<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16311
CHARTER ONE FINANCIAL, INC.
---------------------------
(exact name of registrant as specified in its charter)
DELAWARE 34-1567092
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1215 SUPERIOR AVENUE, CLEVELAND, OHIO 44114
(Address of principal executive offices) (Zip Code)
(216) 566-5300
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's sole class of common
stock as of April 30, 1997 was 46,206,521.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
- --------- -----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
1. Financial Statements
Consolidated Statements of Financial Condition --
March 31, 1997 and December 31, 1996........................................................ 1
Consolidated Statements of Income --
Three months ended March 31, 1997 and 1996.................................................. 2
Consolidated Statement of Changes in Shareholders' Equity --
Three months ended March 31, 1997........................................................... 3
Consolidated Statements of Cash Flows --
Three months ended March 31, 1997 and 1996.................................................. 4
Notes to Consolidated Financial Statements.................................................... 5
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 7
PART II - OTHER INFORMATION
5. Other Information............................................................................... 25
6. Exhibits and Reports on Form 8-K................................................................ 25
Signatures............................................................................................... 26
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL CONDITION
ITEM 1. FINANCIAL STATEMENTS
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(AS RESTATED)
ASSETS
<S> <C> <C>
Cash and deposits with banks.......................................... $ 118,124 152,301
Federal funds sold and other.......................................... 50,233 118,003
------------ ------------
Total cash and cash equivalents.................................. 168,357 270,304
Investment securities available for sale, at fair value............... 281,448 243,632
Mortgage-backed securities:
Available for sale, at fair value................................... 1,069,830 1,070,705
Held to maturity (fair value of $3,491,445 and $3,652,547).......... 3,495,098 3,633,369
Loans and leases, net................................................. 8,472,041 8,100,342
Federal Home Loan Bank stock.......................................... 217,917 215,815
Premises and equipment................................................ 115,167 114,145
Accrued interest receivable........................................... 76,962 77,193
Equipment on operating leases......................................... 19,979 22,599
Real estate owned..................................................... 6,330 7,337
Goodwill.............................................................. 63,330 64,496
Other assets.......................................................... 45,129 73,904
------------ ------------
Total assets..................................................... $ 14,031,588 13,893,841
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Checking accounts................................................... $ 889,842 859,438
Money market accounts............................................... 1,365,418 1,344,973
Savings accounts.................................................... 843,063 868,361
Certificates of deposit............................................. 4,741,156 4,768,425
------------ ------------
Total deposits................................................... 7,839,479 7,841,197
Federal Home Loan Bank advances....................................... 3,081,274 3,194,333
Reverse repurchase agreements......................................... 1,735,966 1,549,778
Other borrowings...................................................... 211,616 211,180
Advance payments by borrowers for taxes and insurance................. 40,303 39,346
Accrued interest payable.............................................. 40,777 35,298
Accrued expenses and other liabilities................................ 136,406 100,985
------------ ------------
Total liabilities................................................ 13,085,821 12,972,117
------------ ------------
Shareholders' equity:
Preferred stock - $.01 par value per share; 20,000,000 shares
authorized and unissued........................................... - -
Common stock - $.01 par value per share; 180,000,000 shares
authorized; shares issued 47,472,486.............................. 475 475
Additional paid-in capital.......................................... 321,991 321,991
Retained earnings................................................... 666,703 637,356
Less 1,133,765 and 1,029,763 shares of common stock held in
treasury at cost.................................................. (44,560) (39,615)
Net unrealized gain on securities, net of tax expense
of $627 and $812.................................................. 1,158 1,517
------------ ------------
Total shareholders' equity................................... 945,767 921,724
------------ ------------
Total liabilities and shareholders' equity................... $ 14,031,588 13,893,841
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
1
<PAGE> 4
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(AS RESTATED)
<S> <C> <C>
INTEREST INCOME:
Loans and leases........................................................ $ 163,982 142,191
Mortgage-backed securities:
Available for sale.................................................... 18,181 20,557
Held to maturity...................................................... 63,841 69,050
Investment securities available for sale................................ 4,719 5,772
Other interest-earning assets........................................... 5,070 5,478
------------ -----------
Total interest income................................................ 255,793 243,048
------------ -----------
INTEREST EXPENSE:
Deposits................................................................ 85,044 79,528
Federal Home Loan Bank advances......................................... 44,926 45,127
Other borrowings........................................................ 28,297 26,391
------------ -----------
Total interest expense............................................... 158,267 151,046
------------ -----------
Net interest income.................................................. 97,526 92,002
Provision for loan and lease losses....................................... 220 1,000
------------ -----------
Net interest income after provision
for loan and lease losses.......................................... 97,306 91,002
------------ -----------
OTHER INCOME:
Loan servicing fees..................................................... 2,574 2,259
Service fees and other charges.......................................... 10,320 6,959
Leasing operations...................................................... 2,088 1,788
Net gains (losses):
Loans................................................................. 123 190
Mortgage-backed securities............................................ - 57
Other gains........................................................... (36) 330
Other................................................................... 112 256
------------ -----------
Total other income................................................... 15,181 11,839
------------ -----------
ADMINISTRATIVE EXPENSES:
Compensation and employee benefits...................................... 24,060 22,037
Net occupancy and equipment............................................. 7,333 6,404
Federal deposit insurance premiums...................................... 1,259 3,989
Amortization of goodwill................................................ 1,113 189
Other administrative expenses........................................... 12,932 11,964
------------ -----------
Total administrative expenses........................................ 46,697 44,583
------------ -----------
Income before federal income taxes........................................ 65,790 58,258
Federal income taxes...................................................... 21,704 19,808
------------ -----------
Net income........................................................... $ 44,086 38,450
============ ===========
Primary earnings per common and common equivalent
share(1)................................................................ $ .93 .80
============ ===========
Average common and common equivalent
shares outstanding(1)................................................... 47,625,723 48,270,184
============ ===========
Cash dividends declared per share(1)...................................... $ .23 .19
============ ===========
- ---------------------------
<FN>
(1) Restated to reflect the 5% stock dividend issued September 30, 1996.
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 5
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL NET UNREALIZED SHARE-
COMMON PAID-IN RETAINED TREASURY GAIN HOLDERS'
STOCK CAPITAL EARNINGS STOCK ON SECURITIES EQUITY
--------- --------- --------- --------- ------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(AS RESTATED) (AS RESTATED)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997........ $ 475 321,991 637,356 (39,615) 1,517 921,724
Purchase of 285,000 shares
of treasury stock........... (11,942) (11,942)
Treasury stock reissued in
connection with stock
options exercised, 180,998
shares...................... (4,086) 6,997 2,911
Dividends paid ($.23
per share).................. (10,653) (10,653)
Change in net unrealized gain
on securities, net of tax
expense..................... (359) (359)
Net income.................... 44,086 44,086
---- --------- --------- --------- ------- ---------
Balance, March 31, 1997......... $ 475 321,991 666,703 (44,560) 1,158 945,767
==== ========= ========= ========= ======= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 6
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
(AS RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................... 44,086 38,450
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and lease losses......................................... 220 1,000
Net gains................................................................... (87) (578)
Accretion of discounts, amortization of premiums,
amortization of goodwill and depreciation, net............................. 5,420 (660)
Origination of real estate loans held for sale.............................. (6,783) (14,168)
Proceeds from sale of loans held for sale................................... 6,906 14,358
Other....................................................................... 69,911 37,190
----------- -----------
Net cash provided by operating activities................................. 119,673 75,592
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net principal disbursed on loans and leases................................... (370,367) (367,964)
Proceeds from principal repayments and maturities of:
Mortgage-backed securities held to maturity................................. 137,394 195,821
Mortgage-backed securities available for sale............................... 2,738 8,159
Investment securities available for sale.................................... 9,761 193,092
Sales of mortgage-backed securities available for sale........................ - 324,002
Purchases of:
Mortgage-backed securities held to maturity................................. - (313,472)
Investment securities available for sale.................................... (50,000) (106,890)
Federal Home Loan Bank stock................................................ - (7,605)
Equipment on operating lease................................................ (1,664) (2,066)
Other......................................................................... (2,771) (3,127)
----------- -----------
Net cash used in investing activities....................................... (274,909) (80,050)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings.............................. 361,182 (579,879)
Proceeds from long-term borrowings............................................ 230,015 409,484
Repayments of long-term borrowings............................................ (517,656) (231,393)
Decrease in deposits.......................................................... (1,525) (1,340)
Increase (decrease) in advance payments by borrowers for taxes and
insurance.................................................................... 957 (1,631)
Payment of dividends on common stock.......................................... (10,653) (8,997)
Purchase of treasury stock, net of options exercised.......................... (9,031) (3,668)
----------- -----------
Net cash provided by (used in) financing activities............................. 53,289 (417,424)
----------- -----------
Net decrease in cash and cash equivalents....................................... (101,947) (421,882)
Cash and cash equivalents, beginning of the period.............................. 270,304 658,371
----------- -----------
Cash and cash equivalents, end of the period.................................... 168,357 236,489
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest on deposits and borrowings............................. 234,534 170,366
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Transfers from loans to real estate owned..................................... 284 335
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 7
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The 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") Notice of 1997
Annual Meeting, Proxy Statement and Annual Financial Report. 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. In April 1997, the boards of directors of Charter One Financial, Inc. and
Haverfield Corporation, the holding company of Home Bank, F.S.B. entered
into a definitive agreement to merge in a stock-for-stock exchange. Home
Bank, headquartered in Cleveland, Ohio, is a federally chartered savings
and loan with $342 million in assets ($273 million in deposits) and 10
branch offices throughout the Cleveland area.
