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 June 30, 2004

[ ] 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 or organization)		(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, 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 July 31, 2004 was 225,814,336.

TABLE OF CONTENTS


Item
Number	Page
PART I - FINANCIAL STATEMENTS
1. Financial Statements
Consolidated Statements of Financial Condition — June 30, 2004 and December 31, 2003		1
Consolidated Statements of Income — Three and six months ended June 30, 2004 and 2003		2
Consolidated Statements of Cash Flows — Six months ended June 30, 2004 and 2003		3
Notes to Consolidated Financial Statements		4
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		6
3. Quantitative and Qualitative Disclosure About Market Risk		20
4. Controls and Procedures		20
PART II – OTHER INFORMATION
2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		21
4. Submission of Matters to a Vote of Security Holders		21
5. Other Information		22
6. Exhibits and Reports on Form 8-K		22
Signatures		23
Index to Exhibits		24
EX-11 COMPUTATION OF PER SHARE EARNINGS
EX-31.1 CEO CERTIFICATION
EX-31.2 CFO CERTIFICATION
EX-32 906 CERTIFICATION

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)


	6/30//04			12/31/03
	(Dollars in thousands,
	except per share data)
ASSETS
Cash accounts	$	580,706		$	518,976
Interest-bearing deposits with banks		10,507			8,673
Federal funds sold and other		520			517

Total cash and cash equivalents		591,733			528,166
Investment securities:
Available for sale (amortized cost of $190,924 and $260,501)		190,634			273,260
Held to maturity (fair value of $3,598 and $3,741)		3,432			3,505
Mortgage-backed securities:
Available for sale (amortized cost of $5,903,361 and $10,159,102)		5,796,777			10,193,798
Held to maturity (fair value of $192,437 and $262,155)		185,627			251,449
Loans and leases, net		32,321,116			28,130,017
Loans held for sale		284,400			120,431
Bank owned life insurance		842,075			828,678
Federal Home Loan Bank and Federal Reserve Bank stock		712,925			705,244
Premises and equipment, net		433,478			404,086
Accrued interest receivable		133,279			140,857
Real estate and other collateral owned		27,274			36,643
Mortgage servicing rights, net		188,177			177,244
Goodwill		415,696			415,696
Other assets		378,050			418,992

Total assets	$	42,504,673		$	42,628,066

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	27,228,560		$	27,203,319
Federal Home Loan Bank advances		9,970,594			9,847,293
Federal funds purchased and repurchase agreements		100,756			269,319
Other borrowings		596,260			697,753
Advance payments by borrowers for taxes and insurance		77,545			61,054
Accrued interest payable		20,218			35,944
Accrued expenses and other liabilities		1,202,749			1,237,515

Total liabilities		39,196,682			39,352,197

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; 229,924,425 and 229,940,729 shares issued		2,299			2,299
Additional paid-in capital		2,299,786			2,280,335
Retained earnings		1,231,486			1,178,803
Less 5,321,530 and 6,767,285 shares of common stock held in treasury at cost		(171,409	)		(209,653	)
Accumulated other comprehensive income		(54,171	)		24,085

Total shareholders’ equity		3,307,991			3,275,869

Total liabilities and shareholders’ equity	$	42,504,673		$	42,628,066

See Notes to Consolidated Financial Statements.

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended						Six Months Ended
	6/30/04			6/30/03			6/30/04			6/30/03
				(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	387,217		$	367,602		$	754,561		$	745,326
Mortgage-backed securities:
Available for sale		80,146			154,490			187,813			303,801
Held to maturity		2,823			6,858			6,194			15,127
Investment securities:
Available for sale		2,992			3,297			6,596			6,340
Held to maturity		47			56			95			110
Other interest-earning assets		7,586			7,856			15,379			15,241

Total interest income		480,811			540,159			970,638			1,085,945

Interest expense:
Deposits		90,659			126,734			186,545			260,477
Federal Home Loan Bank advances		71,036			104,025			147,283			203,824
Other borrowings		10,917			13,969			24,057			27,172

Total interest expense		172,612			244,728			357,885			491,473

Net interest income		308,199			295,431			612,753			594,472
Provision for loan and lease losses		7,160			35,360			25,776			96,831

Net interest income after provision for loan and lease losses		301,039			260,071			586,977			497,641

