Exhibit 99.1
[CHARTER ONE FINANCIAL, INC. LOGO]
CONTACT: ELLEN BATKIE (800) 262-6301
CHARTER ONE REPORTS RECORD 2nd QTR EPS OF $.72, UP 18%
Highlights for the quarter ended 6/30/03:
• Record net earnings of $.72 per share, up 18% over 2Q 2002
• Retail banking revenue up 16% over 2Q 2002; deposit-related portion up 19%
• Efficiency ratio of 41.14%, compared to 38.53% in 2Q 2002
• Excluding custodial balances, noninterest-bearing checking up an annualized 42% in 2Q 2003
• Reserve to loans strengthened to 1.46%, up from 1.40% at 3/31/03
• NPAs of .81% of loans and leases; underperforming assets of .98% of loans and leases
CLEVELAND, Ohio, July 17, 2003 — Charter One Financial, Inc. (NYSE:CF), the holding company of Charter One Bank, N.A., today reported record net income of $166.0 million for the three months ended June 30, 2003, or $.72 per diluted share. This was up 18.0% from $.61 in net earnings per diluted share reported in the year ago quarter. All per share data in this release have been restated for the 5% stock dividend issued on September 30, 2002.
Net income for the quarter generated annualized returns of 1.50% on average assets, 19.86% on average equity, and 22.74% on average tangible equity. In the year ago quarter the returns were 1.51% on average assets, 19.85% on average equity and 22.84% on average tangible equity.
“I am very pleased with our quarterly results achieved in what clearly was an unprecedented operating environment, and am very comfortable with our positioning for the next few quarters,” commented Charles John Koch, Charter One’s Chairman and Chief Executive Officer. “Our results include notable highlights from both our retail banking and lending activities. As we’ve indicated throughout the year, our retail banking deposit strategy is focusing on shifting an increasing percentage of balances into noninterest-bearing products, accomplished in great part by emphasizing the potential in small business relationships. That has resulted in a 26% increase in non-custodial noninterest-bearing bearing deposits in the past 12 months, with an annualized growth rate of 42% this quarter. This success was the primary driver behind the truly exceptional 19% growth in deposit-related revenue over last year’s second quarter. Separately, consumer-oriented lending activity hit new record levels, which drove a 21% growth in auto finance and 20% in home equity lines of credit.
“The persisting low-rate environment continued to drive record levels of revenue out of our residential mortgage operations. The gains resulting from the sale of mortgage-backed securities far exceeded what we consider normal levels, pushing earnings significantly above our expectations. As we have consistently indicated in the past, we do not view this level of gains as sustainable. However, such gains provide us with the flexibility to adjust our balance sheet strategy for the remainder of the year. In the current interest rate environment, we intend to limit
balance sheet growth by reducing our single-family exposure, leaving asset levels flat for the rest of the year. At this point in time, we are targeting a $2 billion reduction in single-family loans and MBSs by the end of 2003. This strategy will likely constrain the growth in net interest income for the near term. However, given the extremely low interest rate environment and the expectation that gains will continue at elevated levels for at least the next quarter, we believe reducing our single-family mortgage exposure is a prudent business strategy. In light of the earnings reported this quarter, and assuming a continuation of the current operating environment, we now expect 2003 earnings to come in at a range of $2.72 to $2.75 per share.”
Net interest income and net yield —Net interest income was $295.4 million for the three months ended June 30, 2003, down 1.2% from the previous quarter and 0.8% from the year ago quarter. Reflecting the downward pressure on asset yields in the declining rate environment, net yield declined to 2.84% during the second quarter of 2003 from 2.99% during the first quarter of 2003 and 3.30% during the second quarter of 2002.
Retail banking revenue —Retail banking revenue totaled $97.1 million for the three months ended June 30, 2003, up 16.2% from the comparable 2002 quarter. The biggest driver of the increase was deposit-related revenue, which totaled $84.9 million, up 18.9% over the year ago quarter. Deposit-related revenue reflected the benefits of the Company’s strategy to emphasize noninterest-bearing checking account growth. The other components of retail banking revenue include fees from retail brokerage activities ($8.4 million, down 5.6% from the year ago quarter), and other revenue related to retail operations ($3.8 million, up 18.0%).
Mortgage banking revenue —The mortgage banking category includes revenue associated with Charter One’s mortgage banking operations, offset by the amortization and valuation adjustments related to its mortgage servicing rights asset (“MSR”). During the second quarter, MSR-related adjustments totaled $46.7 million. The Company increased the valuation allowance by $9.5 million to $133 million, and recorded $37.2 million in permanent impairment MSR adjustments. The total mortgage banking revenue, excluding the MSR-related adjustments, was $22.8 million in the second quarter of 2003. This represented a 46.4% increase from the year ago quarter when the revenue, excluding MSR-related adjustments, totaled $15.6 million. The increase was primarily attributable to a 14% growth over the past 12 months in the portfolio serviced for others, which totaled $19.2 billion at June 30, 2003 and carried a weighted average coupon of 6.37%. The related MSR is now 0.60% of the portfolio at $115 million. With an average servicing spread of 36 basis points, that translates into an MSR valuation of 1.67 times the servicing spread.
Net gains —During the second quarter of 2003, the Company reported net gains of $108.5 million. The primary source of the gains was the sale of $3.2 billion of mortgage-backed securities. As of June 30, 2003, unrealized pretax gains in the mortgage-backed securities portfolio totaled $297 million, compared with $303 million at March 31, 2003.
Leasing operations —Other income from leasing operations was reflected as a loss of $12.2 million in the second quarter of 2003, compared with income of $317,000 in the second quarter of 2002 and a loss of $6.9 million in the first quarter of 2003. The loss in the second quarter of 2003 resulted from a $12.8 million residual adjustment associated with a $15 million leveraged
2
aircraft lease that was nonperforming at March 31, 2003, and which was written off during the second quarter.
Operating expenses —Administrative expenses totaled $194.8 million in the three months ended June 30, 2003, up 6.3% from the previous quarter and up 15.5% from the year ago quarter. The efficiency ratio was 41.1% for the second quarter of 2003, compared to 39.8% for the first quarter of 2003 and 38.5% for the second quarter of 2002. Excluding net gains and the MSR-related adjustments results in an efficiency ratio of 47.3%, compared to 45.3% for the first quarter of 2003, and 41.5% for the second quarter of 2002. In general, the higher level of expenses in the quarter was attributed to higher marketing and compensation costs associated with supporting the Company’s significant retail expansion program.
Lending production and portfolio growth —Loan and lease originations totaled a record $6.7 billion during the second quarter of 2003, compared to $6.0 billion during the first quarter of 2003 and $4.4 billion in the second quarter of 2002. Non-single family loan originations totaled $3.1 billion, or 46% of the total. The non-single family activity was led by $1.2 billion in consumer loans and $1.0 billion in auto finance loans, both of which established new quarterly records.
Loans and leases before reserves totaled $25.9 billion at June 30, 2003, compared to $25.3 billion at March 31, 2003. The underlying growth rate was masked by $2.3 billion of agency securitizations during the quarter ($1.7 billion in one-to-four family and $610 million in mortgage-related consumer loans). Without the securitization activity, the total portfolio would have increased at an annualized rate of 45%, and the non-single family portion would have increased at an annualized rate of 28%. The non-single family growth was led by auto finance at 21% annualized growth during the quarter and home equity lines of credit, which posted 20% annualized growth. At the end of June, non-single family loans totaled $17.5 billion, or 67% of the total portfolio. The total loan portfolio continues to be primarily consumer based, with 77% in consumer-oriented products and 23% in commercial lending (including multifamily real estate).
Mortgage-backed securities available for sale —Mortgage-backed securities available for sale totaled $14.3 billion at June 30, 2003, up from $12.8 billion at March 31, 2003. At June 30, 2003, the portfolio was comprised of 87% in fixed-rate securities with a duration of approximately two years, and 13% in floating-rate securities.
