36,351,811 |            |            |            | 34,848,363 | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|Shareholders equity:                                 |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      | Preferred stock  $.01 par value per share; 20,000,000
shares authorized and unissued                             |                                 |                                            |          |                        |            |            |           |           
|                                                      | Common stock  $.01 par value per share; 360,000,000
shares authorized; 224,853,682 and 224,854,600 shares issued |                                 |                                            | 2,249     |                        |            |            | 2,249      |           
|                                                      | Additional paid-in capital                                                                                        |                                 |                                            | 2,104,361 |                        |            |            | 2,097,473  |           
|                                                      | Retained earnings                                                                                                 |                                 |                                            | 976,380   |                        |            |            | 893,200    |           
|                                                      | Less 4,662,584 and 4,836,968 shares of common stock held in
treasury at cost                                      |                                 |                                            | (135,378  | )                      |            |            | (136,429   | )         
|                                                      | Borrowings of employee investment and stock
ownership plan                                                        |                                 |                                            |          |                        |            |            |           |           
|                                                      | Accumulated other comprehensive income                                                                            |                                 |                                            | 91,119    |                        |            |            | 3,426      |           
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total shareholders equity                 |           |                        | 3,038,731  |            |            |            | 2,859,919  | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           
|                                                      |                                                                                                                   |                                 | Total liabilities and shareholders equity |           | $                      | 39,390,542 |            |            | $          | 37,708,282 | 
|                                                      |                                                                                                                   |                                 |                                            |           |                        |            |            |           

24



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##### Table of Contents



CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
RESTATED FOR ADOPTION OF SFAS NO. 147, ACQUISITION OF
CERTAIN FINANCIAL
INSTITUTIONS, AN AMENDMENT OF FASB STATEMENTS NO. 72 AND 144 AND FASB
INTERPRETATION NO. 9
(unaudited)