Other income:
Retail banking		115,197			97,087			214,810			181,187
Mortgage banking		59,343			(23,895	)		42,661			(23,922	)
Leasing operations		(597	)		(12,230	)		1,528			(19,086	)
Net gains (losses)		(14,240	)		108,549			(105,267	)		185,202
Bank owned life insurance and other		7,120			8,450			18,288			16,406

Total other income		166,823			177,961			172,020			339,787

Administrative expenses:
Compensation and employee benefits		102,109			90,790			204,077			177,846
Net occupancy and equipment		34,329			30,466			68,678			61,652
Marketing expenses		31,051			20,205			59,860			33,852
Federal deposit insurance premiums		1,052			1,125			2,135			2,267
Other administrative expenses		57,360			52,168			109,186			102,429

Total administrative expenses		225,901			194,754			443,936			378,046

Income before income taxes		241,961			243,278			315,061			459,382
Income taxes		75,615			77,241			98,459			145,854

Net income	$	166,346		$	166,037		$	216,602		$	313,528

Basic earnings per share	$	.74		$	.74		$	.96		$	1.40

Diluted earnings per share	$	.72		$	.72		$	.94		$	1.36

Average common shares outstanding:
Basic		224,089,781			225,501,687			223,811,719			225,249,543

Diluted		231,827,268			231,095,694			231,023,165			230,778,271

Cash dividends declared per share	$	.29		$	.24		$	.55		$	.46

See Notes to Consolidated Financial Statements.

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended
	6/30/04			6/30/03
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	216,602		$	313,528
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		25,776			96,831
Net (gains) losses		105,267			(185,202	)
Accretion of discounts, amortization of premiums, and amortization of depreciation, net		50,720			137,532
Origination of loans held for sale		(920,390	)		(1,648,230	)
Proceeds from sale of loans held for sale		908,195			1,646,068
Increase (decrease) in accrued interest payable		(15,726	)		8,046
Other		(112,687	)		179,197

Net cash provided by operating activities		257,757			547,770

Cash flows from investing activities:
Net principal disbursed on loans and leases		(2,929,891	)		(4,770,293	)
Proceeds from principal repayments and maturities of:
Mortgage-backed securities held to maturity		66,079			180,454
Mortgage-backed securities available for sale		1,103,003			2,544,391
Investment securities held to maturity		332			541
Investment securities available for sale		10,206			28,825
Proceeds from sale of:
Mortgage-backed securities available for sale		5,128,951			5,821,613
Investment securities available for sale		96,237			2,379
Federal Home Loan Bank and Federal Reserve Bank stock		6,202			15,107
Purchase of:
Mortgage-backed securities available for sale		(1,824,544	)		(5,108,641	)
Investment securities available for sale		(18,328	)		(57,171	)
Federal Home Loan Bank and Federal Reserve Bank stock		(516	)		(7,430	)
Loans		(1,559,178	)		(44,874	)
Net cash received in connection with business combinations		—			77,944
Other		(66,397	)		(111,290	)

Net cash provided by (used in) investing activities		12,156			(1,428,445	)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings		1,707,437			(762,513	)
Proceeds from long-term borrowings		509,092			2,007,512
Repayments of long-term borrowings		(2,359,313	)		(9,860	)
Increase (decrease) in deposits		26,170			(85,758	)
Increase in advance payments by borrowers for taxes and insurance		16,491			34,998
Payment of dividends on common stock		(123,206	)		(103,514	)
Proceeds from issuance of common stock		79,049			31,761
Purchase of treasury stock		(62,066	)		(82,632	)

Net cash provided by (used in) financing activities		(206,346	)		1,029,994

Net increase in cash and cash equivalents		63,567			149,319
Cash and cash equivalents, beginning of the period		528,166			447,213

Cash and cash equivalents, end of period	$	591,733		$	596,532

Supplemental disclosure of cash flow information:
Cash paid for interest on deposits and borrowings	$	372,682		$	482,629
Cash paid for income taxes		—			12,000
Supplemental schedule of noncash activities:
Loans exchanged for mortgage-backed securities		124,678			5,765,725

See Notes to Consolidated Financial Statements.

CHARTER ONE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.		These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Charter One Financial, Inc. (the “Company” or “Charter One”) Annual Report on Form 10-K for the year ended December 31, 2003. The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. Such adjustments are of a normal recurring nature. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.

2.		Charter One has one operating segment, consumer banking, which offers an array of products and services to its customers. Pursuant to its consumer banking strategy, emphasis is placed on building relationships and identifying cross-sell opportunities with its customers, as opposed to building specific lines of business. As a result, Charter One works as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change.

