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 Reported):October 16, 2003
CHARTER ONE FINANCIAL, INC. (Exact name of registrant as specified in its charter) |
Delaware | 001-15495 | 34-1567092 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1215 Superior Avenue, Cleveland, Ohio | 44114 | |
(Address of principal executive offices) | (Zip Code) |
(216) 566-5300 (Registrant’s telephone number, including area code) |
NOT APPLICABLE (Former name or former address, if changed since report) |
ITEM 12. Results of Operations and Financial Condition
On October 16, 2003, the Registrant issued the following earnings release for the quarterly period ended September 30, 2003:
[CHARTER ONE LOGO]
News Release
CONTACT: ELLEN BATKIE (800) 262-6301
CHARTER ONE REPORTS 3rd QTR EPS OF $.69, UP 13%
Highlights for the quarter ended 9/30/03:
• Net earnings of $.69 per share, up 13% over 3Q 2002 | |||
• Retail banking revenue up 12% over 3Q 2002; deposit-related portion up 14% | |||
• Retail consumer checking accounts up an annualized 18% in 3Q 2003 | |||
• Noninterest-bearing deposits (excluding custodial balances) up an annualized 31% in 3Q 2003 | |||
• Loan and lease portfolio up 10% in 3Q 2003, including 7% growth in non-single family | |||
• Single-family loans and MBSs down $2 billion in 3Q 2003 | |||
• NPAs of .67% of loans and leases; underperforming assets of .85% of loans and leases |
CLEVELAND, Ohio, October 16, 2003 — Charter One Financial, Inc. (NYSE:CF), the holding company of Charter One Bank, N.A., today reported net income of $159.1 million for the three months ended September 30, 2003, or $.69 per diluted share. This was up 13.1% from $.61 in diluted earnings per share reported in the year ago quarter.
Net income for the quarter generated annualized returns of 1.46% on average assets, 20.12% on average equity, and 23.59% on average tangible equity. In the year ago quarter, the returns were 1.46% on average assets, 18.89% on average equity and 21.70% on average tangible equity.
“Not only are we reporting solid results for the third quarter, but the period was marked by measurable progress toward goals we previously identified as critical to increasing franchise value and positioning us for consistent long-term earnings growth,” commented Charles John Koch, Charter One’s Chairman and Chief Executive Officer. “Our primary goals include reducing single-family loan exposure and increasing noninterest-bearing deposits. During the three months, we reduced single-family loans and securities by $2 billion and replaced them with $1.2 billion in non-single family loans and leases. The growth in noninterest-bearing deposits was equally impressive. Excluding the benefits of custodial accounts, we posted a 31% annualized growth rate this quarter, adding $147 million in balances. Finally, we were able to use recoveries from the MSR valuation allowance to offset the reduction in earning assets as we work to reduce single-family loan exposure and the margin compression resulting from the rate environment, as well as to continue the support for our retail initiatives. Over the next few quarters, we plan on continuing our efforts to reduce our exposure to single-family loans and securities which will likely limit overall asset growth. As we previously stated, this strategy could constrain the growth in net interest income for the near term.”
Net interest income and net yield- Net interest income was $285.3 million for the three months ended September 30, 2003, down 3.4% from the previous quarter and 1.7% from the year ago quarter. The decline from the previous quarter was attributable to a 1.5% decrease in average earning assets primarily related to the planned reduction in single-family loan exposure. The decline from the year ago quarter resulted from the decrease in net yield over the 12 months. Net yield declined to 2.80% during the third quarter of 2003 from 2.84% during the second quarter of 2003 and 3.17% during the third quarter of 2002.
Retail banking revenue- Retail banking revenue totaled $94.2 million for the three months ended September 30, 2003, up 11.9% from the comparable 2002 quarter. The biggest driver of the increase was deposit-related revenue, which totaled $82.7 million, up 14.4% over the year ago quarter. Deposit-related revenue reflected the benefits of the Company’s strategy to emphasize noninterest-bearing checking account growth. The third quarter of 2003 included the impact of reduced revenue from debit card transactions that resulted from the MasterCard settlement earlier this year. The settlement, which went into effect August 1, 2003, reduced third quarter revenue by approximately $2.3 million. Without that reduction, third quarter 2003 deposit-related revenue would have been up 17.5% over the third quarter of 2002. The other components of retail banking revenue include fees from retail brokerage activities ($7.6 million, down 10.7% from the year ago quarter), and other revenue related to retail operations ($3.9 million, up 15.8%).
Mortgage banking revenue- The mortgage banking category includes revenue associated with Charter One’s mortgage banking operations, adjusted by the amortization and valuation adjustments related to its mortgage servicing rights asset (“MSR”). During the third quarter, MSR-related adjustments added $50 million to revenue as the Company decreased the valuation allowance to $83 million in response to slower projected prepayment speeds in its loan servicing portfolio. The total mortgage banking revenue, excluding MSR-related adjustments, was $15 million in the third quarter of 2003 compared to $19 million in the year ago quarter. The portfolio serviced for others totaled $16.7 billion at September 30, 2003, and carried a weighted average coupon of 6.24%. The portfolio declined from $18.9 billion at June 30, 2003, reflecting prepayments and the lack of securitization activity during the quarter. The related MSR is now 1.01% of the portfolio at $169 million. With an average servicing spread of 35 basis points, that translates into an MSR valuation of 2.9 times the servicing spread.
Net gains- During the third quarter of 2003, the Company reported net gains of $16.1 million. This included $28 million in net gains ($40 million in gains and $12 million in losses) from the sale of $2.4 billion of mortgage-backed securities, as well as $5 million in SFAS 133 gains on interest-rate exchange agreements. Offsetting the gains was $18 million from the termination of a $250 million FHLB advance (with a weighted average cost of 4.99%) scheduled to mature in 2006. As of September 30, 2003, unrealized pretax gains in the mortgage-backed securities portfolio totaled $147 million, compared with $297 million at June 30, 2003. The Company has committed to sell $1.6 billion in mortgage-backed securities for settlement in the fourth quarter, which will result in a realized gain of $42 million.
Leasing operations- Other income from leasing operations was reflected as a loss of $4.1 million in the third quarter of 2003, compared with income of $404,000 in the third quarter of
2
2002. The loss in the third quarter of 2003 resulted from $5.5 million in residual adjustments on miscellaneous equipment, none of which was related to aircraft.
Operating expenses —Administrative expenses totaled $194.8 million in the three months ended September 30, 2003, unchanged from the previous quarter and up 13.7% from the year ago quarter. In general, the higher level of expenses reflects a franchise growth of 23%, with 107 banking centers added in the past 12 months. The efficiency ratio was 41.84% for the third quarter of 2003, compared to 41.14% for the second quarter of 2003 and 39.90% for the third quarter of 2002. Excluding net gains and the MSR-related adjustments results in an efficiency ratio of 48.79%, compared to 47.32% for the second quarter of 2003, and 42.67% for the third quarter of 2002.