|                                      |                                     |                    |                               |                                                               |         |                        |         |             |         |         |         | 
|------------------------------------- | ----------------------------------- | ------------------ | ----------------------------- | ------------------------------------------------------------- | ------- | ---------------------- | ------- | ----------- | ------- | ------- | ------- | 
|                                      |                                     |                    |                               |                                                               |         | Three Months Ended    
|                                      |                                     |                    |                               |                                                               |         |                       
|                                      |                                     |                    |                               |                                                               |         | 6/30/02                |         | 3/31/02    
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               |                                                               |         | (Dollars in thousands,
|                                      |                                     |                    |                               |                                                               |         | except per share data)
|                                      |                                     |                    |                               |                                                               |         |                       
|Interest income:                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Loans and leases                    |                    | $                             | 415,057                                                       |         |                        | $       | 427,838     |        
|                                      | Mortgage-backed securities:         |                    |                               |                                                               |         |                        |         |             |        
|                                      |                                     | Available for sale |                               |                                                               | 141,773 |                        |         |             | 111,128 |        
|                                      |                                     | Held to maturity   |                               |                                                               | 12,261  |                        |         |             | 14,800  |        
|                                      | Investment securities:              |                    |                               |                                                               |         |                        |         |             |        
|                                      |                                     | Available for sale |                               |                                                               | 2,625   |                        |         |             | 2,962   |        
|                                      |                                     | Held to maturity   |                               |                                                               | 60      |                        |         |             | 71      |        
|                                      | Other interest-earning assets       |                    |                               | 9,478                                                         |         |                        |         | 7,912       |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               | Total interest income                                         |         |                        | 581,254 |             |         |         | 564,711 | 
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Interest expense:                     |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Deposits                            |                    |                               | 169,576                                                       |         |                        |         | 170,401     |        
|                                      | FHLB advances                       |                    |                               | 103,927                                                       |         |                        |         | 103,716     |        
|                                      | Other borrowings                    |                    |                               | 9,884                                                         |         |                        |         | 7,497       |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               | Total interest expense                                        |         |                        | 283,387 |             |         |         | 281,614 | 
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               | Net interest income                                           |         |                        | 297,867 |             |         |         | 283,097 | 
|Provision for loan and lease losses   |                                     |                    | 55,277                        |                                                               |         |                        | 28,717  |            
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               | Net interest income after provision for loan and
lease losses |         |                        | 242,590 |             |         |         | 254,380 | 
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Other income:                         |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Retail banking                      |                    |                               | 83,543                                                        |         |                        |         | 73,756      |        
|                                      | Mortgage banking                    |                    |                               | 9,168                                                         |         |                        |         | 11,290      |        
|                                      | Leasing operations                  |                    |                               | 317                                                           |         |                        |         | 270         |        
|                                      | Net gains                           |                    |                               | 37,840                                                        |         |                        |         | 21,727      |        
|                                      | Bank owned life insurance and other |                    |                               | 8,924                                                         |         |                        |         | 9,508       |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    |                               | Total other income                                            |         |                        | 139,792 |             |         |         | 116,551 | 
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Administrative expenses:              |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Compensation and employee benefits  |                    |                               | 80,645                                                        |         |                        |         | 77,252      |        
|                                      | Net occupancy and equipment         |                    |                               | 27,634                                                        |         |                        |         | 28,563      |        
|                                      | Marketing expenses                  |                    |                               | 10,012                                                        |         |                        |         | 8,829       |        
|                                      | Federal deposit insurance premiums  |                    |                               | 1,106                                                         |         |                        |         | 1,211       |        
|                                      | Amortization of goodwill            |                    |                               |                                                              |         |                        |         |            |        
|                                      | Other administrative expenses       |                    |                               | 49,219                                                        |         |                        |         | 46,307      |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    | Total administrative expenses |                                                               |         | 168,616                |         |             |         | 162,162 |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Income before income taxes            |                                     |                    | 213,766                       |                                                               |         |                        | 208,769 |            
|Income taxes                          |                                     |                    | 67,871                        |                                                               |         |                        | 66,284  |            
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      |                                     |                    | Net income                    |                                                               | $       | 145,895                |         |             | $       | 142,485 |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Basic earnings per share(1)           |                                     | $                  | .63                           |                                                               |         | $                      | .61     |            
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Diluted earnings per share(1)         |                                     | $                  | .61                           |                                                               |         | $                      | .60     |            
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Average common shares outstanding(1): |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Basic                               |                    |                               | 231,197,406                                                   |         |                        |         | 231,684,629 |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|                                      | Diluted                             |                    |                               | 239,123,292                                                   |         |                        |         | 238,221,934 |        
|                                      |                                     |                    |                               |                                                               |         |                        |         |            
|Cash dividends declared per share(1)  |                                     | $                  | .21                           |                                                               |         | $                      | .19     |            
|                                      |                                     |                    |                               |                                                               |         |                        |         |            



---

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

25



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##### Table of Contents






ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits: See attached Index to Exhibits.

(b) Reports on Form 8-K: On August 14, 2002, the Company filed a report on
Form 8-K containing its sworn statements of the Principal Executive
Officer and Principal Financial Officer for the period ended June 30, 2002
as filed on August 14, 2002 with the Securities and Exchange Commission
pursuant to Section 21(a) (1) of the Securities Exchange Act of 1934.

On September 4, 2002, the Company filed a report on Form 8-K announcing that
it has filed a stipulation of dismissal regarding three of five claims
asserted in two previously disclosed court cases related to its supervisory
goodwill litigation.




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: November 14, 2002 |  | /s/ Charles John Koch                                                                                                                   
|                       
|                        |  | Charles John Koch
Chairman of the Board, President and Chief
Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)
|                       
|Date: November 14, 2002 |  | /s/ Richard W. Neu                                                                                                                      
|                       
|                        |  | Richard W. Neu
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)           

26



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##### Table of Contents






CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Charles John Koch, Principal Executive Officer, certify that:

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

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

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

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



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

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



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

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

|                        |  |                                                                               
|----------------------- |  | ------------------------------------------------------------------------------
|Date: November 14, 2002 |  | /s/ Charles John Koch                                                         
|                        |  | Charles John Koch
Chairman of the Board, President and
Chief Executive Officer

27



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##### Table of Contents






CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Richard W. Neu, Principal Financial Officer, certify that:

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

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

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

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



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

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



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

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

|                        |  |                                                                    
|----------------------- |  | -------------------------------------------------------------------
|Date: November 14, 2002 |  | /s/ Richard W. Neu                                                 
|                        |  | Richard W. Neu
Executive Vice President and Chief Financial Officer

28



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##### Table of Contents






CERTIFICATIONS

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

|                        |  |                                                                               
|----------------------- |  | ------------------------------------------------------------------------------
|Date: November 14, 2002 |  | /s/ Charles John Koch                                                         
|                       
|                        |  | Charles John Koch
Chairman of the Board, President and Chief
Executive Officer
|                       
|Date: November 14, 2002 |  | /s/ Richard W. Neu                                                            
|                       
|                        |  | Richard W. Neu
Executive Vice President and Chief Financial Officer           

29



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##### Table of Contents






INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.1     |  | Registrants Second Restated
Certificate of Incorporation, as
amended and currently in effect, filed
as Exhibit 3.1 to Registrants Report
on Form 10-K for the fiscal year ended
December 31, 2000 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.2     |  | Registrants Bylaws, as amended and
restated and currently in effect,
filed as Exhibit 3.2 to Registrants
Report on Form 10-K for the fiscal
year ended December 31, 1999 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.1     |  | Form of Certificate of Common Stock,
as currently in effect, filed as
Exhibit 4.1 to Registrants Report on
Form 10-K for the fiscal year ended
December 31, 2000 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.2     |  | Amended and Restated Stockholder
Protection Rights Agreement, dated
October 20, 1999, between the Company
and Fleet National Bank (f/k/a
BankBoston, N.A.), as rights agent,
filed as Exhibit 2 to the Companys
Registration Statement on Form 8-A/A
filed on October 30, 1999 (File No.
001-15495), is incorporated herein by
reference.                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.3     |  | The Registrant hereby agrees to
furnish to the Securities and Exchange
Commission, upon request, with copies
of all instruments defining rights of
holders of long-term debt of Charter
One and its consolidated subsidiaries.                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.1    |  | Registrants Long-Term Stock Incentive
Plan, filed on January 22, 1988 as
Exhibit 10.1 to Registrants
Registration Statement on Form S-1
(File No. 33-16207), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.2    |  | Registrants Directors Stock Option
Plan, filed on January 22, 1988 as
Exhibit 10.2 to Registrants
Registration Statement on Form S-1
(File No. 33-16207), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.3    |  | Charter One Bank, F.S.B. Executive
Incentive Goal Achievement Plan, filed
as Exhibit 10.8 to Registrants Report
on Form 10-K for the fiscal year ended
December 31, 1994 (File No. 000-16311)
is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.4    |  | First American Savings Bank, F.S.B.
Nonqualified Retirement Plan and First
Amendment thereto, filed as Exhibit
10.17 to Registrants Report on Form
10-K for the fiscal year ended
December 31, 1993 (File No.
000-16311), are incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.5    |  | FirstFed Michigan Corporation 1991
Stock Option Plan, filed on November
1, 1995 as an exhibit to Registrants
Registration Statement on Form S-8
(File No. 33-61273), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.6    |  | Amendment 1, dated May 3, 1996, to
Forms of Supplemental Retirement
Agreements, dated October 31, 1995,
between Charter One and Charles John
Koch, Richard W. Neu, John David Koch,
Mark D. Grossi, and Robert J. Vana
filed as Exhibit 10.7 to the
Registrants Report on Form 10-K for
the fiscal year ended December 31,
1998 (File No. 000-16311), is
incorporated herein by reference. The
Agreements, originally filed on July
25, 1995 as Exhibits 10.4 and 10.5 to
Registrants Registration Statement on
Form S-4 (File No. 33-61273), are
incorporated herein by reference.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.7    |  | Amended and Restated Employment
Agreements, effective August 1, 1999,
between Charter One Financial, Inc.
and Charles John Koch, Richard W. Neu,
John D. Koch, Mark D. Grossi, and
Robert J. Vana filed as Exhibit 10.8
to Registrants Report on Form 10-K
for the fiscal year ended December 31,
1999 (File No. 000-16311), is
incorporated herein by reference.                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.8    |  | Alliance Bancorp 1997 Long-Term
Incentive Stock Benefit Plan, filed as
an attachment to the proxy statement
for the annual meeting of stockholders
of Alliance held on May 28, 1997 (File
No. 000-20082), is incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.9    |  | Hinsdale Financial Corporation 1994
Incentive Stock Option Plan, filed as
an attachment to the proxy statement
for the annual meeting of stockholders
of Alliance held on February 8, 1995
(File No. 000-20082), is incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                