3.		On December 31, 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation -Transition and Disclosure,” an amendment of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS No. 148 amends Accounting Principles Board (“APB”) Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information. The Company has elected to continue application of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock-based employee compensation plans. Accordingly, no stock-based employee compensation cost is, or is expected to be, reflected in net income, as all options granted under the Company’s stock-based employee compensation plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Had stock-based employee compensation costs of the Company’s stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, as amended by SFAS No. 148, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:


	Three Months Ended				Six Months Ended
	6/30/04		6/30/03		6/30/04		6/30/03
	(Dollars in thousands, except per share data)
Net income:
As reported	$	166,346	$	166,037	$	216,602	$	313,528
Less: Total stock-based employee compensation expense determined under the fair value method for all awards, net of tax		7,845		7,448		15,741		15,018

Pro forma	$	158,501	$	158,589	$	200,861	$	298,510

Basic earnings per share:
As reported	$	.74	$	.74	$	.96	$	1.40
Pro forma		.71		.70		.90		1.33
Diluted earnings per share:
As reported		.72		.72		.94		1.36
Pro forma		.68		.69		.86		1.29

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in the three and six months ended June 30, 2004 and 2003:


	Three Months Ended						Six Months Ended
	6/30/04			6/30/03			6/30/04			6/30/03
Dividend yield		3.00	%		3.00	%		3.00	%		3.00	%
Volatility		45.52	%		47.17-47.19	%		45.48-45.59	%		47.17-47.26	%
Risk-free interest rate		3.81-3.88	%		2.68-3.33	%		3.03-3.88	%		2.68-3.36	%
Life of grant	6 years			6 years			6 years			6 years

		The estimated weighted-average date of grant fair value (based on the above option-pricing model and assumptions) was $12.47 and $10.76 for stock options granted in the three months ended June 30, 2004 and 2003, respectively, and $12.44 and $10.98 for stock options granted in the six months ended June 30, 2004 and 2003, respectively.

4.		In January 2003, the FASB issued Interpretation No. (“FIN”) 46, which provides guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE are to be included in a company’s consolidated financial statements. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make decisions about an entity’s activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur, or the right to receive the expected residual returns of the entity if they occur. In December 2003, the FASB reissued FIN 46 with certain modifications and clarifications. Application of this guidance was effective for interests in certain VIEs commonly referred to as special-purpose entities as of December 31, 2003. Application for all other types of entities was required for periods ending after March 15, 2004, unless previously applied. The adoption of FIN 46 did not have a material impact on the Company’s consolidated financial condition or results of operations.

5.		On May 4, 2004, Citizens Financial Group, Inc. (“Citizens”), a subsidiary of The Royal Bank of Scotland Group plc, announced it reached an agreement to acquire Charter One in a cash transaction. The cash purchase price is $44.50 per share or approximately $10.5 billion. The transaction is expected to close by the fourth quarter of 2004, subject to regulatory approval and approval by Charter One shareholders. A special shareholder meeting to vote on the transaction is scheduled for August 23, 2004. As part of this transaction, Charter One’s national bank charter will remain.

		Citizens is a $78 billion commercial bank holding company. It is headquartered in Providence, Rhode Island, and has more than 880 offices, approximately 1,650 ATMs and more than 15,500 employees in seven states. It operates as Citizens Bank in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, Pennsylvania and Rhode Island. Citizens is one of the 20 largest commercial bank holding companies in the United States. Citizens is owned by The Royal Bank of Scotland Group plc.

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

HOLDING COMPANY BUSINESS

The following financial review presents an analysis of the asset and liability structure of Charter One Financial, Inc. and a discussion of the results of operations for each of the periods presented.

General

Headquartered in Cleveland, Ohio, Charter One Financial, Inc., hereafter referred to as “Charter One” or the “Company,” is a financial holding company. Charter One is a Delaware corporation and owns all of the outstanding capital stock of Charter One Bank, N.A., which we sometimes refer to in this document as the “Bank.” The Bank’s primary business is providing consumer banking services to certain major markets in Ohio, Michigan, Illinois, New York, Vermont and in some markets of Massachusetts, Indiana, Connecticut and Pennsylvania. As of June 30, 2004, the Bank and its subsidiaries were doing business through 478 traditional banking centers, 174 in-store banking centers, 29 loan production offices and 1,017 ATMs.