Lending portfolio growth and production —Loans and leases before reserves totaled $28.4 billion at September 30, 2003, up 10% in the quarter. Only $225 million in loans were securitized during the quarter, making this the first quarter since March 31, 2000 where the portfolio growth rate was not significantly masked by securitizations. Non-single family loans totaled $18.6 billion at September 30, 2003, up 7% in three months. The non-single family growth was led by a three-month increase of 20% in retail consumer loans (principally home equity lines and loans) and 17% in the small business component of corporate banking. Small business loans now total $676 million of the $1.6 billion corporate banking portfolio. The total loan portfolio continues to be primarily consumer based, with 78% in consumer-oriented products and 22% in commercial lending (including multifamily real estate).
Loan and lease originations totaled a record $7.3 billion during the third quarter of 2003, compared to $6.7 billion during the second quarter of 2003 and $5.3 billion in the third quarter of 2002. Non-single family loan originations totaled $3.3 billion, or 46% of the total. The non-single family activity was led by a record $1.4 billion in consumer loans, and $909 million in auto finance loans.
Mortgage-backed securities available for sale —Mortgage-backed securities available for sale totaled $11.1 billion at September 30, 2003, down $3.2 billion during the quarter. At September 30, 2003, the portfolio was comprised of 91% in fixed-rate securities with a duration of approximately 2.7 years, and 9% in floating-rate securities.
Deposits- Deposits totaled $28 billion at September 30, 2003, up $106 million in the third quarter. Core deposits (checking, money market and savings accounts) accounted for $17.3 billion, or 62% of the total. At the beginning of this year, the Company indicated it would emphasize noninterest-bearing checking growth, as opposed to total deposits as in previous years. Excluding custodial balances, noninterest-bearing deposits totaled $2 billion at September 30, 2003, up an annualized 31% in the third quarter and 31% (excluding the Advance acquisition) in the past 12 months. Custodial balances totaled $719 million at September 30, 2003, $761 million at June 30, 2003, and $506 million at September 30, 2002.
The push into small business banking continued to post impressive results during the third quarter. Business deposits, which are included in core deposits, increased to $2 billion at September 30, 2003, up $189 million, or 10% (40% annualized), during the three-month period.
3
Finally, the retail sales force has been focusing intensely on net growth in the number of checking accounts in 2003. Charter One ended the third quarter with 1,435,300 checking accounts, up from 1,373,700 accounts at June 30, 2003, for an annualized growth rate of 18%.
Retail expansion update- During 2003, Charter One initiated an aggressive de novo expansion plan. The initiative has led to 92 new banking centers since the end of 2002 (excluding 13 added in the July acquisition of Advance Bancorp), with 44 opened during the third quarter. In-store banking centers represented 82 of the banking centers opened this year and 42 of those opened in the third quarter. Charter One’s in-store franchise now includes 131 banking centers, or 23% of its retail network. Current plans bring the total new banking centers anticipated for 2003 to 125, including 99 in-store locations. The Company expects additional expansion during 2004. The Company is monitoring its de novo success by looking at branches after 30, 60, 90 and 120 days. The median results for banking centers opened through August 31, 2003 were: after being open 30 days (62 banking centers) — $1.6 million in deposits and 268 checking accounts; after 60 days (52 banking centers) — $3.5 million in deposits and 410 checking accounts; after 90 days (40 banking centers) — $4.6 million and 499 checking accounts; after 120 days (27 banking centers) — $6.2 million and 577 checking accounts.
Credit quality and allowance for loan losses- During the third quarter of 2003, the total provision for the quarter exceeded net charge-offs by $13 million, increasing the allowance for loan and lease losses to $389 million at September 30, 2003, which was 1.37% of total loans and leases at September 30, 2003. Net charge-offs during the third quarter of 2003 totaled $24.7 million, or .37% of average loans and leases (annualized).
At September 30, 2003, nonperforming assets totaled $189 million or .67% of loans, leases and collateral owned, down from $206 million or .81% at June 30, 2003. Underperforming assets (including nonperforming assets, troubled debt restructuring and loans delinquent 90 days and still accruing) totaled $240 million or .85% of loans, leases and collateral owned, compared to $251 million or .98% at June 30, 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 3.9 million shares under the authorization during the third quarter of 2003 at an average cost of $31.49 per share, and 6.6 million shares at an average cost of $31.00 per share during the nine months ended September 30, 2003. As of September 30, 2003, the total repurchased under the current authorization was 14.6 million shares at an average cost of $30.99 per share, leaving approximately 7 million shares remaining under the program.
Company profile —Charter One has $43 billion in total assets, making it one of the 25 largest bank holding companies in the country. The Bank has 566 banking center locations in Ohio, Michigan, New York, Illinois, Massachusetts, Vermont, Indiana, Connecticut and Pennsylvania. 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
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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, October 17, 2003. To participate in the call, dial (888) 428-4479 and ask for the Charter One 3rd quarter earnings call. The call is available on a replay basis until October 24, 2003 by dialing (320) 365-3844, access code 669643. 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.
####
5
CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Loans and leases | $ | 368,952 | $ | 367,602 | $ | 377,724 | $ | 418,711 | $ | 410,237 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Available for sale | 129,695 | 154,490 | 149,311 | 131,821 | 135,099 | |||||||||||||||||||
Held to maturity | 5,326 | 6,858 | 8,269 | 9,991 | 10,695 | |||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Available for sale | 3,563 | 3,297 | 3,043 | 2,969 | 2,939 | |||||||||||||||||||
