SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 21, 1998
CHARTER ONE FINANCIAL, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 0-16311 34-1567092
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
1215 Superior Avenue, Cleveland, Ohio 44114
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 566-5300
1
<PAGE>
ITEM 5. OTHER EXHIBITS
Attached as Exhibit 99.1 is the Registrant's press release dated
October 21, 1998 announcing earnings for the three and nine month
periods ended September 30, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) The following exhibit is filed as part of this Report:
99.1 Press release dated October 21, 1998.
2
<PAGE>
SIGNATURE
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: October 21, 1998 By: /s/ Robert J. Vana
-------------------
Robert J. Vana
Chief Corporate Counsel
and Secretary
3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
99.1 Press Release dated October 21, 1998.
<PAGE>
INVESTOR CONTACT: ELLEN BATKIE (800) 262-6301
MEDIA CONTACT: WILLIAM DUPUY (216) 566-5311
CHARTER ONE 3RD QUARTER EARNINGS PER SHARE UP 31% TO $.51
Highlights for the quarter ended 9/30/98:
o Record net income of $68.7 million - $.51 per share
o Return on equity - 18.42%, return on assets - 1.38%
o Net interest income up 9% from year ago quarter, end of period net yield at
2.97%
o Top line revenue up 11% from year ago quarter
o Retail banking revenue up 34% from year ago quarter
o Efficiency ratio - 42.3% vs. 46.3% in year ago quarter
o Loan originations - $2.3 billion, including $931 million in energized
assets
o Nonperforming asset ratio - .40% of assets
o Opened 47,100 new checking accounts
CLEVELAND, Ohio, October 21, 1998 -- Charter One Financial, Inc. (NASDAQ:COFI),
the holding company of Charter One Bank, F.S.B., today reported record net
income for the three months ended September 30, 1998 of $68.7 million, up 28%
from $53.6 million reported for the third quarter of 1997. On a per share basis,
third quarter 1998 earnings were $.51 per diluted share, up 31% from $.39 per
diluted share in 1997. For the first nine months of 1998, net earnings were
$200.6 million, or $1.46 per diluted share, compared with $160.4 million, or
$1.19 per diluted share, for the first nine months of 1997. Prior period per
share data have been restated for the 5% stock dividend paid September 30, 1998
and the 2-for-1 stock split paid May 20, 1998.
Annualized returns for the three months ended September 30, 1998 were 18.42% on
average equity and 1.38% on average assets. These compared with returns of
16.12% on equity and 1.14% on assets for the third quarter of 1997.
<PAGE>
"The third quarter represented another strong and consistent performance from
both a financial and an operational standpoint," observed Charles John Koch,
Charter One's Chairman and Chief Executive Officer. "We continue to profitably
grow our consumer banking franchise which is contributing to a stable net
interest margin. The consumer banking strategy is also responsible for the
tremendous growth in retail banking revenue, accompanied by effective control of
our credit and operating costs. We are entering the fourth quarter with a solid
balance sheet profile, which will be enhanced following the mergers with CS
Financial and ALBANK Financial."
Charter One 3rd Quarter Results
Net interest income - Net interest income increased $11.6 million, or 8.8%, over
the third quarter of 1997. The net yield during the three-month period was
2.97%, up from 2.88% during the third quarter of 1997. These increases were
accomplished notwithstanding a challenging interest rate environment as the
Company continued to be successful in its efforts to better optimize the mix of
earning assets and liabilities. For the nine month periods, net interest income
was up 9.1% in 1998 over 1997.
Provision for loan and lease losses - The provision for loan and lease losses
was $5.8 million in the third quarter of 1998, down from $16.3 million in the
same period last year. In last year's third quarter, RCSB Financial increased
its provision in response to a deterioration in consumer credit and repossession
trends in the indirect auto portfolio. RCSB was merged into Charter One in
October 1997 in a pooling of interests transaction.