Acquisition

On May 4, 2004, Citizens Financial Group, Inc. (“Citizens”), a subsidiary of The Royal Bank of Scotland Group plc, announced it reached an agreement to acquire Charter One in a cash transaction. The cash purchase price is $44.50 per share or approximately $10.5 billion. The transaction is expected to close by the fourth quarter of 2004, subject to regulatory approval and approval by Charter One shareholders. A special shareholder meeting to vote on the transaction is scheduled for August 23, 2004. As part of this transaction, Charter One’s national bank charter will remain.

Citizens is a $78 billion commercial bank holding company. It is headquartered in Providence, Rhode Island, and has more than 880 offices, approximately 1,650 ATMs and more than 15,500 employees in seven states. It operates as Citizens Bank in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, Pennsylvania and Rhode Island. Citizens is one of the 20 largest commercial bank holding companies in the United States. Citizens is owned by The Royal Bank of Scotland Group plc.

Discussion of Forward-Looking Statements

This document, including information incorporated by reference, contains, and future filings by Charter One on Form 10-K, Form 10-Q and Form 8-K and future oral and written statements and press releases by Charter One and its management may contain, forward-looking statements about Charter One which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, including revenue creation, lending origination, operating efficiencies, loan sales, charge-offs and loan loss provisions, deposits and refinancing of liabilities, growth opportunities, interest rates, acquisition and divestiture opportunities, and synergies, efficiencies, cost savings and funding advantages expected to be realized from prior acquisitions. These forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. These forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Accordingly, Charter One cautions readers not to place undue reliance on any forward-looking statements.

Many of these forward-looking statements appear throughout this document. Words such as may, could, should, would, believe, anticipate, estimate, expect, intend, plan and similar expressions are intended to identify these forward-looking statements. The important factors discussed below, as well as other factors discussed elsewhere in this document and factors identified in our filings with the Securities and Exchange Commission and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document. Among the factors that could cause our actual results to differ from these forward-looking statements are:

•

the strength of the United States economy in general and the strength of the local economies in which we conduct our operations; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in the credit quality of our loans and leases and other assets;

•		the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

•		financial markets, monetary and interest rate fluctuations, particularly the relative relationship of short-term interest rates to long-term interest rates;

•		the timely development of and acceptance of new products and services of Charter One and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

•		the impact of changes in financial services laws and regulations (including laws and regulations concerning taxes, accounting standards, banking, securities and insurance); legislative or regulatory changes may adversely affect the business in which we are engaged;

•		the impact of technological changes;

•		our ability to successfully integrate acquisitions into our existing operations, and the availability of new acquisitions, joint ventures and alliance opportunities that build shareholder value;

•		changes in consumer spending and saving habits; and

•		our success at managing the risks involved in the foregoing.

Charter One disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

RESULTS OF OPERATIONS

Performance Overview

Figure 1 sets forth financial results and annualized performance ratios for the three and six months ended June 30, 2004 and 2003, respectively. On January 27, 2004, we prepaid $2.3 billion in fixed rate Federal Home Loan Bank (“FHLB”) advances and incurred a prepayment penalty of $164.5 million before tax ($113.1 million after tax). Because of the unusual nature of the debt prepayment penalty, we believe it is important for comparability purposes to present selected financial results and ratios for the six months ended June 30, 2004 excluding the debt prepayment penalty.

Selected Financial Results and Ratios (Figure 1)


	Three Months Ended						Six Months Ended
	6/30/04			6/30/03			6/30/04									6/30/03
										Prepayment
							Actual			Penalty			Adjusted
	(Dollars in thousands, except per share data)
Results and ratios:
Net income	$	166,346		$	166,037		$	216,602		$	113,068		$	329,670		$	313,528
Diluted earnings per share		.72			.72			.94			.49			1.43			1.36
Return on average assets		1.56	%		1.50	%		1.02	%		1.06	%		1.54	%		1.44	%
Return on average equity		20.50			19.86			13.34			13.91			20.30			19.17
Return on average tangible equity(1)		23.82			22.74			15.51			16.14			23.59			22.02
Average equity to average assets		7.62			7.55			7.61			—			7.61			7.51
Net interest income to administrative expenses		1.36	x		1.52	x		1.38	x		—			1.38	x		1.57	x
Administrative expenses to average assets		2.12	%		1.76	%		2.08	%		—			2.08	%		1.74	%
Efficiency ratio(2)		47.56			41.14			56.57			24.41			46.77			40.46

(1)		Computed as the ratio of net income, excluding the amortization of other intangible assets, to average tangible equity.