Held to maturity | 51 | 56 | 54 | 60 | 61 | |||||||||||||||||||
Other interest-earning assets | 7,531 | 7,856 | 7,385 | 8,184 | 9,729 | |||||||||||||||||||
Total interest income | 515,118 | 540,159 | 545,786 | 571,736 | 568,760 | |||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Deposits | 115,862 | 126,734 | 133,743 | 154,018 | 160,821 | |||||||||||||||||||
Federal Home Loan Bank advances | 100,813 | 104,025 | 99,799 | 105,492 | 103,729 | |||||||||||||||||||
Other borrowings | 13,185 | 13,969 | 13,203 | 13,627 | 13,943 | |||||||||||||||||||
Total interest expense | 229,860 | 244,728 | 246,745 | 273,137 | 278,493 | |||||||||||||||||||
Net interest income | 285,258 | 295,431 | 299,041 | 298,599 | 290,267 | |||||||||||||||||||
Provision for loan and lease losses | 37,663 | 35,360 | 61,471 | 60,314 | 47,695 | |||||||||||||||||||
Net interest income after provision for loan and lease losses | 247,595 | 260,071 | 237,570 | 238,285 | 242,572 | |||||||||||||||||||
Other income: | ||||||||||||||||||||||||
Retail banking | 94,183 | 97,087 | 84,100 | 89,261 | 84,175 | |||||||||||||||||||
Mortgage banking | 65,604 | (23,895 | ) | (27 | ) | (1,992 | ) | (36,961 | ) | |||||||||||||||
Leasing operations | (4,118 | ) | (12,230 | ) | (6,856 | ) | (4,566 | ) | 404 | |||||||||||||||
Net gains | 16,112 | 108,549 | 76,653 | 61,585 | 83,881 | |||||||||||||||||||
Bank owned life insurance and other | 8,638 | 8,450 | 7,956 | 7,834 | 7,582 | |||||||||||||||||||
Total other income | 180,419 | 177,961 | 161,826 | 152,122 | 139,081 | |||||||||||||||||||
Administrative expenses: | ||||||||||||||||||||||||
Compensation and employee benefits | 92,582 | 90,790 | 87,056 | 81,827 | 81,443 | |||||||||||||||||||
Net occupancy and equipment | 31,985 | 30,466 | 31,186 | 30,360 | 30,288 | |||||||||||||||||||
Marketing expenses | 22,411 | 20,205 | 13,647 | 9,843 | 11,788 | |||||||||||||||||||
Federal deposit insurance premiums | 1,118 | 1,125 | 1,142 | 1,142 | 1,104 | |||||||||||||||||||
Other administrative expenses | 46,733 | 52,168 | 50,261 | 53,716 | 46,683 | |||||||||||||||||||
Total administrative expenses | 194,829 | 194,754 | 183,292 | 176,888 | 171,306 | |||||||||||||||||||
Income before income taxes | 233,185 | 243,278 | 216,104 | 213,519 | 210,347 | |||||||||||||||||||
Income taxes | 74,036 | 77,241 | 68,613 | 67,793 | 66,785 | |||||||||||||||||||
Net income | $ | 159,149 | $ | 166,037 | $ | 147,491 | $ | 145,726 | $ | 143,562 | ||||||||||||||
Basic earnings per share | $ | .71 | $ | .74 | $ | .66 | $ | .65 | $ | .63 | ||||||||||||||
Diluted earnings per share | $ | .69 | $ | .72 | $ | .64 | $ | .63 | $ | .61 | ||||||||||||||
Average common shares outstanding: | ||||||||||||||||||||||||
Basic | 224,399,805 | 225,501,687 | 224,997,398 | 225,561,551 | 228,765,954 | |||||||||||||||||||
Diluted | 230,661,929 | 231,095,694 | 230,460,847 | 231,502,688 | 235,615,457 | |||||||||||||||||||
Cash dividends declared per share | $ | .26 | $ | .24 | $ | .22 | $ | .22 | $ | .21 | ||||||||||||||
6
CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Nine Months Ended | ||||||||||||
9/30/03 | 9/30/02 | |||||||||||
(Dollars in thousands, | ||||||||||||
except per share data) | ||||||||||||
Interest income: | ||||||||||||
Loans and leases | $ | 1,114,278 | $ | 1,253,132 | ||||||||
Mortgage-backed securities: | ||||||||||||
Available for sale | 433,496 | 388,000 | ||||||||||
Held to maturity | 20,453 | 37,756 | ||||||||||
Investment securities: | ||||||||||||
Available for sale | 9,903 | 8,526 | ||||||||||
Held to maturity | 161 | 192 | ||||||||||
Other interest-earning assets | 22,772 | 27,119 | ||||||||||
Total interest income | 1,601,063 | 1,714,725 | ||||||||||
Interest expense: | ||||||||||||
Deposits | 376,339 | 500,798 | ||||||||||
Federal Home Loan Bank advances | 304,637 | 311,372 | ||||||||||
Other borrowings | 40,357 | 31,324 | ||||||||||
Total interest expense | 721,333 | 843,494 | ||||||||||
Net interest income | 879,730 | 871,231 | ||||||||||
Provision for loan and lease losses | 134,494 | 131,689 | ||||||||||
Net interest income after provision for loan and lease losses | 745,236 | 739,542 | ||||||||||
Other income: | ||||||||||||
Retail banking | 275,370 | 241,474 | ||||||||||
Mortgage banking | 41,682 | (16,503 | ) | |||||||||
Leasing operations | (23,204 | ) | 991 | |||||||||
Net gains | 201,314 | 143,448 | ||||||||||
Bank owned life insurance and other | 25,044 | 26,014 | ||||||||||
Total other income | 520,206 | 395,424 | ||||||||||
Administrative expenses: | ||||||||||||
Compensation and employee benefits | 270,428 | 239,340 | ||||||||||
Net occupancy and equipment | 93,637 | 86,485 | ||||||||||
Marketing expenses | 56,263 | 30,629 | ||||||||||
Federal deposit insurance premiums | 3,385 | 3,421 | ||||||||||
Other administrative expenses | 149,162 | 142,209 | ||||||||||
Total administrative expenses | 572,875 | 502,084 | ||||||||||
Income before income taxes | 692,567 | 632,882 | ||||||||||
Income taxes | 219,890 | 200,940 | ||||||||||
Net income | $ | 472,677 | $ | 431,942 | ||||||||
Basic earnings per share | $ | 2.11 | $ | 1.87 | ||||||||
Diluted earnings per share | $ | 2.05 | $ | 1.82 | ||||||||
Average common shares outstanding: | ||||||||||||
Basic | 224,966,297 | 230,549,330 | ||||||||||
Diluted | 230,739,490 | 237,653,561 | ||||||||||
Cash dividends declared per share | $ | .72 | $ | .61 | ||||||||
7
CHARTER ONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Cash and deposits with banks | $ | 526,534 | $ | 586,018 | $ | 507,726 | $ | 446,701 | $ | 525,049 | ||||||||||||||
Federal funds sold and other | 516 | 10,514 | 1,350,513 | 512 | 1,105,511 | |||||||||||||||||||
Total cash and cash equivalents | 527,050 | 596,532 | 1,858,239 | 447,213 | 1,630,560 | |||||||||||||||||||
Investments securities: | ||||||||||||||||||||||||
Available for sale | 270,511 | 336,126 | 227,137 | 210,095 | 213,684 | |||||||||||||||||||
Held to maturity | 3,952 | 3,691 | 4,157 | 3,973 | 4,642 | |||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Available for sale | 11,078,285 | 14,313,397 | 12,799,506 | 11,536,608 | 8,805,687 | |||||||||||||||||||
Held to maturity | 292,336 | 362,768 | 445,207 | 540,781 | 648,153 | |||||||||||||||||||
Loans and leases, net | 27,735,087 | 25,127,882 | 24,685,258 | 25,852,846 | 25,351,352 | |||||||||||||||||||
Loans held for sale | 296,078 | 362,270 | 291,729 | 351,892 | 287,891 | |||||||||||||||||||
Bank owned life insurance | 823,676 | 834,337 | 837,660 | 829,043 | 819,664 | |||||||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 700,170 | 694,073 | 679,339 | 681,923 | 676,927 | |||||||||||||||||||