Terms of the agreement call for the tax-free exchange of $27.00 in Charter
One common stock for each of Haverfield's common shares or a total
consideration of approximately $53.7 million. The price will stay fixed at
$27.00 per Haverfield share if Charter One's average stock price remains
between $41.09 and $55.60 per share during a 20-day pricing period ending
five business days before closing the transaction. The merger, which would
be accounted for as a purchase, is expected to close near the end of the
third quarter of 1997. Already approved by the boards of directors of both
companies, the transaction requires the approvals of the Office of Thrift
Supervision and Haverfield shareholders.
3. On January 1, 1997 the Company adopted SFAS No. 125. SFAS No. 125 amends
portions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," amends and extends to all servicing assets and
liabilities the accounting standards for mortgage servicing rights now in
SFAS No. 65, and supersedes SFAS No. 122. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. Those standards are based upon
consistent application of a financial components approach that focuses on
control. The statement also defines accounting treatment for servicing
assets and other retained interests in the assets that are transferred.
SFAS No. 125 is effective for transfers and servicing of financial assets
and extinguishments to liabilities occurring after December 31, 1996 and is
to be applied prospectively. The adoption of this statement has not had a
material effect on the Company's financial condition or results of
operations. The FASB has recently issued SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," that
defers the effective date of certain provisions of SFAS No. 125 related to
secured borrowings and collateral, repurchase agreements, dollar rolls,
securities lending, and similar transactions until after December 31, 1997.
Management has not completed the process of evaluating this statement and
therefore has not determined the impact, if any, that adopting this
statement will have on the financial position and results of operations.
4. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." This
statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock. This
statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 15, "Earnings
Per Share," and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures. This
Statement is effective for financial statements for both interim and annual
periods ending after December 15, 1997.
5
<PAGE> 8
The following presentation illustrates proforma basic and diluted earnings
per share based on the provisions of SFAS No. 128:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Weighted average number of common shares outstanding used in
basic earnings per share calculation....................................... 46,324,519 47,289,413
Add common stock equivalents for shares issuable under Stock
Option Plan(1)............................................................. 1,252,027 931,200
------------ -----------
Weighted average number of shares outstanding adjusted for
common stock equivalent................................................... 47,576,546 48,220,613
============ ===========
Net income.................................................................. $ 44,086 38,450
Basic earnings per share.................................................... .95 .81
Diluted earnings per share.................................................. .93 .80
</TABLE>
Disclosure of earnings per share calculated in accordance with Accounting
Principles Board Opinion No. 15, "Earnings per Share" is contained in Exhibit
11.
- ---------------------------
(1) Additional shares issuable were derived under the "treasury stock method"
using the average market price during the period.
5. In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." This Statement establishes standards for
disclosing information about an entity's capital structure. It supersedes
specific disclosure requirements of APB Opinions No. 10, "Omnibus
Opinion-1966," and No. 15, "Earnings Per Share," and FASB Statement No. 47,
"Disclosure of Long-Term Obligations," and consolidates them in this
Statement for ease of retrieval and for greater visibility to nonpublic
entities. This Statement is effective for financial statements for periods
ending after December 15, 1997. It contains no changes in disclosure
requirements for entities that were previously subject to the requirements
of Opinions 10 and 15 and Statement 47 and, therefore, is not expected to
have a significant impact on the financial condition or results of
operations of the Company.
6. Certain items in the consolidated financial statements for 1996 have been
reclassified to conform to the 1997 presentation.
7. Subsequent to the issuance of the Company's 1996 consolidated financial
statements, the Company's management determined that (1) approximately $1.1
billion of the mortgage-backed security portfolio that was transferred
into held to maturity during 1996 should have remained in available for
sale, and (2) the offset to the fair value adjustment relating to such
security portfolio, which aggregated approximately $40.5 million, net of
tax, that was previously recorded as an increase to accrued liabilities
when such security portfolio was transferred from held to maturity to
available for sale during 1995, should have been recorded as a component
of shareholder's equity. As a result, the Company's 1996 and 1995
consolidated financial statements have been restated from the amounts
previously reported to reflect the proper recording of these
securities. The effects of the restatement did not affect net income.
6
<PAGE> 9
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
AS PREVIOUSLY
REPORTED AS RESTATED
------------- ------------
<S> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 1997:
Interest income:
Mortgage-backed securities available for sale............................. $ 384 18,181
Mortgage-backed securities held to maturity............................... 81,638 63,841
FOR THE THREE MONTHS ENDED MARCH 31, 1996:
Interest income:
Mortgage-backed securities available for sale............................. 7,797 20,557
Mortgage-backed securities held to maturity............................... 81,810 69,050
AT MARCH 31, 1997:
Mortgage-backed securities available for sale............................... 20,183 1,069,830
Mortgage-backed securities held to maturity................................. 4,553,554 3,495,098
Total assets................................................................ 14,040,397 14,031,588
Accrued liabilities......................................................... 139,489 136,406
Unrealized gain on securities............................................... 6,884 1,158
Shareholders' Equity........................................................ 951,493 945,767
AT DECEMBER 31, 1996:
Mortgage-backed securities available for sale............................... 21,800 1,070,705
Mortgage-backed securities held to maturity................................. 4,692,996 3,633,369
Total assets................................................................ 13,904,563 13,893,841
Accrued liabilities......................................................... 104,738 100,985
Unrealized gain on securities............................................... 8,486 1,517
Shareholders' Equity........................................................ 928,693 921,724
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
HOLDING COMPANY BUSINESS
GENERAL
Charter One Financial, Inc. ("Charter One" or the "Company") is a unitary
savings and loan holding company incorporated in Delaware and is the parent
company of Charter Michigan Bancorp, Inc. which owns all of the outstanding
capital stock of Charter One Bank, F.S.B. ("Charter One Bank" or the "Bank"), a
federally chartered stock savings bank headquartered in Cleveland, Ohio. The
bank has 174 branch locations: 94 branches in Ohio operating under the name
Charter One Bank and 80 branches in Michigan under the name First Federal of
Michigan ("First Federal").
RESULTS OF OPERATIONS
PERFORMANCE OVERVIEW
The Company reported net income of $44.1 million, or $0.93 per share, for the
three months ended March 31, 1997. This was a $5.6 million, or 14.7%, increase
over the net income for the first quarter of 1996 which was $38.5 million, or
$0.80 per share. The primary reason for this improvement was a $5.5 million, or
6.0%, increase in net interest income for the first quarter of 1997. In
addition, the Company experienced increases in recurring fee income which were
partially offset by increases in administrative expenses. Overall, income before
the federal tax provision increased by $7.5 million for the first quarter of
1997 as compared to the same period in 1996.