(2)		Computed as the ratio of total administrative expenses to net interest income and total other income.

Net Interest Income

Net interest income is the difference between the interest and dividend income earned on our loans and investments and the interest expense on our deposits and borrowings. Net interest income is our principal source of earnings. Net interest income is affected by a number of factors including the level, pricing and maturity of interest-earning assets and interest-bearing liabilities, interest rate fluctuations and asset quality, as well as general economic conditions and regulatory policies.

The following table shows average balances, interest earned or paid, and average interest rates for the periods indicated. Nonaccrual loans are included in the average balance of loans. The mark-to-market adjustments on securities available for sale are included in noninterest-earning assets. Noninterest-bearing demand deposit accounts are included in noninterest-bearing liabilities. The cost of liabilities includes the annualized effect of interest rate risk management instruments.

Average Balances, Interest Rates and Yields/Costs (Figure 2)


	Three Months Ended
	6/30/04								6/30/03
						Avg.								Avg.
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost			Balance			Interest		Cost
	(Dollars in thousands)
Interest-earning assets:
Loans and leases	$	31,454,312		$	387,217		4.93	%	$	26,101,819		$	367,602		5.64	%
Mortgage-backed securities:
Available for sale		7,422,621			80,146		4.32			14,010,057			154,490		4.41
Held to maturity		196,265			2,823		5.75			395,598			6,858		6.94
Investment securities:
Available for sale		224,495			2,992		5.33			256,677			3,297		5.14
Held to maturity		3,595			47		5.28			3,957			56		5.74
Other interest-earning assets		751,409			7,586		3.99			839,597			7,856		3.70

Total interest-earning assets		40,052,697			480,811		4.80			41,607,705			540,159		5.19

Allowance for loan and lease losses		(390,693	)							(360,448	)
Noninterest-earning assets		2,963,313								3,044,576

Total assets	$	42,625,317							$	44,291,833

Interest-bearing liabilities:
Deposits:
Checking accounts	$	4,874,822			9,730		.80		$	6,951,974			23,412		1.35
Money market and savings accounts		8,546,445			20,233		.95			8,332,278			31,204		1.50
Certificates of deposit		9,976,862			60,696		2.45			9,733,110			72,118		2.97

Total deposits		23,398,129			90,659		1.56			25,017,362			126,734		2.03

Federal Home Loan Bank advances		10,166,098			71,036		2.80			11,397,410			104,025		3.66
Other borrowings		968,900			10,917		4.50			874,062			13,969		6.38

Total borrowings		11,134,998			81,953		2.95			12,271,472			117,994		3.85

Total interest-bearing liabilities		34,533,127			172,612		2.01			37,288,834			244,728		2.63

Noninterest-bearing liabilities:
Demand deposit accounts		3,524,462								2,308,993
Other noninterest-bearing liabilities		1,321,750								1,349,173

Total noninterest-bearing liabilities		4,846,212								3,658,166

Total liabilities		39,379,339								40,947,000

Shareholders’ equity		3,245,978								3,344,833

Total liabilities and shareholders’ equity	$	42,625,317							$	44,291,833

Net interest income				$	308,199							$	295,431

Interest rate spread							2.79								2.56
Net yield on average interest- earning assets							3.08								2.84
Average interest-earning assets to average interest-bearing liabilities							115.98	%							111.58	%


	Six Months Ended
	6/30/04								6/30/03
						Avg.								Avg.
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost			Balance			Interest		Cost
	(Dollars in thousands)
Interest-earning assets:
Loans and leases	$	30,336,896		$	754,561		4.98	%	$	25,977,336		$	745,326		5.75	%
Mortgage-backed securities:
Available for sale		8,477,500			187,813		4.43			13,337,098			303,801		4.56
Held to maturity		212,886			6,194		5.82			438,005			15,127		6.91
Investment securities:
Available for sale		239,964			6,596		5.50			231,906			6,340		5.47
Held to maturity		3,598			95		5.30			4,008			110		5.51
Other interest-earning assets		787,304			15,379		3.86			801,391			15,241		3.78

Total interest-earning assets		40,058,148			970,638		4.85			40,789,744			1,085,945		5.33