30



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##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                        
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Hinsdale Financial Corporation 1992
Stock Option Plan for Outside
Directors and the Hinsdale Financial
Corporation 1992 Incentive Stock
Option Plan, filed as attachments to
the proxy statement for the annual
meeting of stockholders of Alliance
held on February 10, 1993 (File No.
000-20082) is incorporated herein by
reference.
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.11 |  | Charter One Financial, Inc. 1997 Stock
Option and Incentive Plan, as amended
and restated, filed as Exhibit 10.13
to the Registrants Quarterly Report
on Form 10-Q for the quarter ended
June 30, 2002 (File No. 001-15495), is
incorporated herein by reference.                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.12 |  | 1986 Stock Option Plan of RCSB
Financial, Inc., filed on October 8,
1997, as an exhibit to Post-Effective
Amendment Number One on Form S-8 to
Form S-4 (File No. 333-33259), is
incorporated herein by reference.                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.13 |  | 1992 Stock-Based Compensation Plan of
RCSB Financial, Inc., filed on October
8, 1997, as an exhibit to
Post-Effective Amendment Number One on
Form S-8 to Form S-4 (File No.
333-33259), is incorporated herein by
reference.                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.14 |  | Home Federal Savings Bank Stock
Compensation Program, filed on
September 29, 1997 as an exhibit to
Post-Effective Amendment Number One on
Form S-8 to Form S-4 (File No.
333-33169), is incorporated herein by
reference.                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.15 |  | Haverfield 1995 Stock Option Plan,
filed on September 29, 1997 as an
exhibit to Post-Effective Amendment
Number One on Form S-8 to Form S-4
(File No. 333-33169), is incorporated
herein by reference.                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.16 |  | The RCSB Financial, Inc. Non-Employee
Director Deferred Compensation Plan,
as amended and restated on December 1,
1998, filed as Exhibit 10.16 to
Registrants Annual Report on Form
10-K for the fiscal year ended
December 31, 1998 (File No.
000-16311), is incorporated herein by
reference.                                       
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.17 |  | ALBANK Financial Corporation 1992
Stock Incentive Plan for Key
Employees, as amended and restated as
of December 18, 1995, filed as Exhibit
10.11 to ALBANKs Annual Report on
Form 10-K for the year ended December
31, 1995 (File No. 000-19843), is
incorporated herein by reference.                                               
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.18 |  | ALBANK Financial Corporation 1995
Stock Incentive Plan for Outside
Directors, filed as Exhibit 10.12.1 to
ALBANKs Annual Report on Form 10-K
for the year ended December 31, 1995
(File No. 000-19843), is incorporated
herein by reference.                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.19 |  | ALBANK Financial Corporation 1992 Stock Incentive Plan for Outside
Directors, filed as an appendix to the Proxy Statement for the 1992
Annual Meeting of the Stockholders of ALBANK held on October 26,
1992 (File No. 001-19843), is incorporated herein by reference.                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.20 |  | Employment Agreement, dated November 30, 1998, between Charter One
Financial, Inc. and Herbert G. Chorbajian, filed as Exhibit 10.20
to Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (File No. 000-16311), is incorporated
herein by reference.                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                        
|10.21 |  | Charter One Financial, Inc. Top Executive Incentive Goal
Achievement Plan, filed on October 1, 1998 as Annex E to the
Prospectus contained in the Registrants Registration Statement on
Form S-4 (File No. 333-65137), is incorporated herein by reference.                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                        
|11    |  | Statement Regarding Computation of Per Share Earnings                                                                                                                                                                                                                                                                                  

31