CHARTER ONE FINANCIAL INC - 10-Q Quarterly Report


ITEM 1. Financial Statements
	CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
	CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
	CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
ITEM 4. Controls and Procedures
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
EX-11 Computation of Per Share Earnings
EX-31.1 Certification - CEO
EX-31.2 Certification - CFO
EX-32 Certificatoins Required by Section 1350

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2003

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

Commission file number 001-15495

CHARTER ONE FINANCIAL, INC.
(Exact name of registrant as specified in its charter)


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


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

(216) 566-5300
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes_X_ No___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes_X_ No___

The number of shares outstanding of the registrant’s sole class of common stock as of October 31, 2003 was 222,628,528.

TABLE OF CONTENTS


Item
Number	PART I — FINANCIAL INFORMATION	Page

1.	Financial Statements

	Consolidated Statements of Financial Condition — September 30, 2003 and December 31, 2002.	1

	Consolidated Statements of Income — Three and nine months ended September 30, 2003 and 2002.	2

	Consolidated Statements of Cash Flows — Nine months ended September 30, 2003 and 2002.	3

	Notes to Consolidated Financial Statements	4

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7

3.	Quantitative and Qualitative Disclosure About Market Risk	23

4.	Controls and Procedures	23

	PART II – OTHER INFORMATION

5.	Other Information	23

6.	Exhibits and Reports on Form 8-K	24

Signatures		24

Index to Exhibits		25

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)


					9/30/03			12/31/02

					(Dollars in thousands,
					except per share data)
				ASSETS
Cash accounts					$	518,978		$	436,970
Interest-bearing deposits with banks						7,556			9,731
Federal funds sold and other						516			512

		Total cash and cash equivalents				527,050			447,213
Investment securities:
	Available for sale					270,511			210,095
	Held to maturity (fair value of $4,241 and $4,276)					3,952			3,973
Mortgage-backed securities:
	Available for sale					11,078,285			11,536,608
	Held to maturity (fair value of $304,926 and $565,072)					292,336			540,781
Loans and leases, net						27,735,087			25,852,846
Loans held for sale						296,078			351,892
Bank owned life insurance						823,676			829,043
Federal Home Loan Bank and Federal Reserve Bank stock						700,170			681,923
Premises and equipment						391,615			353,730
Accrued interest receivable						147,254			154,962
Real estate and other collateral owned						48,198			42,980
Loan servicing assets						168,697			128,564
Goodwill						415,696			386,372
Other assets						380,647			375,090

		Total assets			$	43,279,252		$	41,896,072

				LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits					$	28,046,238		$	27,527,843
Federal Home Loan Bank advances						9,820,184			9,037,925
Federal funds purchased and repurchase agreements						62,716			283,912
Other borrowings						704,629			708,853
Advance payments by borrowers for taxes and insurance						50,768			23,595
Accrued interest payable						65,075			38,372
Accrued expenses and other liabilities						1,288,801			1,191,747

		Total liabilities				40,038,411			38,812,247

Commitments and contingencies						—			—
Shareholders’ equity:
	Preferred stock — $.01 par value per share; 20,000,000 shares authorized and unissued					—			—
	Common stock — $.01 par value per share; 360,000,000 shares authorized; 229,944,441 and 227,571,468 shares issued					2,299			2,276
	Additional paid-in capital					2,274,947			2,193,095
	Retained earnings					1,098,042			824,564
	Less 6,953,759 and 2,781,151 shares of common stock held in treasury at cost					(215,085	)		(82,610	)
	Accumulated other comprehensive income					80,638			146,500

			Total shareholders’ equity			3,240,841			3,083,825

			Total liabilities and shareholders’ equity		$	43,279,252		$	41,896,072

See Notes to Consolidated Financial Statements.

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)


			Three Months Ended						Nine Months Ended

			9/30/03			9/30/02				9/30/03			9/30/02

			(Dollars in thousands, except per share data)
Interest income:
	Loans and leases		$	368,952		$	410,237			$	1,114,278		$	1,253,132
	Mortgage-backed securities:
		Available for sale		129,695			135,099				433,496			388,000
		Held to maturity		5,326			10,695				20,453			37,756
	Investment securities:
		Available for sale		3,563			2,939				9,903			8,526
		Held to maturity		51			61				161			192
	Other interest-earning assets			7,531			9,729				22,772			27,119


		Total interest income		515,118			568,760				1,601,063			1,714,725

Interest expense:
	Deposits			115,862			160,821				376,339			500,798
	Federal Home Loan Bank advances			100,813			103,729				304,637			311,372
	Other borrowings			13,185			13,943				40,357			31,324

		Total interest expense		229,860			278,493				721,333			843,494

		Net interest income		285,258			290,267				879,730			871,231
Provision for loan and lease losses				37,663			47,695				134,494			131,689

		Net interest income after provision for loan and lease losses		247,595			242,572				745,236			739,542

Other income:
	Retail banking			94,183			84,175				275,370			241,474
	Mortgage banking			65,604			(36,961	)			41,682			(16,503	)
	Leasing operations			(4,118	)		404				(23,204	)		991
	Net gains			16,112			83,881				201,314			143,448
	Bank owned life insurance and other			8,638			7,582				25,044			26,014

		Total other income		180,419			139,081				520,206			395,424

Administrative expenses:
	Compensation and employee benefits			92,582			81,443				270,428			239,340
	Net occupancy and equipment			31,985			30,288				93,637			86,485
	Marketing expenses			22,411			11,788				56,263			30,629
	Federal deposit insurance premiums			1,118			1,104				3,385			3,421
	Other administrative expenses			46,733			46,683				149,162			142,209

		Total administrative expenses		194,829			171,306				572,875			502,084

Income before income taxes				233,185			210,347				692,567			632,882
Income taxes				74,036			66,785				219,890			200,940

		Net income	$	159,149		$	143,562			$	472,677		$	431,942

Basic earnings per share			$	.71		$	.63			$	2.11		$	1.87

Diluted earnings per share			$	.69		$	.61			$	2.05		$	1.82

Average common shares outstanding:
	Basic			224,399,805			228,765,954				224,966,297			230,549,330

	Diluted			230,661,929			235,615,457				230,739,490			237,653,561

Cash dividends declared per share			$	.26		$	.21			$	.72		$	.61

See Notes to Consolidated Financial Statements.

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)


				Nine Months Ended

				9/30/03			9/30/02

				(Dollars in thousands)
Cash flows from operating activities:
	Net income			$	472,677		$	431,942
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan and lease losses			134,494			131,689
		Net gains			(201,314	)		(143,448	)
		Accretion of discounts, amortization of premiums, and amortization of depreciation, net			147,373			131,768
		Origination of loans held for sale			(2,715,313	)		(1,652,269	)
		Proceeds from sale of loans held for sale			2,711,096			1,647,746
		Increase in accrued interest payable			26,703			8,489
		Other			117,679			398,568

			Net cash provided by operating activities		693,395			954,485

Cash flows from investing activities:
	Net principal disbursed on loans and leases				(7,587,052	)		(4,910,650	)
	Proceeds from principal repayments and maturities of:

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