Premises and equipment, net | 391,615 | 375,256 | 355,084 | 353,730 | 348,675 | |||||||||||||||||||
Accrued interest receivable | 147,254 | 153,346 | 149,989 | 154,962 | 155,543 | |||||||||||||||||||
Real estate and other collateral owned | 48,198 | 40,220 | 42,106 | 42,980 | 42,988 | |||||||||||||||||||
Mortgage servicing rights | 168,697 | 115,242 | 139,085 | 128,564 | 126,646 | |||||||||||||||||||
Goodwill | 415,696 | 433,014 | 386,372 | 386,372 | 386,372 | |||||||||||||||||||
Other assets | 380,647 | 386,785 | 347,735 | 375,090 | 351,682 | |||||||||||||||||||
Total assets | $ | 43,279,252 | $ | 44,134,939 | $ | 43,248,603 | $ | 41,896,072 | $ | 39,850,466 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Checking accounts | $ | 8,571,326 | $ | 9,149,326 | $ | 9,652,845 | $ | 9,650,433 | $ | 8,619,130 | ||||||||||||||
Money market and savings accounts | 8,686,491 | 8,475,706 | 8,207,576 | 8,157,534 | 8,248,750 | |||||||||||||||||||
Certificates of deposit | 10,788,421 | 10,314,742 | 9,523,194 | 9,719,876 | 10,218,625 | |||||||||||||||||||
Total deposits | 28,046,238 | 27,939,774 | 27,383,615 | 27,527,843 | 27,086,505 | |||||||||||||||||||
Federal Home Loan Bank advances | 9,820,184 | 10,582,255 | 10,446,630 | 9,037,925 | 7,574,583 | |||||||||||||||||||
Federal funds purchased and repurchase agreements | 62,716 | 51,399 | 52,496 | 283,912 | 54,347 | |||||||||||||||||||
Other borrowings | 704,629 | 706,083 | 707,591 | 708,853 | 710,282 | |||||||||||||||||||
Advance payments by borrowers for taxes and insurance | 50,768 | 58,593 | 46,706 | 23,595 | 47,578 | |||||||||||||||||||
Accrued interest payable | 65,075 | 46,418 | 72,017 | 38,372 | 66,193 | |||||||||||||||||||
Accrued expenses and other liabilities | 1,288,801 | 1,387,835 | 1,307,416 | 1,191,747 | 1,295,185 | |||||||||||||||||||
Total liabilities | 40,038,411 | 40,772,357 | 40,016,471 | 38,812,247 | 36,834,673 | |||||||||||||||||||
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; 229,944,441, 229,946,762, 227,571,468, 227,571,468 and 227,577,813 shares issued | 2,299 | 2,299 | 2,276 | 2,276 | 2,276 | |||||||||||||||||||
Additional paid-in capital | 2,274,947 | 2,270,580 | 2,197,388 | 2,193,095 | 2,192,186 | |||||||||||||||||||
Retained earnings | 1,098,042 | 1,009,784 | 908,486 | 824,564 | 732,731 | |||||||||||||||||||
Less 6,953,759, 3,851,660, 2,539,076, 2,781,151 and 1,158,700 shares of common stock held in treasury at cost | (215,085 | ) | (116,652 | ) | (74,423 | ) | (82,610 | ) | (35,087 | ) | ||||||||||||||
Accumulated other comprehensive income | 80,638 | 196,571 | 198,405 | 146,500 | 123,687 | |||||||||||||||||||
Total shareholders’ equity | 3,240,841 | 3,362,582 | 3,232,132 | 3,083,825 | 3,015,793 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 43,279,252 | $ | 44,134,939 | $ | 43,248,603 | $ | 41,896,072 | $ | 39,850,466 | ||||||||||||||
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CHARTER ONE FINANCIAL, INC.
SELECTED STATISTICAL DATA
(unaudited)
Three Months Ended | |||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | |||||||||||||||||
Annualized returns and ratios based on net income: | |||||||||||||||||||||
Return on average assets | 1.46 | % | 1.50 | % | 1.38 | % | 1.40 | % | 1.46 | % | |||||||||||
Return on average equity | 20.12 | 19.86 | 18.48 | 19.11 | 18.89 | ||||||||||||||||
Average equity to average assets | 7.25 | 7.55 | 7.46 | 7.35 | 7.72 | ||||||||||||||||
Net interest income to administrative expenses | 1.46 | x | 1.52 | x | 1.63 | x | 1.69 | x | 1.69 | x | |||||||||||
Administrative expenses to average assets | 1.79 | % | 1.76 | % | 1.71 | % | 1.70 | % | 1.74 | % | |||||||||||
Efficiency ratio(1) | 41.84 | 41.14 | 39.77 | 39.25 | 39.90 | ||||||||||||||||
Annualized return on average tangible equity(2) | 23.59 | 22.74 | 21.29 | 22.18 | 21.70 |
(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. |
Nine Months Ended | |||||||||
9/30/03 | 9/30/02 | ||||||||
Annualized returns and ratios based on net income: | |||||||||
Return on average assets | 1.45 | % | 1.50 | % | |||||
Return on average equity | 19.52 | 19.47 | |||||||
Average equity to average assets | 7.41 | 7.68 | |||||||
Net interest income to administrative expenses | 1.54 | x | 1.74 | x | |||||
Administrative expenses to average assets | 1.75 | % | 1.74 | % | |||||
Efficiency ratio(1) | 40.92 | 39.64 | |||||||
Annualized return on average tangible equity(2) | 22.58 | 22.38 |
(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. |
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | |||||||||||||||||
End of period capitalization: | |||||||||||||||||||||
Equity to assets | 7.49 | % | 7.62 | % | 7.47 | % | 7.36 | % | 7.57 | % | |||||||||||
Tangible equity to assets | 6.45 | 6.56 | 6.50 | 6.36 | 6.52 | ||||||||||||||||
Book value per share | $ | 14.53 | $ | 14.87 | $ | 14.36 | $ | 13.72 | $ | 13.32 | |||||||||||
Tangible book value per share | 12.52 | 12.81 | 12.50 | 11.86 | 11.47 | ||||||||||||||||
Miscellaneous end-of-period data: | |||||||||||||||||||||
Number of employees (full-time equivalents) | 7,765 | 7,703 | 7,198 | 6,997 | 6,837 | ||||||||||||||||
Number of full-service branches | 566 | 522 | 477 | 461 | 459 | ||||||||||||||||
Number of loan production offices | 27 | 28 | 26 | 26 | 26 | ||||||||||||||||
Number of ATMs | 956 | 953 | 918 | 913 | 920 |
COMPOSITION OF DEPOSITS
(unaudited)
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Checking accounts: | ||||||||||||||||||||||||
Interest-bearing | $ | 5,810,478 | $ | 6,493,279 | $ | 7,267,602 | $ | 7,460,530 | $ | 6,588,045 | ||||||||||||||
Noninterest-bearing | 2,760,848 | 2,656,047 | 2,385,243 | 2,189,903 | 2,031,085 | |||||||||||||||||||
Total checking accounts | 8,571,326 | 9,149,326 | 9,652,845 | 9,650,433 | 8,619,130 | |||||||||||||||||||
Money market and savings accounts | 8,686,491 | 8,475,706 | 8,207,576 | 8,157,534 | 8,248,750 | |||||||||||||||||||
Total transaction accounts | 17,257,817 | 17,625,032 | 17,860,421 | 17,807,967 | 16,867,880 | |||||||||||||||||||
Certificates of deposit: | ||||||||||||||||||||||||
Retail | 10,788,421 | 10,314,742 | 9,523,194 | 9,719,876 | 10,198,753 | |||||||||||||||||||
Brokered | — | — | — | — | 19,872 | |||||||||||||||||||
Total certificates of deposit | 10,788,421 | 10,314,742 | 9,523,194 | 9,719,876 | 10,218,625 | |||||||||||||||||||
Total deposits | $ | 28,046,238 | $ | 27,939,774 | $ | 27,383,615 | $ | 27,527,843 | $ | 27,086,505 | ||||||||||||||
9
CHARTER ONE FINANCIAL, INC.