Noninterest income - Noninterest income for the third quarter of 1998 totaled
$45.8 million, up 28.9% from $35.6 million in the third quarter of 1997. The
revenue growth was driven by a $6.1 million increase in retail banking fee
revenue and a $3.7 million increase in gains resulting primarily from sales of
securities created from a portion of the Company's fixed-rate loan portfolio.
For the nine month periods, noninterest income was up 32.3% in 1998 over 1997.
Lending production - Loan and lease originations for the third quarter of 1998
totaled $2.3 billion, with 60% in residential loans and 40% in energized assets.
Energized asset production principally consisted of retail consumer loans ($433
million) and indirect auto loans ($294 million). In the first nine months of
1998, Charter One originated $7.4 billion in loans and leases, exceeding the
full year results for 1997 of $6.9 billion.
<PAGE>
Lending portfolio and pipeline - The lending portfolio totaled $13.5 billion at
September 30, 1998, up from $12.7 billion at the end of 1997. Adjusting for $1.8
billion in fixed-rate loans securitized since the beginning of the year, this
was equivalent to an annualized growth rate of 27%. Energized assets represented
42% of the September 30 portfolio, compared with 34% at December 31, 1997. The
principal components of the energized asset portfolio are consumer loans, auto
loans, commercial real estate, and business loans and leases. Energized asset
portfolio growth in the first nine months of 1998 has been significant: consumer
loans up 54%, business loans and leases up 34%, and indirect auto loans up 22%.
At September 30, 1998, the total loan origination pipeline was $1.8 billion, of
which $600 million was in energized assets. The $1.2 billion residential
pipeline was predominately fixed rate and consisted of approximately 60% to fund
new purchases and 40% to refinance existing loans. The one-year repricing gap
was a positive 2.2% of assets at September 30, 1998.
Mortgage prepayment experience - Mortgage prepayments declined slightly in the
third quarter of 1998. The annualized prepayment rate on the $5.2 billion
single-family, fixed-rate retail portfolio approximated 15% during the quarter,
while the rate on the $2.4 billion adjustable-rate portfolio approximated 35%.
As of September 30, approximately 25% of the single-family portfolio carried
prepayment penalties.
Credit quality - Credit quality remained strong during the quarter.
Nonperforming assets (including troubled debt restructurings) totaled $78.7
million at September 30, 1998, resulting in a nonperforming asset ratio of .40%
of total assets at the end of the quarter, compared to .38% at the end of 1997.
Net charge-offs for the three months ended September 30, 1998 totaled $5.5
million, or .16% of average loans on an annualized basis. The end of period
allowance for loan losses was $112.4 million.
Checking accounts - At September 30, 1998, the Company had a total of 594,300
checking accounts, up from 538,000 at December 31, 1997 for an annualized net
growth rate of 14%. On a gross basis, the retail network opened a record 47,100
new checking accounts during the quarter.
Deposits - Deposit balances totaled $10.8 billion at September 30, 1998, up 6.2%
year to date. The primary contributor to the increase was certificates of
deposit, which can be largely attributed to improved account retention and
cross-sell efforts.
<PAGE>
Operating expenses - Administrative expenses totaled $79.0 million in the three
months ended September 30, 1998 versus $77.4 million in the same period of 1997.
This translated into an efficiency ratio of 42.3% for the 1998 third quarter,
compared to 46.3% for the third quarter of 1997.
Asset/liability strategy and capital deployment - During the past 12 months,
Charter One has consistently followed the strategy of optimizing its balance
sheet by replacing single-family loans and investment securities with energized
assets. Additionally, given the persistent flatness of the yield curve, Charter
One has substantially increased its sale of excess fixed-rate mortgage loan
production. As a result of these strategies, Charter One's equity to asset ratio
was 7.6% at September 30, well in excess of its internal target of 6.5%.
The Company's capital position together with the current interest rate
environment has provided it with significant opportunities to reprice and/or
extend a portion of its liabilities. Accordingly, early in the fourth quarter,
the Company replaced (through maturity and extinguishment) approximately $3.5
billion in borrowings, bearing a weighted average cost of 5.86%, with longer
term borrowings that have a weighted average maturity of approximately 30
months. This activity, which will result in an after-tax extraordinary loss in
the fourth quarter of 1998 of approximately $17 million, will reduce the cost of
the $3.5 billion borrowing position by approximately 100 basis points.