8
<PAGE> 11
QUARTERLY EARNINGS SUMMARY (Figure 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
3/31/97 12/31/96 9/30/96 6/30/96 3/31/96
------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net interest income..................................... 97,526 95,304 97,179 98,907 92,002
Provision for loan and lease losses..................... (220) (1,000) (1,001) (1,000) (1,000)
Other income, excluding
gains and losses...................................... 15,094 16,257 15,046 12,680 11,262
Administrative expenses, excluding
the SAIF assessment................................... (46,697) (49,234) (47,885) (46,064) (44,583)
------- ------- ------- ------- -------
Pretax core earnings................................ 65,703 61,327 63,339 64,523 57,681
Gains and losses, net................................... 87 3,502 (71) (2,115) 577
Federal deposit insurance special
assessment............................................ - - (56,258) - -
------- ------- ------- ------- -------
Income before federal income taxes.................. 65,790 64,829 7,010 62,408 58,258
Federal income taxes.................................... 21,704 21,958 1,979 21,038 19,808
------- ------- ------- ------- -------
Net income............................................ 44,086 42,871 5,031 41,370 38,450
======= ======= ======= ======= =======
Primary earnings per common and common
equivalent share...................................... .93 .90 .11 .86 .80
======= ======= ======= ======= =======
</TABLE>
The increase in earnings in the first quarter of 1997 contributed to an 18.67%
annualized return on average equity and a 1.26% annualized return on average
assets. This compares to first quarter 1996 annualized returns of 17.18% and
1.19%, respectively. These annualized returns and other selected ratios are set
forth in Figure 2.
SELECTED OPERATING RATIOS (Figure 2)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
3/31/97 3/31/96
------- -------
<S> <C> <C>
Annualized returns:
Return on average assets...................................................... 1.26% 1.19
Return on average equity...................................................... 18.67 17.18
Average equity to average assets.............................................. 6.77 6.92
Annualized operating ratios:
Net interest income to administrative expenses................................ 208.85 206.36
Administrative expenses to average assets..................................... 1.34 1.38
Efficiency ratio.............................................................. 40.48 42.99
</TABLE>
9
<PAGE> 12
NET INTEREST INCOME
Net interest income is the principal source of earnings for the Company. It is
affected by a number of factors including the level, pricing and maturity of
interest-earning assets and interest-bearing liabilities, as well as interest
rate fluctuations and asset quality.
Figure 3 sets forth information concerning Charter One's interest-earning
assets, interest-bearing liabilities, net interest income, interest rate spreads
and net yield on average interest-earning assets during the periods indicated
(including fees which are considered adjustments to yields). Average balance
calculations are based on daily balances.
AVERAGE BALANCES, INTEREST RATES AND YIELDS/COSTS (Figure 3)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------
1997 1996
---------------------------------- --------------------------------------
AVG. AVG.
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------- --------- ------- ----------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans and leases(1)................ $ 8,327,998 $ 163,982 7.89% $ 6,891,130 $ 142,191 8.25%
Mortgage-backed securities:
Available for sale............... 1,082,587 18,181 6.72 1,157,398 20,557 7.10
Held to maturity................. 3,539,920 63,841 7.21 3,854,380 69,050 7.17
Investment securities
available for sale................ 271,666 4,719 6.95 349,246 5,772 6.61
Other interest-earning
assets(2)......................... 302,464 5,070 6.70 334,182 5,478 6.56
----------- --------- ----------- --------
Total interest-earning assets... 13,524,635 255,793 7.57 12,586,336 243,048 7.72
--------- --------
Allowance for loan losses.......... (65,899) (65,987)
Noninterest-earning assets(3)...... 490,542 418,788
----------- -----------
Total assets.................. $ 13,949,278 $ 12,939,137
=========== ===========
Interest bearing liabilities(4):
Deposits:
Checking accounts................ $ 857,208 2,381 1.13 $ 696,499 2,302 1.32
Savings accounts................. 853,524 4,805 2.28 980,169 5,852 2.39
Money market accounts............ 1,353,582 11,815 3.54 851,571 6,869 3.23
Certificates of deposit.......... 4,748,344 66,043 5.64 4,436,971 64,505 5.82
----------- --------- ----------- --------
Total deposits................. 7,812,658 85,044 4.41 6,965,210 79,528 4.57
----------- --------- ----------- --------
FHLB advances...................... 3,131,005 44,926 5.79 3,185,989 45,127 5.67
Other borrowings................... 1,904,506 28,297 5.94 1,729,222 26,391 6.10
----------- --------- ----------- --------
Total borrowings................ 5,035,511 73,223 5.85 4,915,211 71,518 5.82
----------- --------- ----------- --------
Total interest-bearing
liabilities.................... 12,848,169 158,267 4.98 11,880,421 151,046 5.09
--------- --------
Non interest-bearing liabilities... 156,742 163,733
----------- -----------
Total liabilities............... 13,004,911 12,044,154
Shareholders' equity................. 944,367 894,983
----------- -----------
Total liabilities and
shareholders' equity........... $ 13,949,278 $ 12,939,137
=========== ===========
Net interest income.................. $ 97,526 $ 92,002
========= ========
Interest rate spread................. 2.59 2.63
Net yield on average interest-
earning assets(5)................... 2.88 2.92
Average interest-earning assets
to average interest-bearing
liabilities......................... 105.27% 105.94%
- ---------------------------
(1) Average balances include nonaccrual loans and interest income includes loan
fee amortization.
(2) Includes FHLB stock, federal funds sold, interest-bearing deposits with
banks and other.
(3) Includes mark-to-market adjustments on securities available for sale.
(4) The costs of liabilities include the annualized effect of interest rate
risk management instruments.
(5) Annualized net interest income divided by the average balance of
interest-earning assets.
</TABLE>
10
<PAGE> 13
Figure 4 sets forth the changes in Charter One's interest income and interest
expense resulting from changes in interest rates and the volume of
interest-earning assets and interest-bearing liabilities. Changes not solely
attributable to volume or rate have been allocated in proportion to the changes
due to volume and rate.
RATE/VOLUME ANALYSIS (Figure 4)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
1997 V. 1996
----------------------------------
INCREASE (DECREASE) DUE TO
-------------------------
RATE VOLUME TOTAL
---- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income:
Loans and leases............................................................... $ (6,090) 27,881 21,791
Mortgage-backed securities:
Available for sale........................................................... (1,087) (1,289) (2,376)
Held to maturity............................................................. 465 (5,674) (5,209)
Investment securities available for sale....................................... 315 (1,368) (1,053)
Other interest-earning assets.................................................. 127 (535) (408)
------- ------- -------
Total....................................................................... (6,270) 19,015 12,745
Interest expense:
Checking accounts.............................................................. (185) 264 79
Savings accounts............................................................... (324) (723) (1,047)
Money market accounts.......................................................... 612 4,334 4,946
Certificates of deposit........................................................ (2,569) 4,107 1,538
Federal Home Loan Bank advances................................................ 1,635 (1,836) (201)
Other borrowings............................................................... (463) 2,369 1,906
------- ------- -------
Total....................................................................... (1,294) 8,515 7,221
------- ------- -------
Change in net interest income.................................................... $ (4,976) 10,500 5,524
======= ======= =======
</TABLE>
Net interest income for the first quarter of 1997 was $97.5 million, a $5.5
million, or 6.0%, increase over net interest income for the first quarter of
1996. Net interest income increased primarily due to growth in interest-earning
assets, mainly loans and leases, since the first quarter of 1996. Due to high
volumes of loan and lease originations in 1996 and the first quarter of 1997,
the average balance of loans and leases was $1.4 billion higher during the first
three months of 1997 as compared to the first quarter of 1996. This increase in
the balance of loans and leases caused interest income to increase by $27.9
million. Overall, average interest-earning assets in the first quarter of 1997
were $938.3 million higher than in the first quarter of 1996. The decrease in
the remaining components of interest-earning assets helped fund the loan and
lease growth. The other balances were $498.6 million lower in the first quarter
of 1997 which caused interest income to decrease by $8.9 million, partially
offsetting the increase in interest income created by the loan and lease growth.