Allowance for loan and lease losses		(389,199	)							(343,860	)
Noninterest-earning assets		3,008,141								3,097,175

Total assets	$	42,677,090							$	43,543,059

Interest-bearing liabilities:
Deposits:
Checking accounts	$	5,206,702			20,166		.78		$	7,245,197			54,030		1.50
Money market and savings accounts		8,549,931			39,987		.94			8,131,890			61,530		1.53
Certificates of deposit		10,074,494			126,392		2.52			9,648,034			144,917		3.03

Total deposits		23,831,127			186,545		1.57			25,025,121			260,477		2.10

Federal Home Loan Bank advances		10,177,800			147,283		2.90			10,906,526			203,824		3.76
Other borrowings		1,035,442			24,057		4.64			870,299			27,172		6.24

Total borrowings		11,213,242			171,340		3.06			11,776,825			230,996		3.95

Total interest-bearing liabilities		35,044,369			357,885		2.05			36,801,946			491,473		2.69

Noninterest-bearing liabilities:
Demand deposit accounts		3,064,520								2,163,822
Other noninterest-bearing liabilities		1,319,588								1,306,110

Total noninterest-bearing liabilities		4,384,108								3,469,932

Total liabilities		39,428,477								40,271,878
Shareholders’ equity		3,248,613								3,271,181

Total liabilities and shareholders’ equity	$	42,677,090							$	43,543,059

Net interest income				$	612,753							$	594,472

Interest rate spread							2.80								2.64
Net yield on average interest- earning assets							3.06								2.91
Average interest-earning assets to average interest-bearing liabilities							114.31	%							110.83	%

Figure 3 shows the approximate relative contribution of changes in average interest rates and volume to changes in net interest income for the periods indicated. Changes not solely attributable to volume or rate have been allocated in proportion to the changes due to volume and rate. Amortization of net deferred loan costs and automobile dealer reserves included as a reduction in interest income was $31.4 and $28.9 million for the three months ended June 30, 2004 and 2003, respectively, and $63.7 and $56.4 million for the six months ended June 30, 2004 and 2003, respectively.

Rate/Volume Analysis (Figure 3)


	Three Months Ended June 30,									Six Months Ended June 30,
	2004 v. 2003									2004 v. 2003
	Increase (decrease) due to									Increase (decrease) due to
	Rate			Volume			Total			Rate			Volume			Total
	(Dollars in thousands)
Interest income:
Loans and leases	$	(50,976	)	$	70,591		$	19,615		$	(108,444	)	$	117,679		$	9,235
Mortgage-backed securities:
Available for sale		(3,152	)		(71,192	)		(74,344	)		(8,115	)		(107,873	)		(115,988	)
Held to maturity		(1,019	)		(3,016	)		(4,035	)		(2,096	)		(6,837	)		(8,933	)
Investment securities:
Available for sale		120			(425	)		(305	)		35			221			256
Held to maturity		(4	)		(5	)		(9	)		(4	)		(11	)		(15	)
Other interest-earning assets		592			(862	)		(270	)		409			(271	)		138

Total		(54,439	)		(4,909	)		(59,348	)		(118,215	)		2,908			(115,307	)

Interest expense:
Checking accounts		(7,893	)		(5,789	)		(13,682	)		(21,360	)		(12,504	)		(33,864	)
Money market and savings accounts		(11,934	)		962			(10,972	)		(24,964	)		3,421			(21,543	)
Certificates of deposit		(13,187	)		1,766			(11,421	)		(24,707	)		6,182			(18,525	)
Federal Home Loan Bank advances		(18,892	)		(14,097	)		(32,989	)		(33,823	)		(22,718	)		(56,541	)
Other borrowings		(1,587	)		(1,465	)		(3,052	)		(1,265	)		(1,850	)		(3,115	)

Total		(53,493	)		(18,623	)		(72,116	)		(106,119	)		(27,469	)		(133,588	)

Change in net interest income	$	(946	)	$	13,714		$	12,768		$	(12,096	)	$	30,377		$	18,281

Net interest income was $308.2 million for the three months ended June 30, 2004, up $12.8 million, or 4.3%, from the second quarter of 2003. Net yield on average interest-earning assets during the second quarter of 2004 was 3.08%, up 24 basis points from the second quarter of 2003. The improvement was attributable to the increase in average noninterest-bearing deposits, as well as a full quarter’s benefit from the prepayment of $2.3 billion in fixed rate FHLB advances on January 27, 2004. These FHLB advances carried a weighted average cost of 6.27% and were due to mature between June 2005 and January 2006.