On a similar front, on October 13, 1998, Charter One announced that it had
tendered for all or a portion of its secured zero coupon bonds due February
2005. These bonds were issued in 1985 by First Federal of Michigan prior to its
merger with Charter One. The issue had an accreted balance of $198 million, an
original face value of $407 million, and an annual yield to maturity of 11.93%.
As of October 20, 1998, bonds had been tendered with an original face balance of
approximately $200 million, resulting in an after-tax extraordinary loss to be
recognized in the fourth quarter of approximately $33 million. The tender offer
has been extended to October 27, 1998.
Going forward, the above actions, together with the contractual maturity within
one year of $5.2 billion in retail certificates of deposit (with a 5.67% cost of
funds), will tend to mitigate potential margin compression caused by the
downward pressure on asset yields in the current interest rate environment.
<PAGE>
Merger update - On October 16, 1998, Charter One completed its previously
announced acquisition of CS Financial, Inc., a $400 million institution
headquartered in Cleveland, Ohio. As a result of the merger, which was accounted
for as a pooling of interests, Charter One issued an additional 2,131,500 shares
of its common stock. The transaction added eight branches to the Ohio network,
five of which have been consolidated, resulting in a net increase of four
branches. Charter One has already converted CS Financial's data processing
operation, essentially completing all consolidation activity associated with
this merger.
Separately, Charter One's pending acquisition of ALBANK Financial Corporation
will be considered by the companies' respective shareholders at separate special
meetings on November 13, 1998. Headquartered in Albany, New York, ALBANK has
$4.1 billion in assets and $3.5 billion in deposits (bearing an average cost of
approximately 4.00%), and operates with 109 branches throughout upstate New
York, Vermont and Massachusetts. The merger, which is structured as a pooling of
interests, would result in approximately 33 million additional Charter One
common shares being issued. A closing is expected in the fourth quarter of 1998,
with introduction of Charter One products set for the first half of 1999.
Charter One Bank has approximately $20 billion in total assets, making it one of
the largest thrifts in the country. The Bank has more than 220 branch locations
in Ohio, Michigan and western New York. Additionally, Charter One Mortgage
Corporation, the Bank's mortgage banking subsidiary, operates 39 loan production
offices across 13 states, and Charter One Auto Finance, the Bank's indirect auto
finance subsidiary, generates loans in seven states.
The Company's press releases are available by telefax at no charge by calling PR
Newswire Fax On Demand. To retrieve a specific press release, call: (800)
758-5804 and reference account 313075. Additional information may be found at
the Company's web site: www.charterone.com.
* * * * * *
Forward-Looking Information
There are a number of important factors which could cause future results to
differ materially from historical performance. These include but are not limited
to financial condition, operating efficiencies, revenue creation, lending
origination, prepayment speeds, loan sale volumes, charge-offs and loan loss
provisions. Factors that might cause such a difference include, but are not
limited to: (1) competitive pressures among depository institutions increase
significantly; (2) changes in the interest rate environment reduce interest
margins; (3) general economic conditions, either nationally or in the states in
which the Company does business, are less favorable than expected, resulting in,
among other things, a deterioration in credit quality; (4) legislation or
regulatory changes adversely affect the businesses in which the Company is
engaged; (5) changes in business conditions and inflation; and (6) changes in
the securities markets.