The primary funding for the remaining growth in the loan and lease portfolio
came from increases in interest-bearing liabilities. The average balance of
interest-bearing liabilities, primarily savings deposits as a result of the
First Nationwide branch and deposit acquisition at June 28, 1996, was $967.7
million higher in the first quarter of 1997 as compared to the same period in
1996. This caused interest expense to increase by $8.5 million. Overall the
volume changes in interest-earning assets and interest-bearing liabilities
resulted in an increase of $10.5 million in net interest income as the interest
rate spread for the first three months of 1997 was 2.59%, four basis points
lower than the interest rate spread of 2.63% during the first quarter of 1996.
The net yield on interest earning assets also declined by four basis points to
2.88% during the first three months of 1997. New loan and lease volumes were
added at yields lower than the average portfolio yield, primarily due to an
increase in adjustable rate loan production. This was the primary reason the
yield on interest-earning assets declined by 15 basis points to 7.57% during the
first three months of 1997. The average cost of interest-bearing liabilities
declined by 11 basis points to 4.98% for the first quarter of 1997 as compared
to 5.09% for the first quarter of 1996. The four basis point decline in the
interest rate spread caused net interest income to decrease by $5.5 million.
11
<PAGE> 14
Figure 5 sets forth the Company's yields and costs at period end for the dates
indicated.
YIELDS AND COSTS AT END OF PERIOD (Figure 5)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
---------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Weighted average yield:
Loans and leases...................................................... 7.88% 7.96%
Mortgage-backed securities............................................ 7.19 7.22
Investment securities................................................. 6.97 6.89
Other interest-earning assets......................................... 7.20 7.21
Total interest-earning assets......................................... 7.61 7.66
Weighted average cost(1):
Deposits.............................................................. 4.42 4.48
Federal Home Loan Bank advances....................................... 5.80 5.81
Other borrowings...................................................... 6.06 6.15
Total interest-bearing liabilities.................................... 5.00 5.04
Interest rate spread.................................................... 2.61 2.62
Net yield on interest-earning assets.................................... 2.91 2.87
Interest-earning assets................................................. $13,660,435 $13,458,265
- ---------------------------
<FN>
(1) The costs of liabilities include the annualized effect of interest rate
risk management instruments.
</TABLE>
OTHER INCOME (Figure 6)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loan servicing fees................................................................ $ 2,574 2,259
Service fees and other charges:
Retail deposit account service charges and fees.................................. 7,794 5,712
Fees on insurance, annuity, and mutual fund sales................................ 2,134 829
Other branch service fees........................................................ 311 403
Miscellaneous.................................................................... 81 15
-------- -------
Total.......................................................................... 10,320 6,959
Leasing operations................................................................. 2,088 1,788
Net gains:
Real estate...................................................................... (60) 282
Mortgage-backed securities....................................................... - 57
Loans............................................................................ 123 190
Other............................................................................ 24 48
-------- -------
Total.......................................................................... 87 577
Other............................................................................ 112 256
-------- -------
Total......................................................................... 15,181 11,839
======== =======
</TABLE>
OTHER INCOME
Other income was $15.2 million for the first quarter of 1997 as compared to
$11.8 million for the first three months of 1996. This $3.3 million, or 28.2%,
increase was primarily due to increases in recurring fee income as illustrated
in figure 6 above. Increases in retail deposit account service charges and fees
on insurance, annuity and mutual fund sales were the primary reasons that other
income increased. Retail deposit account service charges, primarily checking
account service charges, increased $2.1 million primarily due to increases in
the number of checking accounts as a result of the First Nationwide acquisition
on June 28, 1996. The Bank acquired over
12
<PAGE> 15
55,000 additional checking accounts in this acquisition. Fees on insurance,
annuity and mutual fund sales increased as a result of expanded operations,
primarily in Michigan.
ADMINISTRATIVE EXPENSES (Figure 7)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Compensation and employee benefits............................................... $ 24,060 22,037
Net occupancy and equipment...................................................... 7,333 6,404
Federal deposit insurance premiums............................................... 1,259 3,989
Amortization of goodwill......................................................... 1,113 189
Other administrative expenses.................................................... 12,932 11,964
-------- --------
Administrative expenses........................................................ $ 46,697 44,583
======== ========
Number of full-time equivalent employees
at end of period............................................................... 2,582 2,360
Net interest income to administrative expenses................................... 208.85% 206.36%
Administrative expenses to average assets (annualized)........................... 1.34% 1.38%
Efficiency ratio................................................................. 40.48% 42.99%
</TABLE>
ADMINISTRATIVE EXPENSES
Administrative expenses were $46.7 million during the first quarter of 1997.
This is a $2.1 million, or 4.7%, increase as compared to the first quarter of
1996 which had $44.6 million in administrative expenses. These increases were
primarily due to the expansion of the Bank's branch network in 1996 and expanded
subsidiary operations. On June 28, 1996, the Bank acquired 21 offices with
$796.7 million in deposits from First Nationwide Bank. Four of these offices
were closed as a result of overlapping market areas. Also, the Bank expanded its
subsidiary operations relating to insurance, annuity and mutual fund sales
during 1996. The increases were partially offset by a reduction of $2.7 million
in the federal deposit insurance premium expense. This reduction was due to the
Federal Deposit Insurance Corporation reducing the premium rate to 6.5 basis
points per $100 in deposits as a result of the Savings Association Insurance
Fund recapitalization in 1996.
While the dollar level of expenses increased, those increases were consistent
with the expanded operations of the Bank and its subsidiaries. The ratio of
administrative expenses to average assets was 1.34% for the first quarter of
1997 as compared to 1.38% during the first quarter of 1996. Also, the Company's
efficiency ratio of 40.48% for the first quarter of 1997 compared favorably to
the 42.99% efficiency ratio during the first quarter of 1996. Since efficiency
ratios are a calculation of administrative expenses (excluding the amortization
of goodwill) divided by net interest income plus recurring fee income, the lower
the ratio the better for the Company.
FEDERAL INCOME TAXES
Federal income tax expense was $21.7 million for the three months ending March
31, 1997. This was $1.9 million, or 9.6%, higher than the federal income tax
expense during the first three months of 1996. This increase was primarily due
to a $7.5 million, or 12.9%, increase in pre-tax income. The effective tax rates
were 33.0% for the 1997 period and 34.0% for the 1996 period.
13
<PAGE> 16
FINANCIAL CONDITION
Figure 8 sets forth information concerning the composition of the Company's
assets, liabilities and shareholders' equity at March 31, 1997 and December 31,
1996.
FINANCIAL CONDITION (Figure 8)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
---------------------- ---------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents..................... $ 168,357 1.2% $ 270,304 1.9%
Investment securities......................... 281,448 2.0 243,632 1.8
Mortgage-backed securities.................... 4,564,928 32.5 4,704,074 33.9
Loans and leases, net......................... 8,472,041 60.4 8,100,342 58.3
Other assets.................................. 544,814 3.9 575,489 4.1
----------- ------ ----------- ------
Total...................................... $ 14,031,588 100.0% $ 13,893,841 100.0%
=========== ====== =========== ======
Liabilities:
Deposits...................................... $ 7,839,479 55.9% $ 7,841,197 56.4%
Borrowings.................................... 5,028,856 35.8 4,955,291 35.7
Other liabilities............................. 217,486 1.6 175,629 1.3
Shareholders' equity.......................... 945,767 6.7 921,724 6.6
----------- ------ ----------- ------
Total...................................... $ 14,031,588 100.0% $ 13,893,841 100.0%
=========== ====== =========== ======
</TABLE>
OVERVIEW
At March 31, 1997, total assets were $14.0 billion which was $137.7 million
higher than at December 31, 1996. This increase was primarily the result of
increases in the balances of loans and leases. The loan and lease portfolio grew
by $371.7 million to $8.5 billion at March 31, 1997, funded by reductions of
cash and cash equivalents and mortgage-backed securities along with increased
borrowing levels. The Company's loan and lease portfolio is growing due to the
Bank's ability to originate new loans and leases at levels that exceed
repayments as illustrated in Figure 10.