Deposits —Deposits totaled $27.9 billion at June 30, 2003, up $556 million in the second quarter, including approximately $480 million from the Advance Bancorp acquisition that closed in June. Core deposits (checking, money market and savings accounts) accounted for $17.6 billion, or 63% of the total. At the beginning of this year, the Company indicated it would emphasize noninterest-bearing checking growth this year, as opposed to total deposits as in previous years. Excluding custodial balances and the Advance acquisition, noninterest-bearing deposits were up 42% (annualized) in the second quarter of 2003. At June 30, 2003, noninterest-bearing checking account balances represented 9.5% of total deposits, up from 8.7% at March 31, 2003 and 6.9% a year ago. Charter One ended the second quarter with 1,358,200 total checking accounts, including
3
approximately 14,550 from the Advance acquisition. Custodial balances totaled $761 million at June 30, 2003, $705 million at March 31, 2003 and $352 million at June 30, 2002.
The push into small business banking continues to post impressive results. Business deposits, which are included in core deposits, increased to $1.8 billion at June 30, 2003, up $223 million, or 14% (57% annualized), during the three-month period. The Company now has 99,300 business deposit accounts, up from 85,000 at March 31, 2003.
Retail expansion update —In early 2003, Charter One announced plans for aggressive de novo expansion during 2003 and 2004. The expansion is expected to include 125 new banking centers, with 97 in-store and 28 traditional locations. The 2003 goal is to open approximately 85 new banking centers, with 69 in-store and 16 traditional locations. The Company opened 31 banking centers in the second quarter of 2003, bringing the total for the first six months to 47 new banking centers, the majority of which were in-store locations. Charter One’s in-store franchise now includes 89 banking centers. The Company is monitoring its de novo success by looking at branches after 30, 60 and 90 days. The median results for banking centers opened through May 31, 2003 were: after being opened 30 days (27 banking centers) — $1.6 million in deposits and 295 checking accounts; after 60 days (18 banking centers) — $3.7 million in deposits and 505 checking accounts; after 90 days (14 banking centers) — $4.3 million and 642 checking accounts.
Acquisition update —In addition to the aggressive de novo expansion underway, on June 6, 2003 Charter One completed its previously announced acquisition of Advance Bancorp, a $670 million bank holding company headquartered in Chicago, issuing 2.4 million shares of common stock in the transaction. Advance added 14 banking centers and approximately $480 million in deposits to Charter One’s Chicago franchise, bringing the Chicago totals to 99 banking centers and $6.6 billion in deposits.
Credit quality and allowance for loan losses —During the second quarter of 2003, Charter One continued to strengthen its level of loan loss reserves in light of the current economic environment. The total provision for the quarter exceeded net charge-offs by $15 million and the ratio of the allowance to total loans and leases increased to 1.46% at June 30, 2003 from 1.40% at March 31, 2003. Net charge-offs during the second quarter of 2003 totaled $19.9 million, or .30% of average loans and leases (annualized). The allowance for loan and lease losses increased to $376 million at June 30, 2003.
At June 30, 2003, nonperforming assets totaled $206 million or .81% of loans, leases and collateral owned, up from $194 million or .78% at March 31, 2003. However, the recently completed acquisition of Advance Bancorp added $11.6 million in nonperforming assets to the June 30 balance. Underperforming assets (including nonperforming assets, troubled debt restructuring and loans delinquent 90 days and still accruing) totaled $251 million (including $12.2 million from Advance) or .98% of loans, leases and collateral owned, compared to $252 million or 1.01% at March 31, 2003.
Stock repurchase update —On April 23, 2002, the Company authorized a new repurchase program that permits the repurchase of 10% of its outstanding shares, or approximately 22 million shares. The Company repurchased 2.1 million shares under the authorization during the
4
second quarter of 2003 at an average cost of $30.99 per share, and 2.7 million shares at an average cost of $30.30 per share during the six months ended June 30, 2003. As of June 30, 2003, the total repurchased under the current authorization was 10.7 million shares at an average cost of $30.81 per share, leaving approximately 11 million shares remaining under the program.
Company profile —Charter One has $44 billion in total assets, making it one of the 25 largest bank holding companies in the country. The Bank has 522 banking center locations in Ohio, Michigan, New York, Illinois, Massachusetts, and Vermont and entered Connecticut with a banking center opened in June 2003. The Company’s diverse product set includes: consumer banking, indirect auto finance, commercial leasing, business lending, commercial real estate lending, mortgage banking, and retail investment products. For additional information, including press releases, investor presentations, committee charters, and reports filed with the SEC, investors are directed to Charter One’s web site: www.charterone.com.
The Company has scheduled a conference call to discuss quarterly results for 10:00 a.m. eastern daylight savings time on Friday, July 18, 2003. To participate in the call, dial (888) 428-4474 and ask for the Charter One 2nd quarter earnings call. The call is available on a replay basis until July 25, 2003 by dialing (320) 365-3844, access code 689016. Alternatively, the call will be available through Charter One’s website, both on a live and a replay basis.
Forward-Looking Information
This release contains certain estimates of future operating trends for Charter One Financial, Inc., as well as estimates of financial condition and earnings, operating efficiencies, revenue creation, lending origination, loan sale volumes, charge-offs and loan loss provisions. These estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) revenue growth is lower than expected; (2) competitive pressures among depository institutions increase significantly; (3) changes in the interest rate environment reduce interest margins; (4) deterioration in the credit quality of the Company’s loan portfolio requires higher loss provisions; (5) general economic conditions, either nationally or in the states in which the Company does business, are less favorable than expected; (6) legislation or regulatory changes adversely affect the businesses in which the Company is engaged; and (7) ongoing geopolitical conflicts add unexpected stress on the economy or customer base. Other factors that may affect these statements are identified in previous filings with the Securities and Exchange Commission.