<PAGE>
<TABLE>
<CAPTION>
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans and leases..................................... $ 268,083 232,901 787,971 660,656
Mortgage-backed securities:
Available for sale................................. 32,475 18,739 75,337 56,307
Held to maturity................................... 55,366 82,570 188,866 262,600
Investment securities available for sale............. 796 5,729 11,448 16,143
Other interest-earning assets........................ 7,483 7,091 24,519 19,101
------------ ------------- ------------ ------------
Total interest income........................... 364,203 347,030 1,088,141 1,014,807
------------ ------------- ------------ ------------
Interest expense:
Deposits............................................. 115,963 113,547 341,402 335,502
FHLB advances........................................ 74,184 58,516 219,929 159,492
Other borrowings..................................... 31,814 44,286 100,421 129,046
------------ -------------
Total interest expense.......................... 221,961 216,349 661,752 624,040
------------ ------------- ------------ ------------
Net interest income............................. 142,242 130,681 426,389 390,767
Provision for loan and lease losses................... 5,780 16,342 15,935 25,967
------------ ------------- ------------ ------------
Net interest income after provision for loan
and lease losses............................... 136,462 114,339 410,454 364,800
------------ ------------- ------------ ------------
Other income:
Mortgage banking..................................... 14,165 13,651 44,591 44,821
Retail banking....................................... 23,906 17,824 66,089 47,946
Leasing operations................................... 1,464 1,908 7,114 5,442
Net gains (losses)................................... 5,661 1,982 14,035 2,599
Other................................................ 640 199 1,916 309
------------ ------------- ------------ ------------
Total other income............................. 45,836 35,564 133,745 101,117
------------ ------------- ------------ ------------
Administrative expenses:
Compensation and employee benefits................... 39,120 40,671 117,290 123,766
Net occupancy and equipment.......................... 12,679 13,184 37,935 38,648
Federal deposit insurance premiums................... 1,197 1,345 3,730 4,041
Amortization of goodwill............................. 1,791 1,362 5,373 4,086
Other administrative expenses........................ 24,210 20,879 78,525 61,905
------------ ------------- ------------ ------------
Total administrative expenses.................. 78,997 77,441 242,853 232,446
------------ ------------- ------------ ------------
Income before income taxes........................... 103,301 72,462 301,346 233,471
Income taxes......................................... 34,555 18,889 100,706 73,027
------------ ------------- ------------ ------------
Net income..................................... $ 68,746 53,573 200,640 160,444
============ ============= ============ ============
Basic earnings per share............................. $ .52 .41 1.50 1.22
============ ============= ============ ============
Diluted earnings per share........................... $ .51 .39 1.46 1.19
============ ============= ============ ============
Average common shares(1)............................. 132,966,320 132,084,519 133,926,283 131,677,035
============ ============= ============ ============
Average common and common equivalent shares
outstanding -- assuming dilution(1)................. 135,898,290 135,929,373 137,666,906 135,330,425
============ ============= ============ ============
Cash dividends declared per share(1)................. $ .13 .11 .39 .33
============ ============= ============ ============
<FN>
- ---------------------------
(1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998 and the
5% stock dividend issued September 30, 1998.
</FN>
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
----------------- ------------------
(Dollars in thousands, except per share data)
<S> <C> <C>
ASSETS
Cash and deposits with banks..................................................$ 200,595 214,716
Federal funds sold and other.................................................. 15,235 25,000
----------- -----------
Total cash and cash equivalents.......................................... 215,830 239,716
Investment securities available for sale, at fair value....................... 82,581 582,589
Mortgage-backed securities:
Available for sale, at fair value........................................... 2,124,905 1,070,233
Held to maturity (fair value of $3,103,099 and $4,273,605).................. 3,039,126 4,215,249
Loans and leases, net......................................................... 13,378,290 12,360,134
Loans held for sale........................................................... 155,088 341,671
FHLB stock.................................................................... 285,375 366,647
Premises and equipment........................................................ 160,103 158,500
Accrued interest receivable................................................... 99,621 110,181
Real estate and other collateral owned........................................ 13,540 13,726
Loan servicing assets......................................................... 92,026 81,836
Goodwill...................................................................... 84,937 90,471
Other assets.................................................................. 110,217 129,312
----------- -----------
Total assets............................................................$ 19,841,639 19,760,265