AVERAGE BALANCE SHEET, YIELDS AND COSTS
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Average balance sheet data: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans and leases | $ | 26,993,081 | $ | 26,101,819 | $ | 25,851,471 | $ | 26,690,752 | $ | 25,460,404 | ||||||||||||||
Mortgage-backed securities | 12,732,102 | 14,405,655 | 13,137,545 | 11,218,473 | 10,041,928 | |||||||||||||||||||
Investment securities | 286,497 | 260,634 | 210,920 | 212,698 | 186,249 | |||||||||||||||||||
Other interest-earning assets | 723,721 | 839,597 | 762,760 | 725,937 | 979,454 | |||||||||||||||||||
Total interest-earning assets | 40,735,401 | 41,607,705 | 39,962,696 | 38,847,860 | 36,668,035 | |||||||||||||||||||
Allowance for loan and lease losses | (379,527 | ) | (360,448 | ) | (327,090 | ) | (292,981 | ) | (267,486 | ) | ||||||||||||||
Noninterest-earning assets(1) | 3,272,787 | 3,044,576 | 3,150,359 | 2,946,801 | 2,968,951 | |||||||||||||||||||
Total assets | $ | 43,628,661 | $ | 44,291,833 | $ | 42,785,965 | $ | 41,501,680 | $ | 39,369,500 | ||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Checking accounts | $ | 6,166,100 | $ | 6,951,974 | $ | 7,541,679 | $ | 6,801,571 | $ | 6,283,029 | ||||||||||||||
Money market and savings accounts | 8,545,286 | 8,332,278 | 7,929,274 | 8,579,110 | 8,378,267 | |||||||||||||||||||
Certificates of deposit | 10,708,517 | 9,733,110 | 9,562,013 | 9,898,021 | 9,831,050 | |||||||||||||||||||
Total interest-bearing deposits | 25,419,903 | 25,017,362 | 25,032,966 | 25,278,702 | 24,492,346 | |||||||||||||||||||
Federal Home Loan Bank advances | 10,265,634 | 11,397,410 | 10,410,188 | 9,026,637 | 7,944,811 | |||||||||||||||||||
Other borrowings | 871,430 | 874,062 | 866,495 | 945,945 | 929,957 | |||||||||||||||||||
Total interest-bearing liabilities | 36,556,967 | 37,288,834 | 36,309,649 | 35,251,284 | 33,367,114 | |||||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposit accounts | 2,615,262 | 2,308,993 | 2,017,036 | 2,024,854 | 1,789,713 | |||||||||||||||||||
Other noninterest-bearing liabilities | 1,292,960 | 1,349,173 | 1,266,385 | 1,175,213 | 1,173,108 | |||||||||||||||||||
Total noninterest-bearing liabilities | 3,908,222 | 3,658,166 | 3,283,421 | 3,200,067 | 2,962,821 | |||||||||||||||||||
Total liabilities | 40,465,189 | 40,947,000 | 39,593,070 | 38,451,351 | 36,329,935 | |||||||||||||||||||
Shareholders’ equity | 3,163,472 | 3,344,833 | 3,192,895 | 3,050,329 | 3,039,565 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 43,628,661 | $ | 44,291,833 | $ | 42,785,965 | $ | 41,501,680 | $ | 39,369,500 | ||||||||||||||
Yields and costs during period: | ||||||||||||||||||||||||
Weighted average yield: | ||||||||||||||||||||||||
Loans and leases(2) | 5.46 | % | 5.64 | % | 5.86 | % | 6.26 | % | 6.43 | % | ||||||||||||||
Mortgage-backed securities | 4.24 | 4.48 | 4.80 | 5.06 | 5.81 | |||||||||||||||||||
Investment securities | 5.04 | 5.15 | 5.87 | 5.70 | 6.44 | |||||||||||||||||||
Other interest-earning assets | 4.07 | 3.70 | 3.87 | 4.41 | 3.89 | |||||||||||||||||||
Total interest-earning assets | 5.05 | 5.19 | 5.48 | 5.88 | 6.19 | |||||||||||||||||||
Weighted average cost(3): | ||||||||||||||||||||||||
Checking accounts | .96 | 1.35 | 1.65 | 1.92 | 2.13 | |||||||||||||||||||
Money market and savings accounts | 1.10 | 1.50 | 1.55 | 1.93 | 2.12 | |||||||||||||||||||
Certificates of deposit | 2.86 | 2.97 | 3.09 | 3.19 | 3.32 | |||||||||||||||||||
Total interest-bearing deposits | 1.81 | 2.03 | 2.17 | 2.42 | 2.61 | |||||||||||||||||||
Federal Home Loan Bank advances | 3.89 | 3.66 | 3.88 | 4.64 | 5.18 | |||||||||||||||||||
Other borrowings | 6.03 | 6.38 | 6.10 | 5.74 | 5.97 | |||||||||||||||||||
Total interest-bearing liabilities | 2.49 | 2.63 | 2.75 | 3.07 | 3.31 | |||||||||||||||||||
Interest rate spread | 2.56 | 2.56 | 2.73 | 2.81 | 2.88 | |||||||||||||||||||
Net yield on interest-earning assets | 2.80 | 2.84 | 2.99 | 3.07 | 3.17 |
(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)
Nine Months Ended | ||||||||||||
9/30/03 | 9/30/02 | |||||||||||
(Dollars in thousands) | ||||||||||||
Average balance sheet data: | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans and leases | $ | 26,321,364 | $ | 25,296,320 | ||||||||
Mortgage-backed securities | 13,423,616 | 9,481,939 | ||||||||||
Investment securities | 252,960 | 165,659 | ||||||||||
Other interest-earning assets | 775,216 | 952,088 | ||||||||||
Total interest-earning assets | 40,773,156 | 35,896,006 | ||||||||||
Allowance for loan and lease losses | (355,880 | ) | (260,458 | ) | ||||||||
Noninterest-earning assets(1) | 3,156,356 | 2,863,644 | ||||||||||
Total assets | $ | 43,573,632 | $ | 38,499,192 | ||||||||
Interest-bearing liabilities: | ||||||||||||
Checking accounts | $ | 6,881,546 | $ | 6,102,712 | ||||||||
Money market and savings accounts | 8,271,203 | 7,915,705 | ||||||||||
Certificates of deposit | 10,005,413 | 10,107,847 | ||||||||||
Total interest-bearing deposits | 25,158,162 | 24,126,264 | ||||||||||
Federal Home Loan Bank advances | 10,690,548 | 7,966,061 | ||||||||||
Other borrowings | 870,680 | 598,769 | ||||||||||
Total interest-bearing liabilities | 36,719,390 | 32,691,094 | ||||||||||
Noninterest-bearing liabilities: | ||||||||||||
Demand deposit accounts | 2,315,988 | 1,745,700 | ||||||||||