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5
CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Loans and leases | $ | 367,602 | $ | 377,724 | $ | 418,711 | $ | 410,237 | $ | 415,057 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Available for sale | 154,490 | 149,311 | 131,821 | 135,099 | 141,773 | |||||||||||||||||||
Held to maturity | 6,858 | 8,269 | 9,991 | 10,695 | 12,261 | |||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Available for sale | 3,297 | 3,043 | 2,969 | 2,939 | 2,625 | |||||||||||||||||||
Held to maturity | 56 | 54 | 60 | 61 | 60 | |||||||||||||||||||
Other interest-earning assets | 7,856 | 7,385 | 8,184 | 9,729 | 9,478 | |||||||||||||||||||
Total interest income | 540,159 | 545,786 | 571,736 | 568,760 | 581,254 | |||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Deposits | 126,734 | 133,743 | 154,018 | 160,821 | 169,576 | |||||||||||||||||||
Federal Home Loan Bank advances | 104,025 | 99,799 | 105,492 | 103,729 | 103,927 | |||||||||||||||||||
Other borrowings | 13,969 | 13,203 | 13,627 | 13,943 | 9,884 | |||||||||||||||||||
Total interest expense | 244,728 | 246,745 | 273,137 | 278,493 | 283,387 | |||||||||||||||||||
Net interest income | 295,431 | 299,041 | 298,599 | 290,267 | 297,867 | |||||||||||||||||||
Provision for loan and lease losses | 35,360 | 61,471 | 60,314 | 47,695 | 55,277 | |||||||||||||||||||
Net interest income after provision for loan and lease losses | 260,071 | 237,570 | 238,285 | 242,572 | 242,590 | |||||||||||||||||||
Other income: | ||||||||||||||||||||||||
Retail banking | 97,087 | 84,100 | 89,261 | 84,175 | 83,543 | |||||||||||||||||||
Mortgage banking | (23,895 | ) | (27 | ) | (1,992 | ) | (36,961 | ) | 9,168 | |||||||||||||||
Leasing operations | (12,230 | ) | (6,856 | ) | (4,566 | ) | 404 | 317 | ||||||||||||||||
Net gains | 108,549 | 76,653 | 61,585 | 83,881 | 37,840 | |||||||||||||||||||
Bank owned life insurance and other | 8,450 | 7,956 | 7,834 | 7,582 | 8,924 | |||||||||||||||||||
Total other income | 177,961 | 161,826 | 152,122 | 139,081 | 139,792 | |||||||||||||||||||
Administrative expenses: | ||||||||||||||||||||||||
Compensation and employee benefits | 90,790 | 87,056 | 81,827 | 81,443 | 80,645 | |||||||||||||||||||
Net occupancy and equipment | 30,466 | 31,186 | 30,360 | 30,288 | 27,634 | |||||||||||||||||||
Marketing expenses | 20,205 | 13,647 | 9,843 | 11,788 | 10,012 | |||||||||||||||||||
Federal deposit insurance premiums | 1,125 | 1,142 | 1,142 | 1,104 | 1,106 | |||||||||||||||||||
Other administrative expenses | 52,168 | 50,261 | 53,716 | 46,683 | 49,219 | |||||||||||||||||||
Total administrative expenses | 194,754 | 183,292 | 176,888 | 171,306 | 168,616 | |||||||||||||||||||
Income before income taxes | 243,278 | 216,104 | 213,519 | 210,347 | 213,766 | |||||||||||||||||||
Income taxes | 77,241 | 68,613 | 67,793 | 66,785 | 67,871 | |||||||||||||||||||
Net income | $ | 166,037 | $ | 147,491 | $ | 145,726 | $ | 143,562 | $ | 145,895 | ||||||||||||||
Basic earnings per share(1) | $ | .74 | $ | .66 | $ | .65 | $ | .63 | $ | .63 | ||||||||||||||
Diluted earnings per share(1) | $ | .72 | $ | .64 | $ | .63 | $ | .61 | $ | .61 | ||||||||||||||
Average common shares outstanding(1): | ||||||||||||||||||||||||
Basic | 225,501,687 | 224,997,398 | 225,561,551 | 228,765,954 | 231,197,406 | |||||||||||||||||||
Diluted | 231,095,694 | 230,460,847 | 231,502,688 | 235,615,457 | 239,123,292 | |||||||||||||||||||
Cash dividends declared per share(1) | $ | .24 | $ | .22 | $ | .22 | $ | .21 | $ | .21 | ||||||||||||||
(1) | Restated to reflect the 5% stock dividend issued September 30, 2002. |
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CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Six Months Ended | ||||||||||||
6/30/03 | 6/30/02 | |||||||||||
(Dollars in thousands, | ||||||||||||
except per share data) | ||||||||||||
Interest income: | ||||||||||||
Loans and leases | $ | 745,326 | $ | 842,895 | ||||||||
Mortgage-backed securities: | ||||||||||||
Available for sale | 303,801 | 252,901 | ||||||||||
Held to maturity | 15,127 | 27,061 | ||||||||||
Investment securities: | ||||||||||||
Available for sale | 6,340 | 5,587 | ||||||||||
Held to maturity | 110 | 131 | ||||||||||
Other interest-earning assets | 15,241 | 17,390 | ||||||||||
Total interest income | 1,085,945 | 1,145,965 | ||||||||||
Interest expense: | ||||||||||||
Deposits | 260,477 | 339,977 | ||||||||||
Federal Home Loan Bank advances | 203,824 | 207,643 | ||||||||||
Other borrowings | 27,172 | 17,381 | ||||||||||
Total interest expense | 491,473 | 565,001 | ||||||||||
Net interest income | 594,472 | 580,964 | ||||||||||
Provision for loan and lease losses | 96,831 | 83,994 | ||||||||||
Net interest income after provision for loan and lease losses | 497,641 | 496,970 | ||||||||||
Other income: | ||||||||||||
Retail banking | 181,187 | 157,299 | ||||||||||
Mortgage banking | (23,922 | ) | 20,458 | |||||||||
Leasing operations | (19,086 | ) | 587 | |||||||||
Net gains | 185,202 | 59,567 | ||||||||||
Bank owned life insurance and other | 16,406 | 18,432 | ||||||||||
Total other income | 339,787 | 256,343 | ||||||||||
Administrative expenses: | ||||||||||||
Compensation and employee benefits | 177,846 | 157,897 | ||||||||||
Net occupancy and equipment | 61,652 | 56,197 | ||||||||||
Marketing expenses | 33,852 | 18,841 | ||||||||||
Federal deposit insurance premiums | 2,267 | 2,317 | ||||||||||
Other administrative expenses | 102,429 | 95,526 | ||||||||||
Total administrative expenses | 378,046 | 330,778 | ||||||||||
Income before income taxes | 459,382 | 422,535 | ||||||||||
Income taxes | 145,854 | 134,155 | ||||||||||
Net income | $ | 313,528 | $ | 288,380 | ||||||||
Basic earnings per share(1) | $ | 1.40 | $ | 1.24 | ||||||||
Diluted earnings per share(1) | $ | 1.36 | $ | 1.21 | ||||||||
Average common shares outstanding(1): | ||||||||||||
Basic | 225,249,543 | 231,441,018 | ||||||||||
Diluted | 230,778,271 | 238,672,614 | ||||||||||
Cash dividends declared per share(1) | $ | .46 | $ | .40 | ||||||||
(1) | Restated to reflect the 5% stock dividend issued September 30, 2002. |
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CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and deposits with banks | $ | 586,018 | $ | 507,726 | $ | 446,701 | $ | 525,049 | $ | 592,571 | ||||||||||||||||||||||||||||||||||||||
Federal funds sold and other | 10,514 | 1,350,513 | 512 | 1,105,511 | 800,509 | |||||||||||||||||||||||||||||||||||||||||||
Total cash and cash equivalents | 596,532 | 1,858,239 | 447,213 | 1,630,560 | 1,393,080 | |||||||||||||||||||||||||||||||||||||||||||
Investments securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Available for sale | 336,126 | 227,137 | 210,095 | 213,684 | 169,203 | |||||||||||||||||||||||||||||||||||||||||||
Held to maturity | 3,691 | 4,157 | 3,973 | 4,642 | 4,381 | |||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Available for sale | 14,313,397 | 12,799,506 | 11,536,608 | 8,805,687 | 9,634,674 | |||||||||||||||||||||||||||||||||||||||||||
Held to maturity | 362,768 | 445,207 | 540,781 | 648,153 | 728,003 | |||||||||||||||||||||||||||||||||||||||||||
Loans and leases, net | 25,127,882 | 24,685,258 | 25,852,846 | 25,351,352 | 24,382,986 | |||||||||||||||||||||||||||||||||||||||||||
Loans held for sale | 362,270 | 291,729 | 351,892 | 287,891 | 161,438 | |||||||||||||||||||||||||||||||||||||||||||
Bank owned life insurance | 834,337 | 837,660 | 829,043 | 819,664 | 814,429 | |||||||||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 694,073 | 679,339 | 681,923 | 676,927 | 668,905 | |||||||||||||||||||||||||||||||||||||||||||