Net interest income was $612.8 million for the six months ended June 30, 2004, up $18.3 million, or 3.1%, from the comparable period of 2003. Net yield on average interest-earning assets during the six months ended June 30, 2004 was 3.06%, up 15 basis points from the six months ended June 30, 2003. The improvement was attributable to the increase in average noninterest-bearing deposits, as well as five months’ benefit from the prepayment of $2.3 billion in fixed rate FHLB advances discussed above.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the three months ended June 30, 2004 was $7.2 million, a decrease of $28.2 million from the three months ended June 30, 2003. Net charge-offs totaled $17.8 million for the three months ended June 30, 2004, compared to $19.9 million for the three months ended June 30, 2003. The ratio of net charge-offs as a percent of average loans and leases decreased seven basis points to .23% (annualized) for the second quarter of 2004 compared to .30% (annualized) for the second quarter of 2003. The underlying trends in asset classifications, charge-offs and other credit indicators warranted a reduction in the provision for loan and lease losses year over year.

The provision for loan and lease losses for the six months ended June 30, 2004 was $25.8 million, a decrease of $71.1 million from the comparable period of 2003. Net charge-offs totaled $35.3 million for the six months ended

June 30, 2004, compared to $53.4 million for the six months ended June 30, 2003. The ratio of net charge-offs as a percent of average loans and leases decreased 18 basis points to .23% (annualized) for the six months ended June 30, 2004 compared to .41% (annualized) for the six months ended June 30, 2003.

See “Financial Condition – Asset Quality” for further information regarding our allowance for loan and lease losses.

Other Income

Other income for the three months ended June 30, 2004 was $166.8 million, a decrease of $11.1 million, or 6.3%, from $178.0 million for the three months ended June 30, 2003. This decrease was primarily attributable to net losses, partially offset by an increase in retail banking income, mortgage banking income and income from leasing operations.

Net losses totaled $14.2 million for the second quarter of 2004, compared to net gains of $108.5 million for the second quarter of 2003. Net losses for the second quarter of 2004 included $26.0 million in net losses from the sale of $1.9 billion of mortgage-backed securities. These mortgage-backed securities were sold as part of our ongoing strategy to reduce single-family exposure and the overall duration of interest-earning assets. We did not utilize any special-purpose entities for the sale of any of our mortgage-backed securities.

Mortgage banking income was $59.3 million for the three months ended June 30, 2004, compared to a loss of $23.9 million for the second quarter of 2003. During the second quarter of 2004, we reduced our valuation allowance on mortgage servicing rights by $47.0 million in response to the increase in interest rates. In the year ago quarter, we increased the valuation allowance on mortgage servicing rights by $9.5 million, and recorded a permanent impairment charge of $37.2 million. Total mortgage banking income, excluding the adjustments to the valuation allowance and the permanent impairment charge discussed above, was $12.3 million and $22.8 million in the second quarters of 2004 and 2003, respectively. This reduction in year over year mortgage banking income was due primarily to the decrease in the portfolio of loans serviced for others and lower mortgage production as compared to 2003. The portfolio of loans serviced for others totaled $15.1 billion, down 10.5% since December 31, 2003 and down 20.3% since June 30, 2003. The related mortgage servicing rights totaled $188.2 million at June 30, 2004. With an average servicing spread of 35.6 basis points, that translates into a servicing asset valuation of 3.5 times the servicing spread.

Retail banking income was $115.2 million for the three months ended June 30, 2004, an increase of $18.1 million, or 18.7%, over the three months ended June 30, 2003. The biggest driver of the increase was deposit-related revenue, which totaled $101.7 million for the three months ended June 30, 2004, up 19.8% over the year ago quarter. The increase in debit card transactions continued to be one of the biggest contributors to deposit-related revenue growth. The dollar volume of debit card transactions was 40% higher in the second quarter of 2004 than in the same quarter of last year. The other components of retail banking revenue included fees from retail brokerage activities ($9.8 million, up 16.4% from the year ago quarter) and other revenue related to retail operations ($3.7 million, down 3.0% from the year ago quarter).

Income from leasing operations was a loss of $597,000 in the second quarter of 2004, compared with a loss of $12.2 million in the second quarter of 2003. Residual value adjustments reduced income by $1.6 million in the three months ended June 30, 2004, and $12.8 million in the year ago quarter.