Other noninterest-bearing liabilities | 1,309,737 | 1,104,913 | ||||||||||
Total noninterest-bearing liabilities | 3,625,725 | 2,850,613 | ||||||||||
Total liabilities | 40,345,115 | 35,541,707 | ||||||||||
Shareholders’ equity | 3,228,517 | 2,957,485 | ||||||||||
Total liabilities and shareholders’ equity | $ | 43,573,632 | $ | 38,499,192 | ||||||||
Yields and costs during period: | ||||||||||||
Weighted average yield: | ||||||||||||
Loans and leases(2) | 5.65 | % | 6.61 | % | ||||||||
Mortgage-backed securities | 4.51 | 5.99 | ||||||||||
Investment securities | 5.30 | 7.02 | ||||||||||
Other interest-earning assets | 3.87 | 3.76 | ||||||||||
Total interest-earning assets | 5.24 | 6.37 | ||||||||||
Weighted average cost(3): | ||||||||||||
Checking accounts | 1.34 | 2.20 | ||||||||||
Money market and savings accounts | 1.38 | 2.23 | ||||||||||
Certificates of deposit | 2.97 | 3.54 | ||||||||||
Total interest-bearing deposits | 2.00 | 2.78 | ||||||||||
Federal Home Loan Bank advances | 3.81 | 5.22 | ||||||||||
Other borrowings | 6.17 | 6.96 | ||||||||||
Total interest-bearing liabilities | 2.62 | 3.45 | ||||||||||
Interest rate spread | 2.62 | 2.92 | ||||||||||
Net yield on interest-earning assets | 2.88 | 3.24 |
(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 | ||||||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Originations: | ||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||
Permanent: | ||||||||||||||||||||||||
One-to-four family | $ | 3,896,869 | $ | 3,555,968 | $ | 3,095,718 | $ | 3,440,287 | $ | 2,481,022 | ||||||||||||||
Multifamily | 75,185 | 57,451 | 51,440 | 48,281 | 49,187 | |||||||||||||||||||
Commercial | 124,806 | 60,226 | 90,213 | 62,335 | 48,601 | |||||||||||||||||||
Total permanent loans | 4,096,860 | 3,673,645 | 3,237,371 | 3,550,903 | 2,578,810 | |||||||||||||||||||
Construction: | ||||||||||||||||||||||||
One-to-four family | 62,180 | 53,537 | 35,556 | 40,674 | 54,377 | |||||||||||||||||||
Multifamily | 30,371 | 7,613 | 19,283 | 40,408 | 13,950 | |||||||||||||||||||
Commercial | 16,656 | 30,246 | 10,830 | 53,469 | 29,385 | |||||||||||||||||||
Total construction loans | 109,207 | 91,396 | 65,669 | 134,551 | 97,712 | |||||||||||||||||||
Total real estate loans originated | 4,206,067 | 3,765,041 | 3,303,040 | 3,685,454 | 2,676,522 | |||||||||||||||||||
Retail consumer | 1,431,291 | 1,209,221 | 1,079,290 | 1,205,611 | 948,632 | |||||||||||||||||||
Automobile | 909,477 | 1,026,245 | 981,114 | 916,539 | 1,012,926 | |||||||||||||||||||
Consumer finance | 128,536 | 122,839 | 101,927 | 100,568 | 73,931 | |||||||||||||||||||
Leases | 152,279 | 73,946 | 101,571 | 200,083 | 110,428 | |||||||||||||||||||
Corporate banking | 443,732 | 473,677 | 448,326 | 451,915 | 512,600 | |||||||||||||||||||
Total loans and leases originated | 7,271,382 | 6,670,969 | 6,015,268 | 6,560,170 | 5,335,039 | |||||||||||||||||||
Acquired through business combinations and purchases | 2,737 | 403,324 | 3,765 | 4,316 | 2,637 | |||||||||||||||||||
Sales and principal reductions: | ||||||||||||||||||||||||
Loans sold | 1,067,083 | 885,179 | 763,051 | 742,255 | 527,011 | |||||||||||||||||||
Loans exchanged for mortgage-backed securities | 225,498 | 2,346,609 | 3,419,116 | 1,600,962 | 809,167 | |||||||||||||||||||
Principal reductions | 3,447,925 | 3,260,094 | 3,025,830 | 3,587,423 | 2,943,422 | |||||||||||||||||||
Total sales and principal reductions | 4,740,506 | 6,491,882 | 7,207,997 | 5,930,640 | 4,279,600 | |||||||||||||||||||
Increase (decrease) before net items | $ | 2,533,613 | $ | 582,411 | $ | (1,188,964 | ) | $ | 633,846 | $ | 1,058,076 | |||||||||||||
Nine Months Ended | ||||||||||||||||
9/30/03 | 9/30/02 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Originations: | ||||||||||||||||
Real estate: | ||||||||||||||||
Permanent: | ||||||||||||||||
One-to-four family | $ | 10,548,555 | $ | 7,113,855 | ||||||||||||
Multifamily | 184,076 | 108,885 | ||||||||||||||
Commercial | 275,245 | 175,375 | ||||||||||||||
Total permanent loans | 11,007,876 | 7,398,115 | ||||||||||||||
Construction: | ||||||||||||||||
One-to-four family | 151,273 | 27,720 | ||||||||||||||
Multifamily | 57,267 | 38,938 | ||||||||||||||
Commercial | 57,732 | 111,108 | ||||||||||||||
Total construction loans | 266,272 | 177,766 | ||||||||||||||
Total real estate loans originated | 11,274,148 | 7,575,881 | ||||||||||||||
Retail consumer | 3,719,802 | 2,885,687 | ||||||||||||||
Automobile | 2,916,836 | 2,478,734 | ||||||||||||||
Consumer finance | 353,302 | 185,352 | ||||||||||||||
Leases | 327,796 | 321,013 | ||||||||||||||
Corporate banking | 1,365,735 | 1,265,413 | ||||||||||||||
Total loans and leases originated | 19,957,619 | 14,712,080 | ||||||||||||||
Acquired through business combinations and purchases | 409,826 | 213,992 | ||||||||||||||
Sales and principal reductions: | ||||||||||||||||
Loans sold | 2,715,313 | 1,652,269 | ||||||||||||||
Loans exchanged for mortgage-backed securities | 5,991,223 | 5,066,120 | ||||||||||||||
Principal reductions | 9,733,849 | 8,262,966 | ||||||||||||||
Total sales and principal reductions | 18,440,385 | 14,981,355 | ||||||||||||||
Increase (decrease) before net items | $ | 1,927,060 | $ | (55,283 | ) | |||||||||||
12
CHARTER ONE FINANCIAL, INC.