Premises and equipment | 375,256 | 355,084 | 353,730 | 348,675 | 362,909 | |||||||||||||||||||||||||||||||||||||||||||
Accrued interest receivable | 153,346 | 149,989 | 154,962 | 155,543 | 165,262 | |||||||||||||||||||||||||||||||||||||||||||
Real estate and other collateral owned | 40,220 | 42,106 | 42,980 | 42,988 | 44,511 | |||||||||||||||||||||||||||||||||||||||||||
Mortgage servicing rights | 115,242 | 139,085 | 128,564 | 126,646 | 175,650 | |||||||||||||||||||||||||||||||||||||||||||
Goodwill | 433,014 | 386,372 | 386,372 | 386,372 | 385,808 | |||||||||||||||||||||||||||||||||||||||||||
Other assets | 386,785 | 347,735 | 375,090 | 351,682 | 299,303 | |||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 44,134,939 | $ | 43,248,603 | $ | 41,896,072 | $ | 39,850,466 | $ | 39,390,542 | ||||||||||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||
Checking accounts | $ | 9,149,326 | $ | 9,652,845 | $ | 9,650,433 | $ | 8,619,130 | $ | 7,737,558 | ||||||||||||||||||||||||||||||||||||||
Money market and savings accounts | 8,475,706 | 8,207,576 | 8,157,534 | 8,248,750 | 8,893,253 | |||||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 10,314,742 | 9,523,194 | 9,719,876 | 10,218,625 | 9,926,504 | |||||||||||||||||||||||||||||||||||||||||||
Total deposits | 27,939,774 | 27,383,615 | 27,527,843 | 27,086,505 | 26,557,315 | |||||||||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank advances | 10,582,255 | 10,446,630 | 9,037,925 | 7,574,583 | 7,841,524 | |||||||||||||||||||||||||||||||||||||||||||
Federal funds purchased and repurchase agreements | 51,399 | 52,496 | 283,912 | 54,347 | 53,089 | |||||||||||||||||||||||||||||||||||||||||||
Other borrowings | 706,083 | 707,591 | 708,853 | 710,282 | 720,133 | |||||||||||||||||||||||||||||||||||||||||||
Advance payments by borrowers for taxes and insurance | 58,593 | 46,706 | 23,595 | 47,578 | 51,822 | |||||||||||||||||||||||||||||||||||||||||||
Accrued interest payable | 46,418 | 72,017 | 38,372 | 66,193 | 38,029 | |||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 1,387,835 | 1,307,416 | 1,191,747 | 1,295,185 | 1,089,899 | |||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 40,772,357 | 40,016,471 | 38,812,247 | 36,834,673 | 36,351,811 | |||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock — $.01 par value per share; 20,000,000 shares authorized and unissued | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Common stock — $.01 par value per share; 360,000,000 shares authorized; 229,946,762, 227,571,468, 227,571,468, 227,577,813 and 224,853,682 shares issued | 2,299 | 2,276 | 2,276 | 2,276 | 2,249 | |||||||||||||||||||||||||||||||||||||||||||
Additional paid-in capital | 2,270,580 | 2,197,388 | 2,193,095 | 2,192,186 | 2,104,361 | |||||||||||||||||||||||||||||||||||||||||||
Retained earnings | 1,009,784 | 908,486 | 824,564 | 732,731 | 976,380 | |||||||||||||||||||||||||||||||||||||||||||
Less 3,851,660, 2,539,076, 2,781,151, 1,158,700 and 4,662,584 shares of common stock held in treasury at cost | (116,652 | ) | (74,423 | ) | (82,610 | ) | (35,087 | ) | (135,378 | ) | ||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | 196,571 | 198,405 | 146,500 | 123,687 | 91,119 | |||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity | 3,362,582 | 3,232,132 | 3,083,825 | 3,015,793 | 3,038,731 | |||||||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 44,134,939 | $ | 43,248,603 | $ | 41,896,072 | $ | 39,850,466 | $ | 39,390,542 | ||||||||||||||||||||||||||||||||||||||
8
CHARTER ONE FINANCIAL, INC.
SELECTED STATISTICAL DATA
(unaudited)
Three Months Ended | |||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | |||||||||||||||||
Annualized returns and ratios based on net income: | |||||||||||||||||||||
Return on average assets | 1.50 | % | 1.38 | % | 1.40 | % | 1.46 | % | 1.51 | % | |||||||||||
Return on average equity | 19.86 | 18.48 | 19.11 | 18.89 | 19.85 | ||||||||||||||||
Average equity to average assets | 7.55 | 7.46 | 7.35 | 7.72 | 7.60 | ||||||||||||||||
Net interest income to administrative expenses | 1.52 | x | 1.63 | x | 1.69 | x | 1.69 | x | 1.77 | x | |||||||||||
Administrative expenses to average assets | 1.76 | % | 1.71 | % | 1.70 | % | 1.74 | % | 1.74 | % | |||||||||||
Efficiency ratio(1) | 41.14 | 39.77 | 39.25 | 39.90 | 38.53 | ||||||||||||||||
Annualized return on average tangible equity(2) | 22.74 | 21.29 | 22.18 | 21.70 | 22.84 |
(1) | Computed as the ratio of total administrative expenses to net interest income and total other income. | |
(2) | Computed as the ratio of net income, excluding the amortization of other intangible assets, to average tangible equity. |
Six Months Ended | |||||||||
6/30/03 | 6/30/02 | ||||||||
Annualized returns and ratios based on net income: | |||||||||
Return on average assets | 1.44 | % | 1.53 | % | |||||
Return on average equity | 19.17 | 19.78 | |||||||
Average equity to average assets | 7.51 | 7.76 | |||||||
Net interest income to administrative expenses | 1.57 | x | 1.76 | x | |||||
Administrative expenses to average assets | 1.74 | % | 1.76 | % | |||||
Efficiency ratio(1) | 40.46 | 39.50 | |||||||
Annualized return on average tangible equity(2) | 22.02 | 22.67 |
(1) | Computed as the ratio of total administrative expenses to net interest income and total other income. | |
(2) | Computed as the ratio of net income, excluding the amortization of other intangible assets, to average tangible equity. |
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | |||||||||||||||||
End of period capitalization: | |||||||||||||||||||||
Equity to assets | 7.62 | % | 7.47 | % | 7.36 | % | 7.57 | % | 7.71 | % | |||||||||||
Tangible equity to assets | 6.56 | 6.50 | 6.36 | 6.52 | 6.65 | ||||||||||||||||
Book value per share(1) | $ | 14.87 | $ | 14.36 | $ | 13.72 | $ | 13.32 | $ | 13.14 | |||||||||||
Tangible book value per share(1) | 12.81 | 12.50 | 11.86 | 11.47 | 11.33 | ||||||||||||||||
Miscellaneous end-of-period data: | |||||||||||||||||||||
Number of employees (full-time equivalents) | 7,703 | 7,198 | 6,997 | 6,837 | 6,914 | ||||||||||||||||
Number of full-service branches | 522 | 477 | 461 | 459 | 461 | ||||||||||||||||
Number of loan production offices | 28 | 26 | 26 | 26 | 27 | ||||||||||||||||
Number of ATMs | 953 | 918 | 913 | 920 | 928 |
(1) | Restated to reflect the 5% stock dividend issued September 30, 2002. |
COMPOSITION OF DEPOSITS
(unaudited)
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Checking accounts: | ||||||||||||||||||||||||
Interest-bearing | $ | 6,493,279 | $ | 7,267,602 | $ | 7,460,530 | $ | 6,588,045 | $ | 5,917,228 | ||||||||||||||
Noninterest-bearing | 2,656,047 | 2,385,243 | 2,189,903 | 2,031,085 | 1,820,330 | |||||||||||||||||||
Total checking accounts | 9,149,326 | 9,652,845 | 9,650,433 | 8,619,130 | 7,737,558 | |||||||||||||||||||
Money market and savings accounts | 8,475,706 | 8,207,576 | 8,157,534 | 8,248,750 | 8,893,253 | |||||||||||||||||||
Total transaction accounts | 17,625,032 | 17,860,421 | 17,807,967 | 16,867,880 | 16,630,811 | |||||||||||||||||||
Certificates of deposit: | ||||||||||||||||||||||||
Retail | 10,314,742 | 9,523,194 | 9,719,876 | 10,198,753 | 9,886,732 | |||||||||||||||||||
Brokered | — | — | — | 19,872 | 39,772 | |||||||||||||||||||
Total certificates of deposit | 10,314,742 | 9,523,194 | 9,719,876 | 10,218,625 | 9,926,504 | |||||||||||||||||||
Total deposits | $ | 27,939,774 | $ | 27,383,615 | $ | 27,527,843 | $ | 27,086,505 | $ | 26,557,315 | ||||||||||||||
9
CHARTER ONE FINANCIAL, INC.