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Checking accounts...........................................................$ 1,432,980 1,181,528
Money market accounts....................................................... 1,781,174 1,799,709
Savings accounts............................................................ 1,095,546 1,155,093
Certificates of deposit..................................................... 6,539,713 6,082,870
----------- -----------
Total deposits.......................................................... 10,849,413 10,219,200
FHLB advances................................................................. 5,187,809 5,370,503
Reverse repurchase agreements................................................. 1,695,062 2,096,524
Other borrowings.............................................................. 242,823 229,798
Advance payments by borrowers for taxes and insurance......................... 50,811 138,379
Accrued interest payable...................................................... 62,314 53,094
Accrued expenses and other liabilities........................................ 249,974 275,878
----------- -----------
Total liabilities...................................................... 18,338,206 18,383,376
----------- -----------
Shareholders' equity:
Preferred stock - $.01 par value per share; 20,000,000 shares
authorized and unissued.................................................... - -
Common stock - $.01 par value per share; 180,000,000 shares
authorized; 132,541,371 and 129,915,210 shares issued(1)................... 1,325 1,299
Additional paid-in capital(1)............................................... 774,901 706,155
Retained earnings........................................................... 680,932 700,616
Less zero and 2,217,536 shares of common stock held in treasury at cost(1).. - (45,441)
Borrowings of employee investment and stock ownership plan.................. (1,734) (2,349)
Accumulated other comprehensive income...................................... 48,009 16,609
----------- -----------
Total shareholders' equity............................................. 1,503,433 1,376,889
----------- -----------
Total liabilities and shareholders' equity.............................$ 19,841,639 19,760,265
=========== ===========
<FN>
- ---------------------------
(1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998.
</FN>
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC.
SELECTED STATISTICAL DATA
(unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
----------------- ------------------
<S> <C> <C>
End of period capitalization:
Equity to assets................................ 7.58% 6.97%
Tangible equity to assets....................... 7.13 6.48
Book value per share(1)......................... $11.34 $10.27
Tangible book value per share(1)................ 10.67 9.56
Miscellaneous end-of-period data:
Number of employees (full-time equivalents)..... 4,238 4,327
Number of full-service branches................. 227 220
Number of loan production offices............... 37 37
Number of ATMs.................................. 232 221
<FN>
- ---------------------------
(1) Restated to reflect the 2-for-1 stock split issued May 20, 1998 and the 5%
stock dividend issued September 30, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Annualized returns:
Return on average assets......................... 1.38% 1.14% 1.35% 1.17%
Return on average equity......................... 18.42 16.12 18.35 16.49
Average equity to average assets................. 7.50 7.09 7.35 7.07
Annualized operating ratios:
Net interest income to administrative expenses... 1.80x 1.69x 1.76x 1.68x
Administrative expenses to average assets........ 1.59% 1.65% 1.63% 1.69%
Efficiency ratio................................. 42.32 46.32 43.49 46.67
</TABLE>
COMPOSITION OF DEPOSITS
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
----------------- ------------------
(Dollars in thousands)
----
<S> <C> <C>
Checking accounts:
Interest-bearing....................................... $ 783,916 $ 783,768
Noninterest-bearing.................................... 649,064 397,760
Money market accounts.................................... 1,781,174 1,799,709
Savings accounts......................................... 1,095,546 1,155,093
Certificates of deposit:
Retail:
Six months or less................................... 703,176 797,002
Greater than six months to one year.................. 2,409,614 1,834,161
Greater than one year to three years................. 2,590,020 2,505,717
Other................................................ 835,722 908,311
------------ -----------
Total retail....................................... 6,538,532 6,045,191
Total brokered..................................... - 36,243
------------ -----------
Total certificates of deposit.................... 6,538,532 6,081,434
------------ -----------
Deposits......................................... 10,848,232 10,217,764
Plus unamortized premium on deposits purchased... 1,181 1,436
------------ -----------
Total deposits................................. $ 10,849,413 10,219,200
============ ===========
</TABLE>
MARKET PRICE DATA
<TABLE>
<S> <C> <C> <C> <C> <C>
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
1998 1998 1998 1997 1997
------- ------- ------- ------- -------
Market price of common stock(1):
High................................ $ 34.17 34.89 32.44 30.48 27.90
Low................................. 21.84 28.57 22.86 25.77 23.36
Close............................... 24.88 32.09 31.88 30.06 26.82
<FN>
- ---------------------------
(1) Restated to reflect the 2-for-1 stock split issued on May 20, 1998 and the
5% stock dividend issued September 30, 1998.