ALLOWANCE FOR LOAN AND LEASE LOSSES
(unaudited)
Three Months Ended | ||||||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Allowance for loan and lease losses: | ||||||||||||||||||||||||
Balance, beginning of period | $ | 376,393 | $ | 355,926 | $ | 328,017 | $ | 292,800 | $ | 267,155 | ||||||||||||||
Provision for loan and lease losses | 37,663 | 35,360 | 61,471 | 60,314 | 47,695 | |||||||||||||||||||
Acquired through business combination | — | 4,969 | — | — | — | |||||||||||||||||||
Loans and leases charged off: | ||||||||||||||||||||||||
One-to-four family | (655 | ) | (1,036 | ) | (670 | ) | (1,127 | ) | (643 | ) | ||||||||||||||
Commercial real estate | (474 | ) | (253 | ) | (500 | ) | (144 | ) | (290 | ) | ||||||||||||||
Retail consumer | (2,819 | ) | (2,596 | ) | (3,478 | ) | (3,004 | ) | (2,308 | ) | ||||||||||||||
Automobile | (15,869 | ) | (13,628 | ) | (16,450 | ) | (15,941 | ) | (16,429 | ) | ||||||||||||||
Consumer finance | (4,396 | ) | (3,975 | ) | (4,537 | ) | (5,785 | ) | (5,160 | ) | ||||||||||||||
Leases | — | (2,095 | ) | (6,061 | ) | (88 | ) | (519 | ) | |||||||||||||||
Corporate banking | (6,610 | ) | (2,652 | ) | (7,245 | ) | (5,799 | ) | (4,776 | ) | ||||||||||||||
Total charge-offs | (30,823 | ) | (26,235 | ) | (38,941 | ) | (31,888 | ) | (30,125 | ) | ||||||||||||||
Recoveries: | ||||||||||||||||||||||||
One-to-four family | 31 | 41 | 17 | 42 | 881 | |||||||||||||||||||
Commercial real estate | 68 | 61 | 148 | 41 | 488 | |||||||||||||||||||
Retail consumer | 1,044 | 548 | 433 | 588 | 484 | |||||||||||||||||||
Automobile | 4,279 | 4,561 | 4,115 | 3,582 | 3,574 | |||||||||||||||||||
Consumer finance | 329 | 235 | 105 | 191 | 238 | |||||||||||||||||||
Leases | 228 | 606 | 393 | 1,897 | 430 | |||||||||||||||||||
Corporate banking | 143 | 321 | 168 | 450 | 1,980 | |||||||||||||||||||
Total recoveries | 6,122 | 6,373 | 5,379 | 6,791 | 8,075 | |||||||||||||||||||
Net loan and lease charge-offs | (24,701 | ) | (19,862 | ) | (33,562 | ) | (25,097 | ) | (22,050 | ) | ||||||||||||||
Balance, end of period | $ | 389,355 | $ | 376,393 | $ | 355,926 | $ | 328,017 | $ | 292,800 | ||||||||||||||
Net charge-offs to average loans and leases (annualized) | .37 | % | .30 | % | .52 | % | .38 | % | .35 | % |
Nine Months Ended | ||||||||||||
9/30/03 | 9/30/02 | |||||||||||
(Dollars in thousands) | ||||||||||||
Allowance for loan and lease losses: | ||||||||||||
Balance, beginning of period | $ | 328,017 | $ | 255,478 | ||||||||
Provision for loan and lease losses | 134,494 | 131,689 | ||||||||||
Acquired through business combination | 4,969 | 3,184 | ||||||||||
Loans and leases charged off: | ||||||||||||
One-to-four family | (2,361 | ) | (4,675 | ) | ||||||||
Commercial real estate | (1,227 | ) | (1,208 | ) | ||||||||
Retail consumer | (8,893 | ) | (10,096 | ) | ||||||||
Automobile | (45,947 | ) | (63,024 | ) | ||||||||
Consumer finance | (12,908 | ) | (20,610 | ) | ||||||||
Leases | (8,156 | ) | (2,780 | ) | ||||||||
Corporate banking | (16,507 | ) | (10,813 | ) | ||||||||
Total charge-offs | (95,999 | ) | (113,206 | ) | ||||||||
Recoveries: | ||||||||||||
One-to-four family | 89 | 915 | ||||||||||
Commercial real estate | 277 | 618 | ||||||||||
Retail consumer | 2,025 | 1,246 | ||||||||||
Automobile | 12,955 | 9,105 | ||||||||||
Consumer finance | 669 | 333 | ||||||||||
Leases | 1,227 | 430 | ||||||||||
Corporate banking | 632 | 3,008 | ||||||||||
Total recoveries | 17,874 | 15,655 | ||||||||||
Net loan and lease charge-offs | (78,125 | ) | (97,551 | ) | ||||||||
Balance, end of period | $ | 389,355 | $ | 292,800 | ||||||||
Net charge-offs to average loans and leases (annualized) | .40 | % | .51 | % |
13
CHARTER ONE FINANCIAL, INC.
NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES
(unaudited)
Three Months Ended | ||||||||||||||||||||||
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Average loans and leases: | ||||||||||||||||||||||
Mortgage | $ | 11,481,071 | $ | 11,126,226 | $ | 11,083,170 | $ | 11,659,164 | $ | 11,265,962 | ||||||||||||
Retail consumer | 4,535,869 | 4,329,896 | 4,510,460 | 5,264,728 | 4,969,219 | |||||||||||||||||
Automobile | 6,317,768 | 6,088,204 | 5,763,289 | 5,447,392 | 5,035,920 | |||||||||||||||||
Consumer finance | 1,055,588 | 1,023,295 | 995,653 | 980,524 | 972,843 | |||||||||||||||||
Leases | 2,116,646 | 2,127,384 | 2,145,022 | 2,085,474 | 2,029,779 | |||||||||||||||||
Corporate banking | 1,486,139 | 1,406,814 | 1,353,877 | 1,253,470 | 1,186,681 | |||||||||||||||||
Total average loans and leases | $ | 26,993,081 | $ | 26,101,819 | $ | 25,851,471 | $ | 26,690,752 | $ | 25,460,404 | ||||||||||||
Net charge-offs (recoveries) to average loans and leases (annualized): | ||||||||||||||||||||||
Mortgage | .04 | % | .04 | % | .04 | % | .04 | % | (.02 | )% | ||||||||||||
Retail consumer | .16 | .19 | .27 | .18 | .15 | |||||||||||||||||
Automobile | .73 | .60 | .86 | .91 | 1.02 | |||||||||||||||||
Consumer finance | 1.54 | 1.46 | 1.78 | 2.28 | 2.02 | |||||||||||||||||
Leases | (.04 | ) | .28 | 1.06 | (.35 | ) | .02 | |||||||||||||||
Corporate banking | 1.74 | .66 | 2.09 | 1.71 | .94 | |||||||||||||||||
Total | .37 | .30 | .52 | .38 | .35 |
LOAN AND LEASE PORTFOLIO
(unaudited)
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Loan and lease portfolio, net(1): | ||||||||||||||||||||||||
One-to-four family: | ||||||||||||||||||||||||
Permanent: | ||||||||||||||||||||||||
Fixed rate | $ | 6,737,463 | $ | 5,411,639 | $ | 5,506,314 | $ | 5,869,554 | $ | 5,942,919 | ||||||||||||||
Adjustable rate | 2,600,507 | 2,577,778 | 2,546,426 | 2,437,166 | 2,694,956 | |||||||||||||||||||