AVERAGE BALANCE SHEET, YIELDS AND COSTS
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Average balance sheet data: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans and leases | $ | 26,101,819 | $ | 25,851,471 | $ | 26,690,752 | $ | 25,460,404 | $ | 24,838,010 | ||||||||||||||
Mortgage-backed securities | 14,405,655 | 13,137,545 | 11,218,473 | 10,041,928 | 10,127,245 | |||||||||||||||||||
Investment securities | 260,634 | 210,920 | 212,698 | 186,249 | 156,998 | |||||||||||||||||||
Other interest-earning assets | 839,597 | 762,760 | 725,937 | 979,454 | 1,028,371 | |||||||||||||||||||
Total interest-earning assets | 41,607,705 | 39,962,696 | 38,847,860 | 36,668,035 | 36,150,624 | |||||||||||||||||||
Allowance for loan and lease losses | (360,448 | ) | (327,090 | ) | (292,981 | ) | (267,486 | ) | (257,591 | ) | ||||||||||||||
Noninterest-earning assets(1) | 3,044,576 | 3,150,359 | 2,946,801 | 2,968,951 | 2,767,624 | |||||||||||||||||||
Total assets | $ | 44,291,833 | $ | 42,785,965 | $ | 41,501,680 | $ | 39,369,500 | $ | 38,660,657 | ||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Checking accounts | $ | 6,951,974 | $ | 7,541,679 | $ | 6,801,571 | $ | 6,283,029 | $ | 5,883,423 | ||||||||||||||
Money market and savings accounts | 8,332,278 | 7,929,274 | 8,579,110 | 8,378,267 | 8,519,541 | |||||||||||||||||||
Certificates of deposit | 9,733,110 | 9,562,013 | 9,898,021 | 9,831,050 | 10,093,412 | |||||||||||||||||||
Total interest-bearing deposits | 25,017,362 | 25,032,966 | 25,278,702 | 24,492,346 | 24,496,376 | |||||||||||||||||||
Federal Home Loan Bank advances | 11,397,410 | 10,410,188 | 9,026,637 | 7,944,811 | 7,878,506 | |||||||||||||||||||
Other borrowings | 874,062 | 866,495 | 945,945 | 929,957 | 584,882 | |||||||||||||||||||
Total interest-bearing liabilities | �� | 37,288,834 | 36,309,649 | 35,251,284 | 33,367,114 | 32,959,764 | ||||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposit accounts | 2,308,993 | 2,017,036 | 2,024,854 | 1,789,713 | 1,743,736 | |||||||||||||||||||
Other noninterest-bearing liabilities | 1,349,173 | 1,266,385 | 1,175,213 | 1,173,108 | 1,017,623 | |||||||||||||||||||
Total noninterest-bearing liabilities | 3,658,166 | 3,283,421 | 3,200,067 | 2,962,821 | 2,761,359 | |||||||||||||||||||
Total liabilities | 40,947,000 | 39,593,070 | 38,451,351 | 36,329,935 | 35,721,123 | |||||||||||||||||||
Shareholders’ equity | 3,344,833 | 3,192,895 | 3,050,329 | 3,039,565 | 2,939,534 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 44,291,833 | $ | 42,785,965 | $ | 41,501,680 | $ | 39,369,500 | $ | 38,660,657 | ||||||||||||||
Yields and costs during period: | ||||||||||||||||||||||||
Weighted average yield: | ||||||||||||||||||||||||
Loans and leases(2) | 5.64 | % | 5.86 | % | 6.26 | % | 6.43 | % | 6.69 | % | ||||||||||||||
Mortgage-backed securities | 4.48 | 4.80 | 5.06 | 5.81 | 6.08 | |||||||||||||||||||
Investment securities | 5.15 | 5.87 | 5.70 | 6.44 | 6.84 | |||||||||||||||||||
Other interest-earning assets | 3.70 | 3.87 | 4.41 | 3.89 | 3.65 | |||||||||||||||||||
Total interest-earning assets | 5.19 | 5.48 | 5.88 | 6.19 | 6.43 | |||||||||||||||||||
Weighted average cost(3): | ||||||||||||||||||||||||
Checking accounts | 1.35 | 1.65 | 1.92 | 2.13 | 2.08 | |||||||||||||||||||
Money market and savings accounts | 1.50 | 1.55 | 1.93 | 2.12 | 2.37 | |||||||||||||||||||
Certificates of deposit | 2.97 | 3.09 | 3.19 | 3.32 | 3.53 | |||||||||||||||||||
Total interest-bearing deposits | 2.03 | 2.17 | 2.42 | 2.61 | 2.78 | |||||||||||||||||||
Federal Home Loan Bank advances | 3.66 | 3.88 | 4.64 | 5.18 | 5.29 | |||||||||||||||||||
Other borrowings | 6.38 | 6.10 | 5.74 | 5.97 | 6.74 | |||||||||||||||||||
Total interest-bearing liabilities | 2.63 | 2.75 | 3.07 | 3.31 | 3.45 | |||||||||||||||||||
Interest rate spread | 2.56 | 2.73 | 2.81 | 2.88 | 2.98 | |||||||||||||||||||
Net yield on interest-earning assets | 2.84 | 2.99 | 3.07 | 3.17 | 3.30 |
(1) | Includes mark-to-market adjustments on securities available for sale. | |
(2) | Excludes impact of related tax benefits. | |
(3) | Includes the annualized effect of interest rate risk management instruments. |
10
CHARTER ONE FINANCIAL, INC.
AVERAGE BALANCE SHEET, YIELDS AND COSTS
(unaudited)
Six Months Ended | ||||||||||||
6/30/03 | 6/30/02 | |||||||||||
(Dollars in thousands) | ||||||||||||
Average balance sheet data: | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans and leases | $ | 25,977,336 | $ | 25,182,491 | ||||||||
Mortgage-backed securities | 13,775,103 | 9,197,295 | ||||||||||
Investment securities | 235,914 | 153,826 | ||||||||||
Other interest-earning assets | 801,391 | 937,964 | ||||||||||
Total interest-earning assets | 40,789,744 | 35,471,576 | ||||||||||
Allowance for loan and lease losses | (343,860 | ) | (256,464 | ) | ||||||||
Noninterest-earning assets(1) | 3,097,175 | 2,371,827 | ||||||||||
Total assets | $ | 43,543,059 | $ | 37,586,939 | ||||||||
Interest-bearing liabilities: | ||||||||||||
Checking accounts | $ | 7,245,197 | $ | 5,959,645 | ||||||||
Money market and savings accounts | 8,131,890 | 7,615,664 | ||||||||||
Certificates of deposit | 9,648,034 | 9,935,478 | ||||||||||
Total interest-bearing deposits | 25,025,121 | 23,510,787 | ||||||||||
Federal Home Loan Bank advances | 10,906,526 | 7,974,697 | ||||||||||
Other borrowings | 870,299 | 523,134 | ||||||||||
Total interest-bearing liabilities | 36,801,946 | 32,008,618 | ||||||||||
Noninterest-bearing liabilities: | ||||||||||||
Demand deposit accounts | 2,163,822 | 1,691,166 | ||||||||||
Other noninterest-bearing liabilities | 1,306,110 | 971,291 | ||||||||||
Total noninterest-bearing liabilities | 3,469,932 | 2,662,457 | ||||||||||
Total liabilities | 40,271,878 | 34,671,075 | ||||||||||
Shareholders’ equity | 3,271,181 | 2,915,864 | ||||||||||
Total liabilities and shareholders’ equity | $ | 43,543,059 | $ | 37,586,939 | ||||||||
Yields and costs during period: | ||||||||||||
Weighted average yield: | ||||||||||||
Loans and leases(2) | 5.75 | % | 6.71 | % | ||||||||
Mortgage-backed securities | 4.63 | 6.09 | ||||||||||
Investment securities | 5.47 | 7.43 | ||||||||||
Other interest-earning assets | 3.78 | 3.69 | ||||||||||
Total interest-earning assets | 5.33 | 6.47 | ||||||||||
Weighted average cost(3): | ||||||||||||
Checking accounts | 1.50 | 2.26 | ||||||||||
Money market and savings accounts | 1.53 | 2.32 | ||||||||||
Certificates of deposit | 3.03 | 3.77 | ||||||||||
Total interest-bearing deposits | 2.10 | 2.92 | ||||||||||
Federal Home Loan Bank advances | 3.76 | 5.25 | ||||||||||
Other borrowings | 6.24 | 6.64 | ||||||||||
Total interest-bearing liabilities | 2.69 | 3.56 | ||||||||||
Interest rate spread | 2.64 | 2.91 | ||||||||||
Net yield on interest-earning assets | 2.91 | 3.28 |
(1) | Includes mark-to-market adjustments on securities available for sale. | |
(2) | Excludes impact of related tax benefits. | |
(3) | Includes the annualized effect of interest rate risk management instruments. |
11
CHARTER ONE FINANCIAL, INC.