LOANS AND LEASES
COMPOSITION OF LOANS AND LEASES(Figure 9)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------------- --------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
---------- ------ ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate:
One-to-four family..................................... $ 6,329,315 74.7% $ 6,072,927 75.0%
Multifamily............................................ 274,967 3.2 290,195 3.6
Commercial............................................. 349,653 4.2 348,787 4.4
Construction........................................... 294,274 3.5 302,405 3.7
---------- ------ ---------- -----
Total real estate................................... 7,248,209 85.6 7,014,314 86.7
Consumer................................................. 1,001,287 11.7 929,204 11.4
Leases................................................... 278,214 3.3 251,133 3.1
Business................................................. 114,935 1.4 100,302 1.2
---------- ------ ---------- -----
Total loans and leases................................ 8,642,645 102.0 8,294,953 102.4
Less net items........................................... 170,604 2.0 194,611 2.4
---------- ------ ---------- -----
Loans and leases, net............................... $ 8,472,041 100.0% $ 8,100,342 100.0%
========== ====== ========== =====
</TABLE>
14
<PAGE> 17
LOAN AND LEASE ACTIVITY (Figure 10)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Originations:
Real estate:
Permanent:
One-to-four family.......................................................... $ 418,338 542,368
Multifamily................................................................. 4,569 15,502
Commercial.................................................................. 14,580 8,174
--------- --------
Total permanent........................................................... 437,487 566,044
--------- --------
Construction:
One-to-four family.......................................................... 58,613 47,321
Multifamily................................................................. 1,400 -
Commercial.................................................................. 5,295 1,000
--------- --------
Total construction........................................................ 65,308 48,321
--------- --------
Total real estate loans originated...................................... 502,795 614,365
--------- --------
Consumer line of credit draws................................................. 60,610 39,583
Consumer...................................................................... 91,568 101,091
Business line of credit draws................................................. 15,776 18,197
Business...................................................................... 15,661 6,604
Leases(1)..................................................................... 67,600 32,246
--------- --------
Total loans and leases originated....................................... 754,010 812,086
--------- --------
Sales and principal reductions:
Loans sold...................................................................... 6,783 14,168
Principal reductions............................................................ 399,535 434,264
--------- --------
Total sales and principal reductions...................................... 406,318 448,432
--------- --------
Increase before net items............................................... $ 347,692 363,654
========= ========
- ---------------------------
(1) Not included herein are $1.7 and $2.1 million in operating leases
originated during the three months ended March 31, 1997 and 1996,
respectively.
</TABLE>
15
<PAGE> 18
INVESTMENT SECURITIES
The entire investment securities portfolio was classified as available for sale
at both March 31, 1997 and December 31, 1996. Figure 11 summarizes the fair
values of the portfolio at those dates.
INVESTMENT SECURITIES PORTFOLIO (Figure 11)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Treasury and agency securities.................................... $ 276,059 238,135
Corporate notes and commercial paper................................... 4,012 4,107
Other.................................................................. 1,377 1,390
-------- ---------
Total................................................................ $ 281,448 243,632
======== =========
Weighted average rate................................................ 6.97% 6.89%
======== =========
</TABLE>
MORTGAGE-BACKED SECURITIES (AS RESTATED)
Figure 12 summarizes the mortgage-backed securities ("MBS") portfolios at March
31, 1997 and December 31, 1996. The amounts reflected represent the fair values
of securities available for sale and the amortized cost of securities held to
maturity.
MORTGAGE-BACKED SECURITIES (Figure 12)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
AVAILABLE FOR SALE
Participation certificates:
Government agency issues:
FHLMC.................................................................... $ 12,544 13,335
Collateralized mortgage obligations:
Government agency issues:
FHLMC.................................................................... 349,947 350,158
FNMA..................................................................... 264,363 264,682
Private issues............................................................. 442,976 442,530
---------- ----------
Total mortgage-backed securities available for sale...................... 1,069,830 1,070,705
---------- ----------
HELD TO MATURITY
Participation certificates:
Government agency issues:
FNMA..................................................................... 1,196,220 1,246,398
FHLMC.................................................................... 595,308 636,228
GNMA..................................................................... 181,105 188,057
Private issues............................................................. 391,886 407,564
Collateralized mortgage obligations:
Government agency issues:
FNMA..................................................................... 162,522 162,646
FHLMC.................................................................... 82,322 82,433
Private issues............................................................. 885,735 910,043
---------- ----------
Total mortgage-backed securities held to maturity...................... 3,495,098 3,633,369
---------- ----------
Total............................................................... $ 4,564,928 4,704,074
========== ==========
</TABLE>
16
<PAGE> 19
MORTGAGE-BACKED SECURITIES BY PAYMENT TYPE (Figure 13)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------------------- -------------------------
BOOK AVERAGE BOOK AVERAGE
VALUE RATE VALUE RATE
----------- ------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Adjustable rate:
Collateralized mortgage obligations.............. $ 1,056,344 6.86% $ 1,056,087 6.94%
----------- -----------
Total adjustable rate.......................... 1,056,344 6.86 1,056,087 6.94
----------- -----------
Fixed rate:
Participation certificates....................... 12,544 6.03 13,335 6.03
Collateralized mortgage obligations.............. 942 5.09 1,283 5.09
----------- -----------
Total fixed rate............................... 13,486 5.96 14,618 5.94
----------- -----------
Total available for sale..................... 1,069,830 6.85 1,070,705 6.93
----------- -----------
HELD TO MATURITY
Adjustable rate:
Participation certificates....................... 967,345 7.14 1,019,324 7.16
Collateralized mortgage obligations.............. 298,007 7.20 301,866 7.23
----------- -----------
Total adjustable rate.......................... 1,265,352 7.16 1,321,190 7.18
----------- -----------
Fixed rate:
Participation certificates....................... 1,397,173 7.50 1,458,923 7.51
Collateralized mortgage obligations.............. 832,573 7.15 853,256 7.15
----------- -----------
Total fixed rate............................... 2,229,746 7.37 2,312,179 7.38
----------- -----------
Total held to maturity....................... 3,495,098 7.29 3,633,369 7.31
----------- -----------
Total mortgage-backed securities........... $ 4,564,928 7.19% $ 4,704,074 7.22%
=========== ===========
</TABLE>
17
<PAGE> 20
ASSET QUALITY
ANALYSIS OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES (Figure 14)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period...................................................... $ 65,922 64,436
Provision for loan and lease losses............................................... 220 1,000
Loans and leases charged off:
Mortgage........................................................................ (226) (34)
Consumer........................................................................ (139) (315)
Leases.......................................................................... - -
Business........................................................................ (39) (1)
------- --------
Total charge-offs............................................................. (404) (350)
------- --------
Recoveries:
Mortgage........................................................................ 69 44
Consumer........................................................................ 26 88
Leases.......................................................................... - -
Business........................................................................ - -
------- --------
Total recoveries............................................................. 95 132
------- --------
Net loan and lease charge-offs............................................. (309) (218)
------- --------
Balance, end of period............................................................ 65,833 65,218
======= ========
Net charge-offs to average loans and leases (annualized) .01% .01%
</TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES (Figure 15)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
---------------- -----------------
(DOLLARS IN THOUSANDS)
----
<S> <C> <C>
Mortgage...................................................................... $ 52,976 53,133
Consumer...................................................................... 6,671 6,765
Leases........................................................................ 1,177 977
Business...................................................................... 5,009 5,047
------- -------
Total....................................................................... $ 65,833 65,922
======= =======
Percent of loans and leases to ending loans and leases:
Mortgage.................................................................... 83.6% 84.3%
Consumer.................................................................... 11.8 11.4
Leases...................................................................... 3.3 3.1
Business.................................................................... 1.3 1.2
------- -------
Total..................................................................... 100.0% 100.0%
======= =======
</TABLE>
The allowance for loan and lease losses as a percentage of ending loans and
leases (before the allowance) was .77% at March 31, 1997, down slightly from
.81% at December 31, 1996. Credit quality remained high, with nonperforming
assets at only .32% of total assets at March 31, 1997. Net charge-offs totaled
$309,000 for the three months ended March 31, 1997. Net charge-offs for the
comparable period of 1996 was $218,000.
Management believes that the allowance for loan and lease losses has been
established in accordance with generally accepted accounting principles based on
the best information available. However, future adjustments to reserves may be
necessary and net income could be significantly affected if circumstances and/or
economic conditions differ substantially from the assumptions used in making the
initial determinations. A downturn in the Ohio or Michigan real estate markets
could result in an increased level of nonperforming assets and charge-offs,
significant provisions for loan and lease losses and significant reductions in
income. Additionally, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan and lease
losses. Such agencies may require the recognition of additions to the allowance
based on their judgments of information available to them at the time of their
examination.