</FN>
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC.
AVERAGE BALANCE SHEET, YIELDS AND COSTS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Average balance sheet data Interest-earning assets:
Real estate loans................................... $ 8,666,887 8,330,450 8,868,228 8,028,583
Automobile loans.................................... 1,876,826 1,418,808 1,761,207 1,255,529
Retail consumer loans............................... 2,390,747 1,418,330 2,041,142 1,300,099
Leases.............................................. 603,087 324,020 537,338 293,045
Corporate banking loans............................. 184,520 138,742 177,820 121,690
----------- ------------ ----------- ------------
Total loans and leases............................ 13,722,067 11,630,350 13,385,735 10,998,946
Mortgage-backed securities.......................... 4,963,747 5,760,660 4,966,921 6,029,785
Investment securities............................... 49,486 336,475 220,088 311,946
Other interest-earning assets....................... 405,457 403,343 458,625 370,779
----------- ------------ ----------- ------------
Total interest-earning assets..................... 19,140,757 18,130,828 19,031,369 17,711,456
Allowance for loan leases........................... (111,164) (93,557) (112,007) (93,100)
Noninterest-earning assets (1)...................... 876,790 718,581 908,777 724,600
----------- ------------ ----------- ------------
Total assets................................... $ 19,906,383 18,755,852 19,828,139 18,342,956
=========== ============ =========== ============
Interest-bearing liabilities:
Checking............................................ $ 1,499,465 1,106,611 1,382,466 1,095,782
Savings............................................. 1,115,405 1,314,789 1,131,601 1,333,792
Money Market........................................ 1,771,218 1,629,502 1,777,180 1,639,902
Certificates of deposit............................. 6,486,179 6,069,176 6,361,964 6,060,907
----------- ------------ ----------- ------------
Total deposits................................... 10,872,267 10,120,078 10,653,211 10,130,383
FHLB advances....................................... 5,240,515 3,985,902 5,200,188 3,655,711
Other borrowings.................................... 1,950,974 2,923,309 2,085,449 2,890,107
----------- ------------ ----------- ------------
Total interest-bearing liabilities............. 18,063,756 17,029,289 17,938,848 16,676,201
Noninterest-bearing liabilities....................... 349,950 396,967 431,441 369,541
----------- ------------ ----------- ------------
Total liabilities.............................. 18,413,706 17,426,256 18,370,289 17,045,742
Shareholders' equity.................................. 1,492,677 1,329,596 1,457,850 1,297,214
----------- ------------ ----------- ------------
Total liabilities and shareholders' equity..... $ 19,906,383 18,755,852 19,828,139 18,342,956
=========== ============ =========== ============
Yields and costs during period Weighted average yield:
Real estate loans................................... 7.53% 7.74% 7.58% 7.80%
Automobile loans.................................... 9.07 9.04 9.01 8.97
Retail consumer loans............................... 7.96 8.58 8.16 8.45
Leases(2)........................................... 6.68 7.37 6.85 7.49
Corporate banking loans............................. 9.27 8.79 9.27 8.91
Total loans and leases............................ 7.80 8.00 7.85 8.01
Mortgage-backed securities.......................... 7.08 7.03 7.09 7.05
Investment securities............................... 6.44 6.81 6.94 6.90
Other interest-earning assets....................... 7.22 6.88 7.05 6.79
Total interest-earning assets................... 7.60 7.65 7.62 7.64
Weighted average cost (3):
Checking............................................ .77 1.16 .85 1.15
Savings............................................. 2.17 2.35 2.19 2.37
Money market........................................ 3.25 3.49 3.26 3.50
Certificates of deposit............................. 5.66 5.76 5.69 5.73
Total deposits.................................... 4.23 4.45 4.28 4.43
FHLB advances....................................... 5.61 5.80 5.65 5.81
Other borrowings.................................... 6.41 5.86 6.36 5.90
Total interest-bearing liabilities............. 4.87 5.02 4.92 4.99
Interest rate spread.................................. 2.73 2.63 2.70 2.65
Net yield on interest-earning assets.................. 2.97 2.88 2.99 2.94
<FN>
- ---------------------------
(1) Includes market-to-market adjustments on securities available for sale.