LOAN AND LEASE ACTIVITY
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Originations: | ||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||
Permanent: | ||||||||||||||||||||||||
One-to-four family | $ | 3,555,968 | $ | 3,095,718 | $ | 3,440,287 | $ | 2,481,022 | $ | 1,974,839 | ||||||||||||||
Multifamily | 57,451 | 51,440 | 48,281 | 49,187 | 23,979 | |||||||||||||||||||
Commercial | 60,226 | 90,213 | 62,335 | 48,601 | 34,686 | |||||||||||||||||||
Total permanent loans | 3,673,645 | 3,237,371 | 3,550,903 | 2,578,810 | 2,033,504 | |||||||||||||||||||
Construction: | ||||||||||||||||||||||||
One-to-four family | 53,527 | 35,556 | 40,674 | 54,377 | 40,686 | |||||||||||||||||||
Multifamily | 7,613 | 19,283 | 40,408 | 13,950 | — | |||||||||||||||||||
Commercial | 30,246 | 10,830 | 53,469 | 29,385 | 15,489 | |||||||||||||||||||
Total construction loans | 91,396 | 65,669 | 134,551 | 97,712 | 56,175 | |||||||||||||||||||
Total real estate loans originated | 3,765,041 | 3,303,040 | 3,685,454 | 2,676,522 | 2,089,679 | |||||||||||||||||||
Retail consumer | 1,209,221 | 1,079,290 | 1,205,611 | 948,632 | 938,328 | |||||||||||||||||||
Automobile | 1,026,245 | 981,114 | 916,539 | 1,012,926 | 781,763 | |||||||||||||||||||
Consumer finance | 122,839 | 101,927 | 100,568 | 73,931 | 55,338 | |||||||||||||||||||
Leases | 73,946 | 101,571 | 200,083 | 110,428 | 117,544 | |||||||||||||||||||
Corporate banking | 473,677 | 448,326 | 451,915 | 512,600 | 399,173 | |||||||||||||||||||
Total loans and leases originated | 6,670,969 | 6,015,268 | 6,560,170 | 5,335,039 | 4,381,825 | |||||||||||||||||||
Acquired through business combinations and purchases | 403,324 | 3,765 | 4,316 | 2,637 | 206,640 | |||||||||||||||||||
Sales and principal reductions: | ||||||||||||||||||||||||
Loans sold | 885,179 | 763,051 | 742,255 | 527,011 | 481,161 | |||||||||||||||||||
Loans exchanged for mortgage-backed securities | 2,346,609 | 3,419,116 | 1,600,962 | 809,167 | 1,539,682 | |||||||||||||||||||
Principal reductions | 3,260,094 | 3,025,830 | 3,587,423 | 2,943,422 | 2,479,838 | |||||||||||||||||||
Total sales and principal reductions | 6,491,882 | 7,207,997 | 5,930,640 | 4,279,600 | 4,500,681 | |||||||||||||||||||
Increase (decrease) before net items | $ | 582,411 | $ | (1,188,964 | ) | $ | 633,846 | $ | 1,058,076 | $ | 87,784 | |||||||||||||
Six Months Ended | ||||||||||||||
6/30/03 | 6/30/02 | |||||||||||||
(Dollars in thousands) | ||||||||||||||
Originations: | ||||||||||||||
Real estate: | ||||||||||||||
Permanent: | ||||||||||||||
One-to-four family | $ | 6,651,686 | $ | 4,632,833 | ||||||||||
Multifamily | 108,891 | 59,698 | ||||||||||||
Commercial | 150,439 | 126,774 | ||||||||||||
Total permanent loans | 6,911,016 | 4,819,305 | ||||||||||||
Construction: | ||||||||||||||
One-to-four family | 89,093 | 77,030 | ||||||||||||
Multifamily | 26,896 | 24,988 | ||||||||||||
Commercial | 41,076 | 81,723 | ||||||||||||
Total construction loans | 157,065 | 183,741 | ||||||||||||
Total real estate loans originated | 7,068,081 | 5,003,046 | ||||||||||||
Retail consumer | 2,288,511 | 1,937,055 | ||||||||||||
Automobile | 2,007,359 | 1,465,808 | ||||||||||||
Consumer finance | 224,766 | 111,421 | ||||||||||||
Leases | 175,517 | 210,585 | ||||||||||||
Corporate banking | 922,003 | 752,813 | ||||||||||||
Total loans and leases originated | 12,686,237 | 9,480,728 | ||||||||||||
Acquired through business combinations and purchases | 407,089 | 211,355 | ||||||||||||
Sales and principal reductions: | ||||||||||||||
Loans sold | 1,648,230 | 1,125,258 | ||||||||||||
Loans exchanged for mortgage-backed securities | 5,765,725 | 4,256,953 | ||||||||||||
Principal reductions | 6,285,924 | 5,423,231 | ||||||||||||
Total sales and principal reductions | 13,699,879 | 10,805,442 | ||||||||||||
Decrease before net items | $ | (606,553 | ) | $ | (1,113,359 | ) | ||||||||
12
CHARTER ONE FINANCIAL, INC.