18
<PAGE> 21
Figure 16 sets forth information concerning nonperforming assets and the
allowance for loan lease losses. At March 31, 1997, the Bank had no outstanding
commitments to lend additional funds to borrowers whose loans were on nonaccrual
or restructured status.
NONPERFORMING ASSETS (Figure 16)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonperforming loans and leases:
Nonaccrual loans and leases:
Mortgage loans:
One-to-four family................................................... $ 11,683 10,264
Multifamily and commercial........................................... 3,755 2,372
Construction and land................................................ 840 827
------- -------
Total mortgage loans............................................... 16,278 13,463
Consumer............................................................... - -
Business............................................................... 169 95
Lease financings....................................................... - -
------- -------
Total nonaccrual loans and leases.................................. 16,447 13,558
------- -------
Accruing loans and leases delinquent more than 90 days:
Mortgage loans:
One-to-four family................................................... 5,489 5,961
Multifamily and commercial........................................... - -
Construction and land................................................ - -
------- -------
Total mortgage loans............................................... 5,489 5,961
Consumer............................................................... 2,919 544
Business............................................................... 6 58
Lease financings....................................................... - -
------- -------
Total accruing 90-day delinquent loans and leases.................. 8,414 6,563
------- -------
Restructured real estate loans........................................... 13,895 15,294
------- -------
Total nonperforming loans and leases............................... 38,756 35,415
Real estate acquired through foreclosure and other....................... 6,026 7,030
------- -------
Total nonperforming assets......................................... $ 44,782 42,445
======= =======
Ratio of:
Nonperforming loans and leases to total loans and leases............... .46% .44%
Nonperforming assets to total assets................................... .32 .31
Allowance for loan and lease losses to:
Nonperforming loans and leases....................................... 169.87 186.14
Total loans and leases before allowance.............................. .77 .81
</TABLE>
Nonperforming assets at March 31, 1997 totaled $44.8 million, up from $42.4
million from December 31, 1996. The increase was due to an increase in the
delinquencies of one-to-four family residential loans and consumer loans. The
ratio of non-performing loans to total loans was .46% at March 31, 1997 as
compared to .44% at December 31, 1996.
At March 31, 1997, there were $31.6 million of loans not reflected in the table
above, where known information about possible credit problems of borrowers
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms and that may result in disclosure of such
loans in the future. The largest of these potential problem loans is a $15.6
million loan on apartment buildings where the borrower is experiencing cash flow
deficiencies but the loan is current.
19
<PAGE> 22
SOURCES OF FUNDS
GENERAL
Deposits have historically been the most important source of the Bank's funds
for use in lending and for general business purposes. The Bank also derives
funds from Federal Home Loan Bank ("FHLB") advances, reverse repurchase
agreements and other borrowings, principal repayments on loans and
mortgage-backed securities, funds provided by operations and proceeds from the
sale of loans and loan participations. At March 31, 1997 and December 31, 1996,
61% of interest-bearing liabilities were in the form of deposits and 39% were in
borrowings.
DEPOSITS
Deposit inflows and outflows are significantly influenced by general interest
rates, market conditions and competitive factors. The Bank reprices its deposits
primarily based on competitive conditions. In order to decrease the volatility
of its deposits, the Bank imposes stringent early withdrawal penalties on its
certificates of deposit. Consumer and commercial deposits are attracted
principally within the Bank's primary market areas through the offering of a
broad range of deposit instruments.
COMPOSITION OF DEPOSITS (Figure 17)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
WEIGHTED PERCENT WEIGHTED PERCENT
AVERAGE OF AVERAGE OF
AMOUNT RATE TOTAL AMOUNT RATE TOTAL
------ ---- ----- ------ ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Checking accounts:
Interest-bearing........................ $ 565,553 1.74% 7.21% $ 558,753 1.86% 7.13%
Noninterest-bearing..................... 324,289 - 4.14 300,685 - 3.83
Savings accounts.......................... 843,063 2.23 10.76 868,361 2.42 11.08
Money market accounts..................... 1,365,418 3.46 17.42 1,344,973 3.52 17.16
Certificates of deposit................... 4,739,293 5.85 60.47 4,766,369 5.85 60.80
----------- ------ ----------- ------
Deposits.............................. 7,837,616 4.51 100.0% 7,839,141 4.56 100.0%
====== ======
Plus unamortized premium
on deposits purchased.................... 1,863 2,056
----------- -----------
Deposits, net........................ $ 7,839,479 $ 7,841,197
=========== ===========
Weighted average cost
including the annualized
effect of applicable swaps,
floors, and amortization
of deferred gains on
terminated swaps......................... 4.42% 4.48%
===== =====
</TABLE>
BORROWINGS
At March 31, 1997, borrowings primarily consisted of FHLB advances and reverse
repurchase agreements. These positions were secured by Charter One's investment
in the stock of the FHLB, as well as $4.4 billion in real estate loans and $2.4
billion in mortgage-backed securities.
20
<PAGE> 23
FEDERAL HOME LOAN BANK ADVANCES (Figure 18)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
----------------------- ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed-rate advances........................................ $ 1,960,774 5.97% $ 1,791,332 5.99%
Variable-rate advances..................................... 1,120,500 5.52 1,403,000 5.56
---------- ----------
Advances................................................. 3,081,274 5.81 3,194,332 5.80
Unamortized premium........................................ - 1
---------- ----------
Total advances, net...................................... $ 3,081,274 $ 3,194,333
========== ==========
Weighted average, cost including the annualized
effect of applicable caps and amortization of
deferred gains on terminated swaps....................... 5.80% 5.81%
===== ====
</TABLE>
The variable-rate advances reprice based upon three-month LIBOR at three-month
intervals, and included $573 million which are callable, at par, by the FHLB.
The fixed-rate advances include $200 million and $225 million maturing in 2001
and 2002, respectively, which are convertible at the counterparty's option, to a
variable rate of three-month LIBOR, beginning in February 1999 and March 1999,
respectively, and quarterly thereafter.
Figure 19 presents a summary of outstanding reverse repurchase agreements. The
Bank enters into short-term reverse repurchase agreements for terms up to one
year, as well as longer term fixed- and variable-rate agreements.
REVERSE REPURCHASE AGREEMENTS (Figure 19)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
----------------------- ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Short term............................................... $ 361,182 5.48% $ - -
Long term:
Fixed rate............................................. 1,374,784 5.57 1,374,784 5.58%
Variable rate.......................................... - 174,994 5.93
---------- ----------
Weighted average cost including
amortization of fees................................... $ 1,735,966 5.55 $ 1,549,778 5.62
========== ==========
Weighted average cost including the annualized
effect of amortization of deferred gains
on terminated swaps.................................... 5.54% 5.59%
===== ====
</TABLE>
The long term fixed-rate agreements include $470 million convertible, at the
counterparty's option, to a variable rate based on three-month LIBOR. The
agreements are convertible as follows: $200 million beginning in June 1997, $120
million beginning in August 1997 and $250 million in October 1997.
INTEREST RATE RISK MANAGEMENT
The company utilizes various types of interest rate contracts in managing its
interest rate risk on certain of its deposits. The Company has utilized fixed
payment swaps to convert certain of its floating-rate or short-term, fixed-rate
liabilities into longer term, fixed-rate instruments. Under these agreements,
the Company 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. The Company also utilizes
fixed receipt swaps to convert certain of its longer term callable certificates
of deposit into short-term variable instruments. Under these agreements the
Company has
21
<PAGE> 24
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.
INTEREST RATE SWAPS (Figure 20)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
------------------------------------ ------------------------------------
NOTIONAL RECEIVING PAYING NOTIONAL RECEIVING PAYING
PRINCIPAL INTEREST INTEREST PRINCIPAL INTEREST INTEREST
AMOUNT RATE RATE AMOUNT RATE RATE
-------- --------- ----------- -------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fixed payment and variable
receipt maturing in 1999.......... $ 100,000 5.63%(1) 10.09% $ 100,000 5.77% 10.09%
======== ========
Variable payment and fixed receipt:
Maturing in:
1998.......................... $ 65,000 6.12% 5.54% $ 115,000 6.40% 5.53%
1999.......................... 60,000 6.50 5.57 - - -
2000.......................... 40,000 6.89 5.63 110,000 7.06 5.54
2001.......................... 210,000 7.25 5.55 140,000 7.28 5.53
-------- --------
Total....................... $ 375,000 6.90% 5.56%(1) $ 365,000 6.93% 5.53%(1)
======== ========
- ---------------------------
<FN>
(1) Rates are based upon LIBOR.