Construction | 451,093 | 418,485 | 412,973 | 427,729 | 427,871 | |||||||||||||||||||
9,789,063 | 8,407,902 | 8,465,713 | 8,734,449 | 9,065,746 | ||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Multifamily | 752,006 | 739,464 | 705,851 | 730,263 | 776,382 | |||||||||||||||||||
Commercial | 1,181,362 | 1,148,073 | 1,058,610 | 1,024,840 | 1,055,564 | |||||||||||||||||||
Construction | 528,628 | 536,330 | 496,106 | 506,178 | 498,690 | |||||||||||||||||||
2,461,996 | 2,423,867 | 2,260,567 | 2,261,281 | 2,330,636 | ||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Retail | 4,999,488 | 4,180,702 | 4,173,080 | 5,494,453 | 5,008,393 | |||||||||||||||||||
Automobile | 6,376,830 | 6,247,964 | 5,934,502 | 5,606,329 | 5,281,731 | |||||||||||||||||||
Consumer finance | 1,073,054 | 1,038,517 | 1,005,077 | 984,772 | 973,981 | |||||||||||||||||||
12,449,372 | 11,467,183 | 11,112,659 | 12,085,554 | 11,264,105 | ||||||||||||||||||||
Business: | ||||||||||||||||||||||||
Leases | 2,166,350 | 2,104,713 | 2,125,905 | 2,133,468 | 2,028,687 | |||||||||||||||||||
Corporate banking | 1,553,739 | 1,462,880 | 1,368,069 | 1,318,003 | 1,242,869 | |||||||||||||||||||
3,720,089 | 3,567,593 | 3,493,974 | 3,451,471 | 3,271,556 | ||||||||||||||||||||
Loans and leases before allowance for loan and lease losses | 28,420,520 | 25,866,545 | 25,332,913 | 26,532,755 | 25,932,043 | |||||||||||||||||||
Allowance for loan and lease losses | (389,355 | ) | (376,393 | ) | (355,926 | ) | (328,017 | ) | (292,800 | ) | ||||||||||||||
Loans and leases, net(1) | $ | 28,031,165 | $ | 25,490,152 | $ | 24,976,987 | $ | 26,204,738 | $ | 25,639,243 | ||||||||||||||
Portfolio of loans serviced for others | $ | 16,700,490 | $ | 18,948,077 | $ | 18,713,649 | $ | 16,893,609 | $ | 16,840,025 |
(1) | Includes loans held for sale. |
14
CHARTER ONE FINANCIAL, INC.
NONPERFORMING AND UNDERPERFORMING ASSETS
(unaudited)
9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Nonperforming assets: | ||||||||||||||||||||||||
Nonaccrual loans and leases: | ||||||||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
One-to-four family | $ | 22,784 | $ | 25,723 | $ | 27,867 | $ | 27,904 | $ | 31,528 | ||||||||||||||
Multifamily and commercial | 11,333 | 16,764 | 5,591 | 5,369 | 6,621 | |||||||||||||||||||
Construction and land | 22,974 | 27,483 | 8,015 | 9,885 | 10,598 | |||||||||||||||||||
Total real estate mortgage loans | 57,091 | 69,970 | 41,473 | 43,158 | 48,747 | |||||||||||||||||||
Retail consumer | 10,405 | 10,652 | 12,046 | 13,937 | 14,128 | |||||||||||||||||||
Automobile | — | — | — | — | — | |||||||||||||||||||
Consumer finance | 42,589 | 43,175 | 42,562 | 40,227 | 38,403 | |||||||||||||||||||
Leases | 6,569 | 6,877 | 15,264 | 6,211 | 7,964 | |||||||||||||||||||
Corporate banking | 25,078 | 35,595 | 42,068 | 39,098 | 37,230 | |||||||||||||||||||
Total nonaccrual loans and leases | 141,732 | 166,269 | 153,413 | 142,631 | 146,472 | |||||||||||||||||||
Restructured real estate mortgage loans | 481 | 488 | 494 | 501 | 1,149 | |||||||||||||||||||
Total nonperforming loans and leases | 142,213 | 166,757 | 153,907 | 143,132 | 147,621 | |||||||||||||||||||
Real estate and other collateral owned | 47,249 | 39,278 | 40,020 | 40,776 | 40,270 | |||||||||||||||||||
Total nonperforming assets | $ | 189,462 | $ | 206,035 | $ | 193,927 | $ | 183,908 | $ | 187,891 | ||||||||||||||
Ratio of: | ||||||||||||||||||||||||
Nonperforming loans and leases to total loans and leases | .51 | % | .65 | % | .62 | % | .55 | % | .58 | % | ||||||||||||||
Nonperforming assets to total assets | .44 | .47 | .45 | .44 | .47 | |||||||||||||||||||
Nonperforming assets to total loans, leases and real estate and other collateral owned | .67 | .81 | .78 | .70 | .73 | |||||||||||||||||||
Allowance for loan and lease losses to: | ||||||||||||||||||||||||
Nonperforming loans and leases | 273.78 | 225.71 | 231.26 | 229.17 | 198.35 | |||||||||||||||||||
Total loans and leases before allowance | 1.37 | 1.46 | 1.40 | 1.24 | 1.13 | |||||||||||||||||||
Accruing loans and leases delinquent more than 90 days: | ||||||||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
One-to-four family | $ | 21,239 | $ | 18,056 | $ | 23,507 | $ | 25,643 | $ | 24,854 | ||||||||||||||
Multifamily and commercial | — | 396 | — | — | — | |||||||||||||||||||
Construction and land | — | — | — | — | — | |||||||||||||||||||
Total real estate mortgage loans | 21,239 | 18,452 | 23,507 | 25,643 | 24,854 | |||||||||||||||||||
Retail consumer | 2,654 | 3,056 | 3,229 | 4,758 | 5,630 | |||||||||||||||||||
Automobile | 2,680 | 2,254 | 3,579 | 3,621 | 2,595 | |||||||||||||||||||
Consumer finance | 23,298 | 21,172 | 27,395 | 26,739 | 25,269 | |||||||||||||||||||
Leases | — | — | 181 | 19 | — | |||||||||||||||||||
Corporate banking | 311 | 117 | 471 | 1,536 | 1,955 | |||||||||||||||||||
Total accruing loans and leases delinquent more than 90 days | $ | 50,182 | $ | 45,051 | $ | 58,362 | $ | 62,316 | $ | 60,303 | ||||||||||||||
Total underperforming assets | $ | 239,644 | $ | 251,086 | $ | 252,289 | $ | 246,224 | $ | 248,194 | ||||||||||||||
Ratio of: | ||||||||||||||||||||||||
Underperforming assets to total assets | .55 | % | .57 | % | .58 | % | .59 | % | .62 | % | ||||||||||||||
Underperforming assets to total loans, leases and real estate and other collateral owned | .85 | .98 | 1.01 | .94 | .97 |
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
CHARTER ONE FINANCIAL, INC. | |||
Date: October 16, 2003 | By: /s/ Robert J. Vana Robert J. Vana Senior Vice President, Chief Corporate Counsel and Corporate Secretary |