ALLOWANCE FOR LOAN AND LEASE LOSSES
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Allowance for loan and lease losses: | ||||||||||||||||||||||||
Balance, beginning of period | $ | 355,926 | $ | 328,017 | $ | 292,800 | $ | 267,155 | $ | 258,605 | ||||||||||||||
Provision for loan and lease losses | 35,360 | 61,471 | 60,314 | 47,695 | 55,277 | |||||||||||||||||||
Acquired through business combination | 4,969 | — | — | — | 3,184 | |||||||||||||||||||
Loans and leases charged off: | ||||||||||||||||||||||||
One-to-four family | (1,036 | ) | (670 | ) | (1,127 | ) | (643 | ) | (3,056 | ) | ||||||||||||||
Commercial real estate | (253 | ) | (500 | ) | (144 | ) | (290 | ) | (117 | ) | ||||||||||||||
Retail consumer | (2,596 | ) | (3,478 | ) | (3,004 | ) | (2,308 | ) | (5,530 | ) | ||||||||||||||
Automobile | (13,628 | ) | (16,450 | ) | (15,941 | ) | (16,429 | ) | (29,675 | ) | ||||||||||||||
Consumer finance | (3,975 | ) | (4,537 | ) | (5,785 | ) | (5,160 | ) | (11,628 | ) | ||||||||||||||
Leases | (2,095 | ) | (6,061 | ) | (88 | ) | (519 | ) | (1,801 | ) | ||||||||||||||
Corporate banking | (2,652 | ) | (7,245 | ) | (5,799 | ) | (4,776 | ) | (2,014 | ) | ||||||||||||||
Total charge-offs(1) | (26,235 | ) | (38,941 | ) | (31,888 | ) | (30,125 | ) | (53,821 | ) | ||||||||||||||
Recoveries: | ||||||||||||||||||||||||
One-to-four family | 41 | 17 | 42 | 881 | 32 | |||||||||||||||||||
Commercial real estate | 61 | 148 | 41 | 488 | 9 | |||||||||||||||||||
Retail consumer | 548 | 433 | 588 | 484 | 359 | |||||||||||||||||||
Automobile | 4,561 | 4,115 | 3,582 | 3,574 | 3,123 | |||||||||||||||||||
Consumer finance | 235 | 105 | 191 | 238 | 32 | |||||||||||||||||||
Leases | 606 | 393 | 1,897 | 430 | — | |||||||||||||||||||
Corporate banking | 321 | 168 | 450 | 1,980 | 355 | |||||||||||||||||||
Total recoveries | 6,373 | 5,379 | 6,791 | 8,075 | 3,910 | |||||||||||||||||||
Net loan and lease charge-offs(1) | (19,862 | ) | (33,562 | ) | (25,097 | ) | (22,050 | ) | (49,911 | ) | ||||||||||||||
Balance, end of period | $ | 376,393 | $ | 355,926 | $ | 328,017 | $ | 292,800 | $ | 267,155 | ||||||||||||||
Net charge-offs to average loans and leases (annualized)(1) | .30 | % | .52 | % | .38 | % | .35 | % | .80 | % |
Six Months Ended | ||||||||||||
6/30/03 | 6/30/02 | |||||||||||
(Dollars in thousands) | ||||||||||||
Allowance for loan and lease losses: | ||||||||||||
Balance, beginning of period | $ | 328,017 | $ | 255,478 | ||||||||
Provision for loan and lease losses | 96,831 | 83,994 | ||||||||||
Acquired through business combination | 4,969 | 3,184 | ||||||||||
Loans and leases charged off: | ||||||||||||
One-to-four family | (1,706 | ) | (4,032 | ) | ||||||||
Commercial real estate | (753 | ) | (918 | ) | ||||||||
Retail consumer | (6,074 | ) | (7,788 | ) | ||||||||
Automobile | (30,078 | ) | (46,595 | ) | ||||||||
Consumer finance | (8,512 | ) | (15,450 | ) | ||||||||
Leases | (8,156 | ) | (2,261 | ) | ||||||||
Corporate banking | (9,897 | ) | (6,037 | ) | ||||||||
Total charge-offs(1) | (65,176 | ) | (83,081 | ) | ||||||||
Recoveries: | ||||||||||||
One-to-four family | 58 | 34 | ||||||||||
Commercial real estate | 209 | 130 | ||||||||||
Retail consumer | 981 | 762 | ||||||||||
Automobile | 8,676 | 5,531 | ||||||||||
Consumer finance | 340 | 95 | ||||||||||
Leases | 999 | — | ||||||||||
Corporate banking | 489 | 1,028 | ||||||||||
Total recoveries | 11,752 | 7,580 | ||||||||||
Net loan and lease charge-offs(1) | (53,424 | ) | (75,501 | ) | ||||||||
Balance, end of period | $ | 376,393 | $ | 267,155 | ||||||||
Net charge-offs to average loans and leases (annualized)(1) | .41 | % | .60 | % |
(1) | Includes $27.3 million in net charge-offs recorded in the second quarter of 2002 in conjunction with Charter One’s adoption of a new loan charge-off policy in which consumer loans are charged off based upon delinquency, repossession and in certain cases, at the point of bankruptcy discharge. Previously, Charter One’s policy was to record charge-offs of loans secured by one-to-four family real estate at the point of foreclosure and automobile loans at the point of repossessed collateral disposition. This new policy will neither increase nor decrease ultimate net loan charge-offs. It simply accelerates the timing of the recognition of the loss on these consumer loans. This new policy was implemented prospectively. Management believes the changes to this policy conforms Charter One’s charge-off methodology to that of its commercial banking peers. |
13
CHARTER ONE FINANCIAL, INC.
NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES
(unaudited)
Three Months Ended | ||||||||||||||||||||||
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Average loans and leases: | ||||||||||||||||||||||
Mortgage | $ | 11,126,226 | $ | 11,083,170 | $ | 11,659,164 | $ | 11,265,962 | $ | 11,088,463 | ||||||||||||
Retail consumer | 4,329,896 | 4,510,460 | 5,264,728 | 4,969,219 | 4,827,223 | |||||||||||||||||
Automobile | 6,088,204 | 5,763,289 | 5,447,392 | 5,035,920 | 4,740,267 | |||||||||||||||||
Consumer finance | 1,023,295 | 995,653 | 980,524 | 972,843 | 1,002,306 | |||||||||||||||||
Leases | 2,127,384 | 2,145,022 | 2,085,474 | 2,029,779 | 2,036,604 | |||||||||||||||||
Corporate banking | 1,406,814 | 1,353,877 | 1,253,470 | 1,186,681 | 1,143,147 | |||||||||||||||||
Total average loans and leases | $ | 26,101,819 | $ | 25,851,471 | $ | 26,690,752 | $ | 25,460,404 | $ | 24,838,010 | ||||||||||||
Net charge-offs to average loans and leases (annualized)(1): | ||||||||||||||||||||||
Mortgage | .04 | % | .04 | % | .04 | % | (.02 | )% | .11 | % | ||||||||||||
Retail consumer | .19 | .27 | .18 | .15 | .43 | |||||||||||||||||
Automobile | .60 | .86 | .91 | 1.02 | 2.24 | |||||||||||||||||
Consumer finance | 1.46 | 1.78 | 2.28 | 2.02 | 4.63 | |||||||||||||||||
Leases | .28 | 1.06 | (.35 | ) | .02 | .35 | ||||||||||||||||
Corporate banking | .66 | 2.09 | 1.71 | .94 | .58 | |||||||||||||||||
Total | .30 | .52 | .38 | .35 | .80 |
(1) | Includes $27.3 million in net charge-offs recorded in the second quarter of 2002 in conjunction with Charter One’s adoption of a new loan charge-off policy in which consumer loans are charged off based upon delinquency, repossession and, in certain cases, at the point of bankruptcy discharge. Previously, Charter One’s policy was to record charge-offs of loans secured by one-to-four family real estate at the point of foreclosure and automobile loans at the point of repossessed collateral disposition. This new policy will neither increase nor decrease ultimate net loan charge-offs. It simply accelerates the timing of the recognition of the loss on these consumer loans. This new policy was implemented prospectively. Management believes the changes to this policy conforms Charter One’s charge-off methodology to that of its commercial banking peers. |
LOAN AND LEASE PORTFOLIO
(unaudited)
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Loan and lease portfolio, net(1): | ||||||||||||||||||||||||
One-to-four family: | ||||||||||||||||||||||||
Permanent: | ||||||||||||||||||||||||
Fixed rate | $ | 5,411,639 | $ | 5,506,314 | $ | 5,869,554 | $ | 5,942,919 | $ | 5,556,239 | ||||||||||||||
Adjustable rate | 2,577,778 | 2,546,426 | 2,437,166 | 2,694,956 | 2,584,413 | |||||||||||||||||||
Construction | 418,485 | 412,973 | 427,729 | 427,871 | 414,716 | |||||||||||||||||||
8,407,902 | 8,465,713 | 8,734,449 | 9,065,746 | 8,555,368 | ||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Multifamily | 942,689 | 920,295 | 953,688 | 1,017,393 | 1,036,049 | |||||||||||||||||||
Commercial | 1,481,178 | 1,340,272 | 1,307,593 | 1,313,243 | 1,321,438 | |||||||||||||||||||
2,423,867 | 2,260,567 | 2,261,281 | 2,330,636 | 2,357,487 | ||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Retail | 4,180,702 | 4,173,080 | 5,494,453 | 5,008,393 | 4,855,164 | |||||||||||||||||||
Automobile | 6,247,964 | 5,934,502 | 5,606,329 | 5,281,731 | 4,826,370 | |||||||||||||||||||
Consumer finance | 1,038,517 | 1,005,077 | 984,772 | 973,981 | 976,446 | |||||||||||||||||||
11,467,183 | 11,112,659 | 12,085,554 | 11,264,105 | 10,657,980 | ||||||||||||||||||||
Business: | ||||||||||||||||||||||||
Leases | 2,104,713 | 2,125,905 | 2,133,468 | 2,028,687 | 2,026,955 | |||||||||||||||||||
Corporate banking | 1,462,880 | 1,368,069 | 1,318,003 | 1,242,869 | 1,213,789 | |||||||||||||||||||
3,567,593 | 3,493,974 | 3,451,471 | 3,271,556 | 3,240,744 | ||||||||||||||||||||
Loans and leases before allowance for loan and lease losses | 25,866,545 | 25,332,913 | 26,532,755 | 25,932,043 | 24,811,579 | |||||||||||||||||||
Allowance for loan and lease losses | (376,393 | ) | (355,926 | ) | (328,017 | ) | (292,800 | ) | (267,155 | ) | ||||||||||||||
Loans and leases, net(1) | $ | 25,490,152 | $ | 24,976,987 | $ | 26,204,738 | $ | 25,639,243 | $ | 24,544,424 | ||||||||||||||
Portfolio of loans serviced for others | $ | 19,244,092 | $ | 18,713,649 | $ | 16,893,609 | $ | 16,840,025 | $ | 16,889,298 |
(1) | Includes loans held for sale. |
14
CHARTER ONE FINANCIAL, INC.