(2) Excludes impact of related tax benefits.
(3) The costs of liabilities include the annualized effect of interest rate
risk management instruments.
</FN>
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC.
YIELDS AND COSTS AT END OF PERIOD
(unaudited)
<TABLE>
<S> <C> <C>
September 30, 1998 December 31, 1997
------------------ ------------------
Yields and costs at end of period
Weighted average yield:
Real estate loans..................................... 7.52% 7.72%
Automobile loans...................................... 8.81 8.92
Retail consumer loans................................. 7.98 8.40
Leases(1)............................................. 6.45 8.04
Corporate banking loans............................... 9.15 8.86
Total loans and leases.............................. 7.76 8.00
Mortgage-backed securities............................ 7.02 7.20
Investment securities................................. 8.02 6.67
Other interest-earning assets......................... 7.14 7.29
Total interest-earning assets..................... 7.55 7.73
Weighted average cost (2):
Checking.............................................. .68 1.02
Savings............................................... 2.16 2.33
Money market.......................................... 3.14 3.31
Certificates of deposit............................... 5.65 5.73
Total deposits...................................... 4.23 4.37
FHLB advances......................................... 5.62 5.83
Other borrowings...................................... 6.45 6.38
Total interest-bearing liabilities............... 4.87 5.07
Interest rate spread.................................... 2.68 2.66
Net yield on interest-earning assets.................... 2.97 2.96
<FN>
- ------------------------------------
(1) Excludes impact of related tax benefits.
(2) The costs of liabilities include the annualized effect of interest rate
risk management instruments.
</FN>
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC.
LOAN AND LEASE PORTFOLIO
(unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------------ ----------------------
% of % of
Amount Total Amount Total
------------ ---------- ----------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan and lease portfolio, net
One-to-four family:
Permanent:
Fixed rate.................................... $ 5,220,855 38.58% $ 5,281,533 41.59%
Adjustable rate............................... 2,402,851 17.75 2,880,513 22.68
Construction.................................... 200,160 1.48 196,647 1.55
------------ ------- ----------- -------
7,823,866 57.81 8,358,693 65.82
Commercial real estate:
Multifamily..................................... 199,149 1.47 265,360 2.09
Other........................................... 352,318 2.61 325,646 2.56
------------ ------- ----------- -------
551,467 4.08 591,006 4.65
Consumer:
Retail.......................................... 2,473,559 18.28 1,606,128 12.64
Automobile...................................... 1,877,685 13.87 1,542,230 12.14
------------ ------- ----------- -------
4,351,244 32.15 3,148,358 24.78
Business:
Leasing......................................... 622,486 4.60 437,227 3.44
Corporate banking............................... 184,315 1.36 166,521 1.31
------------ ------- ----------- -------
806,801 5.96 603,748 4.75
------------ ------- ----------- -------
$ 13,533,378 100.00% $ 12,701,805 100.00%
============ ======= =========== =======
Portfolio of loans serviced for others.............. $ 9,905,436 $ 9,084,871
============ ===========
</TABLE>
<PAGE>
LOAN AND LEASE ACTIVITY
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Originations:
Real Estate:
Permanent:
One-to-four family........................... $ 1,266,592 1,039,460 4,117,455 2,804,554
Multifamily.................................. 4,706 1,570 20,820 18,859
Commercial................................... 44,893 15,816 77,198 53,907
---------- ---------- ---------- ----------
Total permanent loans..................... 1,316,191 1,056,846 4,215,473 2,877,320
---------- ---------- ---------- ----------
Construction:
One-to-four family........................... 113,061 106,601 316,205 282,688
Multifamily.................................. 11,942 5,350 16,833 7,714
Commercial................................... 15,433 5,630 24,191 15,225
---------- ---------- ---------- ----------
Total construction loans.................. 140,436 117,581 357,229 305,627
---------- ---------- ---------- ----------
Total real estate loans originated..... 1,456,627 1,174,427 4,572,702 3,182,947