</TABLE>
The Company also utilizes swaps to hedge a special class of certificates of
deposit. These swaps provide for the receipt of variable interest based upon the
S&P 500 Index, and the payment of either fixed or variable interest. At March
31, 1997, the notional principal amount outstanding was $33.8 million with a
weighted average receipt rate of 21.75% and payment rate of 5.65%. At December
31, 1996, the outstanding principal was $32.2 million with receipt and payment
rates of 19.58% and 5.59%, respectively.
In 1995, the Company entered into $300 million of four-year interest rate floor
agreements maturing in March 1999, which provide for receipt of interest when
six-month LIBOR falls below 6.00%. The Company receives the difference between
6.00% and LIBOR at the time of repricing, calculated on the $300 million
notional amount. At March 31, 1997, interest received based on a 5.67% weighted
average LIBOR rate was partially offset by a .07% per annum fee cost. Fees paid
at inception of the agreements are being amortized over the terms of the
agreements. Unamortized fees totaled $407,000 at March 31, 1997.
In the past, the Company entered into caps with primary dealers to limit its
exposure to rising rates on certain of its variable-rate and short-term,
fixed-rate liabilities. The agreements provided for receipt of interest when
three-month LIBOR exceeded an agreed upon base rate. The Company received a rate
of interest equal to the excess of three-month LIBOR at the time of repricing
over the 6.00% base rate, calculated on a notional principal amount. At December
31, 1996, the notional principal amount outstanding was $650 million. As of
March 31, 1997, all interest rate caps had fully matured.
The cost (benefit) of interest rate exchange, cap, floor and collar positions,
including amortization of gains and losses on terminated positions, was included
in interest expense as follows:
22
<PAGE> 25
COST OF INTEREST RATE RISK MANAGEMENT (Figure 21)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest expense (income):
Deposits.......................................... $(3,800) (916)
FHLB advances..................................... 257 499
Reverse repurchase agreements..................... (308) (636)
------ ------
Total........................................... $(3,851) (1,053)
====== ======
</TABLE>
LIQUIDITY
Deposits have historically been the most important source of the Bank's funds
for use in lending and for general business purposes. The Bank also derives
funds from FHLB advances, reverse repurchase agreements and other borrowings,
principal repayments on loans and mortgage-backed securities, funds provided by
operations and proceeds from the sale of loans and securities. While scheduled
loan, security and interest-bearing deposit amortization and maturities are
relatively predictable sources of funds, deposit flows and loan and security
prepayments are greatly influenced by economic conditions, the general level of
interest rates and competition. The Bank utilizes particular sources of funds
based on comparative costs and availability. The Bank generally manages the
pricing of its deposits to maintain a steady deposit balance, but has from time
to time decided not to pay rates on deposits as high as its competition and,
when necessary, to supplement deposits with longer term and/or less expensive
alternative sources of funds such as advances and reverse repurchase agreements.
The Bank is required by regulation to maintain specific minimum levels of liquid
investments. Regulations currently in effect require the Bank to maintain liquid
assets at least equal to 5.0% of the sum of its average daily balance of net
withdrawable accounts and borrowed funds due in one year or less. This
regulatory requirement may be changed from time to time to reflect current
economic conditions. The Bank's average regulatory liquidity ratio for the
quarter ended March 31, 1997 was 5.38%.
Liquidity management is both a daily and long-term responsibility of management.
The Bank adjusts its investments in cash and cash equivalents based upon
management's assessment of (i) expected loan and lease demand, (ii) projected
security maturities, (iii) expected deposit flows, (iv) yields available on
short-term investments, and (v) the objectives of its asset/liability management
program. Excess liquidity is generally invested in federal funds sold, U.S.
Treasury and agency securities and commercial paper. If the Bank requires funds
beyond its ability to generate them internally, it has additional borrowing
capacity with the FHLB and collateral eligible for reverse repurchase
agreements. Because the Bank has a stable retail deposit base, management
believes that significant borrowings will not be necessary to maintain its
current liquidity position.
The Bank anticipates that it will have sufficient funds available during the
next 12 months to meet current and future loan commitments. At March 31, 1997,
the Bank and its subsidiaries had outstanding commitments to originate loans and
leases of $513.1 million, unfunded lines of consumer credit totaling $457.6
million (a significant portion of which normally remains undrawn) and unfunded
lines of commercial (business loans) credit totaling $34.4 million. Outstanding
letters of credit totaled $14.4 million as of March 31, 1997. Certificates of
deposit scheduled to mature in one year or less at March 31, 1997 totaled $2.3
billion. Management believes that a significant portion of the amounts maturing
during the next 12 months will remain with the Bank because they are retail
deposits. At March 31, 1997, the Bank had $1.3 billion of advances from the FHLB
and $361.2 million of reverse repurchase agreements which mature during the next
12 months. Management will review the need for advances and reverse repurchase
agreements when they mature and believes the Bank has significant additional
borrowing capacity with the FHLB and investment banking firms to meet any need
for replacement borrowings.
23
<PAGE> 26
CAPITAL AND DIVIDENDS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. The regulations require the Bank to meet
specific capital adequacy guidelines and the regulatory framework for prompt
corrective action that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank'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 the Bank to maintain minimum amounts and ratios of total risk-based,
Tier 1 risk-based, Tier 1 leverage and tangible capital as set forth in the
tables below.
REGULATORY CAPITAL (Figure 22)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-------------------------------------------------------------------
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------------- -------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets).......... $ 801,167 10.67% $ 600,677 8.0% $ 750,846 10.0%
Tier 1 capital (to risk-weighted assets)......... 739,027 9.84 N/A N/A 450,507 6.0
Tier 1 capital (to adjusted tangible assets)..... 739,027 5.25 422,409 3.0 704,014 5.0
Tangible capital (to adjusted tangible assets)... 739,027 5.25 211,204 1.5 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-------------------------------------------------------------------
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------------- -------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets).......... $ 741,904 10.62% $559,080 8.0% $698,850 10.0%
Tier 1 capital (to risk-weighted assets)......... 679,967 9.73 N/A N/A 419,310 6.0
Tier 1 capital (to adjusted tangible assets)..... 679,967 5.00 407,700 3.0 679,500 5.0
Tangible capital (to adjusted tangible assets)... 679,967 5.00 203,850 1.5 N/A N/A
</TABLE>
As of December 31, 1996, the most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the regulatory
framework for Prompt Corrective Action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the table above. There are no conditions or
events since that notification that have changed the Bank's category.
Management believes, as of March 31, 1997, that the Bank meets all capital
requirements to which it is subject. Events beyond management's control, such as
fluctuations in interest rates or a downturn in the economy in areas in which
the Bank's loans and securities are concentrated, could adversely affect future
earnings and, consequently, the Bank's ability to meet its future capital
requirements.
24
<PAGE> 27
QUARTERLY STOCK PRICES AND DIVIDENDS (Figure 23)
<TABLE>
<CAPTION>
1ST QUARTER 4TH QUARTER 3RD QUARTER 2ND QUARTER 1ST QUARTER
1997 1996 1996 1996 1996
---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Market price of common stock(1):
High.......................................... $ 50.13 44.75 40.56 36.19 33.57
Low........................................... 41.13 38.13 32.03 29.34 27.14
Close......................................... 43.88 42.00 40.00 33.22 32.14
Dividends declared and paid..................... .23 .23 .22 .22 .19
<FN>
(1) Restated to reflect the 5% stock dividend issued September 30, 1996.
</TABLE>
On May 15, 1996, the Board of Directors of the Company authorized management to
repurchase 5% of the Company's outstanding common stock in a buyback program. As
of that date, the Company had 47,354,637 common shares outstanding (adjusted for
subsequent stock dividend). The Company has purchased 425,000 of its shares
during 1997, leaving approximately 975,000 shares as authorized for repurchase.