NONPERFORMING AND UNDERPERFORMING ASSETS
(unaudited)
6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Nonperforming assets(1): | ||||||||||||||||||||||||
Nonaccrual loans and leases: | ||||||||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
One-to-four family(2) | $ | 25,723 | $ | 27,867 | $ | 27,904 | $ | 31,528 | $ | 34,641 | ||||||||||||||
Multifamily and commercial | 16,764 | 5,591 | 5,369 | 6,621 | 4,640 | |||||||||||||||||||
Construction and land | 27,483 | 8,015 | 9,885 | 10,598 | 11,273 | |||||||||||||||||||
Total real estate mortgage loans | 69,970 | 41,473 | 43,158 | 48,747 | 50,554 | |||||||||||||||||||
Retail consumer(2) | 10,652 | 12,046 | 13,937 | 14,128 | 12,092 | |||||||||||||||||||
Automobile | — | — | — | — | — | |||||||||||||||||||
Consumer finance(2) | 43,175 | 42,562 | 40,227 | 38,403 | 40,313 | |||||||||||||||||||
Leases | 6,877 | 15,264 | 6,211 | 7,964 | 8,958 | |||||||||||||||||||
Corporate banking | 35,595 | 42,068 | 39,098 | 37,230 | 19,807 | |||||||||||||||||||
Total nonaccrual loans and leases | 166,269 | 153,413 | 142,631 | 146,472 | 131,724 | |||||||||||||||||||
Restructured real estate mortgage loans | 488 | 494 | 501 | 1,149 | 1,159 | |||||||||||||||||||
Total nonperforming loans and leases | 166,757 | 153,907 | 143,132 | 147,621 | 132,883 | |||||||||||||||||||
Real estate and other collateral owned(3) | 39,278 | 40,020 | 40,776 | 40,270 | 40,186 | |||||||||||||||||||
Total nonperforming assets | $ | 206,035 | $ | 193,927 | $ | 183,908 | $ | 187,891 | $ | 173,069 | ||||||||||||||
Ratio of: | ||||||||||||||||||||||||
Nonperforming loans and leases to total loans and leases | .65 | % | .62 | % | .55 | % | .58 | % | .54 | % | ||||||||||||||
Nonperforming assets to total assets | .47 | .45 | .44 | .47 | .44 | |||||||||||||||||||
Nonperforming assets to total loans, leases and real estate and other collateral owned | .81 | .78 | .70 | .73 | .70 | |||||||||||||||||||
Allowance for loan and lease losses to: | ||||||||||||||||||||||||
Nonperforming loans and leases | 225.71 | 231.26 | 229.17 | 198.35 | 201.05 | |||||||||||||||||||
Total loans and leases before allowance | 1.46 | 1.40 | 1.24 | 1.13 | 1.08 | |||||||||||||||||||
Accruing loans and leases delinquent more than 90 days(1): | ||||||||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
One-to-four family | $ | 18,056 | $ | 23,507 | $ | 25,643 | $ | 24,854 | $ | 21,781 | ||||||||||||||
Multifamily and commercial | 396 | — | — | — | 944 | |||||||||||||||||||
Construction and land | — | — | — | — | — | |||||||||||||||||||
Total real estate mortgage loans | 18,452 | 23,507 | 25,643 | 24,854 | 22,725 | |||||||||||||||||||
Retail consumer | 3,056 | 3,229 | 4,758 | 5,630 | 4,362 | |||||||||||||||||||
Automobile | 2,254 | 3,579 | 3,621 | 2,595 | 2,211 | |||||||||||||||||||
Consumer finance | 21,172 | 27,395 | 26,739 | 25,269 | 19,470 | |||||||||||||||||||
Leases | — | 181 | 19 | — | 219 | |||||||||||||||||||
Corporate banking | 117 | 471 | 1,536 | 1,955 | 3,330 | |||||||||||||||||||
Total accruing loans and leases delinquent more than 90 days | $ | 45,051 | $ | 58,362 | $ | 62,316 | $ | 60,303 | $ | 52,317 | ||||||||||||||
Total underperforming assets | $ | 251,086 | $ | 252,289 | $ | 246,224 | $ | 248,194 | $ | 225,386 | ||||||||||||||
Ratio of: | ||||||||||||||||||||||||
Underperforming assets to total assets | .57 | % | .58 | % | .59 | % | .62 | % | .57 | % | ||||||||||||||
Underperforming assets to total loans, leases and real estate and other collateral owned | .98 | 1.01 | .94 | .97 | .92 |
(1) | Effective June 30, 2002, amounts exclude loans guaranteed by the Federal Housing Administration or Veterans’ Administration. | |
(2) | Effective June 30, 2002, Charter One adopted a new accrual policy in which consumer loans secured by residential real estate are placed on nonaccrual at six payments past due as long as the loan is well secured and in the process of collection. This new policy was implemented prospectively. The change in the accrual policy did not have a material impact on interest income. Management believes the changes to this policy conforms Charter One’s accrual methodology to that of its commercial banking peers. | |
(3) | Effective for the period ended June 30, 2002, Charter One adopted a new loan charge-off policy in which automobile loans are charged off based upon repossession and, in certain cases, at the point of bankruptcy discharge. Any automobile loan reaching 120 days delinquent will be charged off completely. Previously, Charter One’s policy was to record charge-offs of loans secured by automobiles at the point of repossessed collateral disposition. This new policy was implemented prospectively. Management believes the changes to this policy conforms Charter One’s charge-off methodology to that of its commercial banking peers. |
15