---------- ---------- ---------- ----------
Retail consumer............................... 433,410 237,266 1,480,930 665,471
Automobile.................................... 294,190 270,625 893,386 821,203
Leases........................................ 62,539 67,838 279,987 132,621
Corporate banking............................. 63,743 55,436 156,620 159,029
---------- ---------- ---------- ----------
Total loans and leases originated.......... 2,310,509 1,805,592 7,383,625 4,961,271
---------- ---------- ---------- ----------
Loans purchased..................................... 2,708 295,318 18,857 295,318
Sales and principal reductions:
Loans sold........................................ 564,819 471,637 1,453,503 1,290,939
Loans exchanged for MBS........................... 468,666 - 1,816,088 -
Principal reductions.............................. 1,073,016 765,120 3,367,334 1,980,300
---------- ---------- ---------- ----------
Total sales and principal reductions...... 2,106,501 1,236,757 6,636,925 3,271,239
---------- ---------- ---------- ----------
Increase before net items.............. $ 206,716 864,153 765,557 1,985,350
========== ========== ========== ==========
</TABLE>
<PAGE>
CHARTER ONE FINANCIAL, INC.
NONPERFORMING ASSETS AND ALLOWANCE FOR LOSSES
(unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
----------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Nonperforming assets
Nonperforming loans and leases:
Nonaccrual loans and leases................................. $ 38,704 38,607
Accruing loans and leases delinquent more than 90 days...... 20,456 16,864
Restructured real estate loans.............................. 6,258 6,722
--------- --------
Nonperforming loans and leases............................ 65,418 62,193
Foreclosed and repossessed assets........................... 13,249 13,414
--------- --------
Nonperforming assets(1)................................. $ 78,667 75,607
========= ========
Allowance for loans and lease losses............................ $ 112,416 113,868
Ratio of (excluding guaranteed nonperforming loans):
Nonperforming loans and leases to total loans and leases.... .48% .49%
Nonperforming assets to total assets........................ .40 .38
Allowance for loan and lease losses to:
Nonperforming loans and leases............................ 171.84 183.09
Total loans and leases before allowance................... .82 .89
<FN>
- ---------------------------
(1) Nonperforming assets are reported net of $18.6 million of government
guaranteed nonperforming loans as of September 30, 1998. There were no
comparable nonperforming government loans at December 31, 1997.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for loan and lease losses
Balance, beginning of period................................ $ 112,142 92,924 113,868 94,112
Provision for loan and lease losses......................... 5,780 16,342 15,935 25,967
Adjustment to convert Rochester to a calendar year end...... - - - 650
Loans and leases charged off:
Mortgage.................................................. (1,224) (3,075) (2,833) (6,917)
Automobile................................................ (5,894) (4,495) (18,662) (13,216)
Retail consumer........................................... (222) (866) (453) (2,319)
Leases.................................................... - - - -
Corporate banking......................................... (71) - (71) (42)
--------- --------- -------- --------
Total charge-offs...................................... (7,411) (8,436) (22,019) (22,494)
--------- --------- -------- --------
Recoveries:
Mortgage.................................................. 367 3,115 642 3,560
Automobile................................................ 1,435 1,038 3,624 2,876
Retail consumer........................................... 102 239 339 546
Leases.................................................... - - - -
Corporate banking......................................... 1 1 27 6
--------- --------- -------- --------
Total recoveries....................................... 1,905 4,393 4,632 6,988
--------- --------- -------- --------
Net loan and lease charge-offs...................... (5,506) (4,043) (17,387) (15,506)
--------- --------- -------- --------
Balance, end of period..................................... $ 112,416 105,223 112,416 105,223
========= ========= ======== ========
Net charge-offs to average loans and leases (annualized)... .16% .14% .17% .19%
</TABLE>