On July 24, 1996, the Directors of Charter One Financial, Inc. approved a 5%
stock dividend which was distributed September 30, 1996, to shareholders of
record on September 13, 1996.
25
<PAGE> 28
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
DIVIDEND
On April 24, 1997, the Directors of Charter One Financial, Inc. declared a
quarterly cash dividend of 25 cents per common share. The dividend will be
payable on May 20, 1997 to shareholders of record as of May 8, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Selected Monthly Financial Highlights
(b) Reports on Form 8-K
On April 24, 1997 the Company filed an 8-K disclosing that the
boards of directors of Charter One Financial, Inc. and
Haverfield Corporation, the holding company of Home Bank,
F.S.B. entered into a definitive agreement to merge in a
stock-for-stock exchange. Home Bank, headquartered in
Cleveland, Ohio, is a federally chartered savings and loan with
$342 million in assets ($273 million in deposits) and 10 branch
offices throughout the Cleveland area.
Terms of the agreement call for the tax-free exchange of $27.00
in Charter One common stock for each of Haverfield's common
shares or a total consideration of approximately $53.7 million.
The price will stay fixed at $27.00 per Haverfield share if
Charter One's average stock price remains between $41.09 and
$55.60 per share during a 20-day pricing period ending five
business days before closing the transaction. The merger, which
would be accounted for as a purchase, is expected to close near
the end of the third quarter of 1997. Already approved by the
boards of directors of both companies, the transaction requires
the approvals of the Office of Thrift Supervision and
Haverfield shareholders.
26
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHARTER ONE FINANCIAL, INC.
Date: May 8, 1997 /s/ Robert J. Vana
----------------------------------------------------
Robert J. Vana
Chief Corporate Counsel and Secretary
Date: May 8, 1997 /s/ Richard W. Neu
----------------------------------------------------
Richard W. Neu
Executive Vice President and Chief Financial Officer
27
<PAGE> 1
EXHIBIT 11
CHARTER ONE FINANCIAL, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER SHARE:
Weighted average number of common shares outstanding..................... 46,324,519 47,289,413
Add common stock equivalents for shares issuable under:
Stock Appreciation Rights Plan(1)...................................... 49,177 49,571
Stock Option Plan(1)................................................... 1,252,027 931,200
------------ ------------
Weighted average number of shares outstanding adjusted
for common stock equivalents....................................... 47,625,723 48,270,184
============ ============
Net income................................................................. $ 44,086 38,450
Primary earnings per share................................................. .93 .80
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of common shares outstanding..................... 46,324,519 47,289,413
Add common stock equivalents for shares issuable under:
Stock Appreciation Rights Plan(2)...................................... 49,177 53,327
Stock Option Plan(2)................................................... 1,254,025 1,039,146
------------ ------------
Weighted average number of shares outstanding adjusted
for common stock equivalents....................................... 47,627,721 48,381,886
============ ============
Net income................................................................. $ 44,086 38,450
Fully diluted earnings per share........................................... .93 .79
- ---------------------------
<FN>
(1) Additional shares issuable were derived under the "treasury stock method"
using average market price during the period.
(2) Additional shares issuable were derived under the "treasury stock method"
using the higher of the average market price during the period or the
market price at the end of the period.
</TABLE>
28
<PAGE> 1
EXHIBIT 99
CHARTER ONE FINANCIAL, INC.
SELECTED MONTHLY FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL DATA AT MONTH END
<TABLE>
<CAPTION>
03/31/97 02/28/97 01/31/97
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total assets..................................................... $ 14,031,588 14,033,173 13,946,727
Cash & cash equivalents.......................................... 168,357 266,203 229,918
Investment securities............................................ 281,448 284,221 283,830
Mortgage-backed securities....................................... 4,564,928 4,605,809 4,655,433
Loans receivable................................................. 8,472,041 8,325,041 8,231,799
Portfolio of loans serviced for others........................... 1,422,526 1,441,278 1,459,548
Common shares outstanding, net................................... 46,338,721 46,330,703 46,309,468
Treasury shares.................................................. 1,133,765 1,141,783 1,163,018
Deposits:
Checking....................................................... $ 889,842 884,941 847,099
Savings........................................................ 843,063 844,627 856,602
MMDA........................................................... 1,365,418 1,355,463 1,349,292
Certificates:
6 month or less.............................................. 573,416 584,357 590,857
6 month to 1 year............................................ 1,528,237 1,511,682 1,473,975
Retail jumbos................................................ 237,486 239,363 239,870
Other........................................................ 2,402,017 2,412,498 2,447,122
----------- ------------ -----------
Total CDS.................................................. 4,741,156 4,747,900 4,751,824
----------- ------------ -----------
Total deposits........................................... $ 7,839,479 7,832,931 7,804,817
=========== ============ ===========
Borrowings:
Reverse repurchase agreements.................................. $ 1,735,966 1,735,966 1,633,496
FHLB advances.................................................. 3,081,274 3,105,958 3,189,149
Other.......................................................... 211,616 211,168 211,749
----------- ------------ -----------
Total borrowings............................................. $ 5,028,856 5,053,092 5,034,394
=========== ============ ===========
Weighted average rates:
Loans.......................................................... 7.88% 7.89% 7.93%
MBS............................................................ 7.19 7.15 7.19
Loans and MBS................................................ 7.64 7.63 7.66
Other investments.............................................. 7.08 6.86 6.91
Total interest-earning assets................................ 7.61 7.60 7.63
Deposits....................................................... 4.42 4.46 4.47
Borrowings..................................................... 5.90 5.88 5.89
Total interest-bearing liabilities........................... 5.00 5.02 5.03
Interest rate spread............................................. 2.61% 2.58% 2.60%
Net yield on interest-earning assets............................. 2.91% 2.84% 2.86%
Nonperforming assets and allowance for loss:
Nonperforming loans............................................ $ 24,861 20,121* 20,121*
Restructured loans............................................. 13,895 15,294* 15,294*
REO and other repossessed assets............................... 6,026 7,030* 7,030*
----------- ------------ -----------
Total nonperforming assets................................... $ 44,782 42,445* 42,445*
=========== ============ ===========
Allowance for loss............................................... 65,833 65,860 65,932
Number of employees (FTEs)....................................... 2,582 2,557 2,550
<FN>
*At December 31, 1996.
</TABLE>
30
<PAGE> 2
SELECTED ACTIVITY FOR THE MONTH AND QUARTER
<TABLE>
<CAPTION>
ONE MONTH ENDED 3 MONTHS
---------------------------------------- ENDED
03/31/97 02/28/97 01/31/97 03/31/97
--------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan and MBS activity:
Mortgage loan originations:
One-to-four family............................... $ 179,015 136,249 161,687 476,951
Multifamily...................................... 3,562 2,407 - 5,969
Commercial real estate........................... 5,178 8,617 6,080 19,875
Consumer loan originations......................... 57,003 46,598 48,577 152,178
--------- --------- --------- --------
Total mortgage and loan originations........... $ 244,758 193,871 216,344 654,973
========= ========= ========= ========
Loans sold........................................... 3,200 2,048 1,535 6,783
MBS purchased........................................ - - - -
MBS sold............................................. - - - -
Deposit portfolio activity:
Net increase (decrease):
Checking......................................... $ 4,901 37,842 (12,339) 30,404
Savings.......................................... (1,564) (11,975) (11,759) (25,298)
MMDA............................................. 9,955 6,171 4,319 20,445
Certificates:
6 month or less................................ (10,941) (6,500) (8,548) (25,989)
6 month to 1 year.............................. 16,555 37,707 28,588 82,850
Retail jumbos.................................. (1,877) (507) (2,586) (4,970)
Other.......................................... (10,481) (34,624) (34,055) (79,160)
--------- --------- --------- --------
Total CDS.................................... (6,744) (3,924) (16,601) (27,269)
--------- --------- --------- --------
Net increase in deposits............................. $ 6,548 28,114 (36,380) (1,718)
========= ========= ========= ========
Interest credited to deposits included above......... $ 51,089 12,132 11,993 75,214
Total increase (decrease) as a percentage of
beginning deposits................................. .08% .36% (.46%) (.02%)
</TABLE>
31