Other income for the six months ended June 30, 2004 was $172.0 million, a decrease of $167.8 million, or 49.4%, from $339.8 million for the six months ended June 30, 2003. This decrease was primarily attributable to net losses, partially offset by an increase in income from leasing operations. Net losses totaled $105.3 million for the six months ended June 30, 2004, compared to net gains of $185.2 million for the six months ended June 30, 2003. Net losses for the 2004 period included a $164.5 million debt prepayment penalty. As discussed in “Performance Overview” above, we prepaid $2.3 billion in fixed rate FHLB advances in January 2004 and incurred a debt prepayment penalty of $164.5 million before tax. Transactions resulting in net gains and losses are primarily undertaken in an effort to mitigate interest rate risk while still achieving targeted net interest yield by managing the size and mix of the Bank’s interest sensitive asset and liability portfolios.

Income from leasing operations was $1.5 million for the six months ended June 30, 2004, compared with a loss of $19.1 million for the six months ended June 30, 2003. Residual value adjustments reduced income by $21.5 million in the six months ended June 30, 2003.

Administrative Expenses

Administrative expenses were $225.9 million for the three months ended June 30, 2004, an increase of $31.1 million, or 16.0%, from the second quarter of 2003. The increase in administrative expenses was primarily

attributable to increased compensation expense and marketing costs. Compensation expense increased $11.3 million and was primarily due to operating more banking centers than a year ago. During 2003, we initiated an aggressive de novo branch expansion plan. These efforts led to the net addition of 130 new banking centers since June 30, 2003, including 36 net new banking centers opened in the second quarter of 2004. Our plan is to continue the expansion in 2004 for a total of 125 additional banking centers. Marketing costs increased by $10.8 million from the year-ago quarter as we provided ongoing support for our retail bank expansion strategy and other franchise enhancing initiatives. Our efficiency ratio was 47.56% for the three months ended June 30, 2004, compared to 41.14% for the three months ended June 30, 2003.

Administrative expenses were $443.9 million for the six months ended June 30, 2004, an increase of $65.9 million, or 17.4%, from the six months ended June 30, 2003. The increase in administrative expenses was substantially the same as for the second quarter results discussed in the above paragraph. Due to the penalty associated with the debt prepayment discussed in “Performance Overview” above, the efficiency ratio was 56.57% for the six months ended June 30, 2004. Excluding the $164.5 million debt prepayment penalty, the efficiency ratio was 46.77% for the six months ended June 30, 2004, compared to 40.46% for the six months ended June 30, 2003.

Federal Income Tax

Federal income tax expense for the three months ended June 30, 2004 was $75.6 million, compared to $77.2 million for the same period in 2003. The primary reason for this decrease in the provision for federal income taxes was a decrease in pre-tax income. The effective tax rate was 31.3% for the 2004 period and 31.8% for the 2003 period.

Federal income tax expense for the six months ended June 30, 2004 was $98.5 million, compared to $145.9 million for the same period in 2003. The primary reason for this decrease in the provision for federal income taxes was a decrease in pre-tax income. This decrease in pre-tax income was primarily attributable to our prepayment penalty of $164.5 million on the early termination of the FHLB advances in the first quarter of 2004. The effective tax rate was 31.3% for the 2004 period and 31.8% for the 2003 period.

FINANCIAL CONDITION

Overview

At June 30, 2004, total assets were $42.5 billion, compared to total assets of $42.6 billion at December 31, 2003.

Loans and Leases

Composition of Loans and Leases (Figure 4)


	6/30/04			12/31/03
	(Dollars in thousands)
One-to-four family:
Permanent:
Fixed rate	$	8,422,124		$	6,001,695
Adjustable rate		2,608,089			2,830,677
Construction		510,957			485,354

		11,541,170			9,317,726

Commercial real estate:
Multifamily		866,076			776,528
Commercial		1,276,177			1,193,377
Construction		583,999			521,680

		2,726,252			2,491,585

Consumer:
Retail		6,899,475			5,491,923
Automobile		6,245,154			6,364,703
Consumer finance		1,395,972			1,092,533

		14,540,601			12,949,159

Business:
Leasing		2,244,746			2,195,418
Corporate banking		1,926,983			1,680,293

		4,171,729			3,875,711

Loans and leases before allowance for loan and lease losses		32,979,752			28,634,181
Allowance for loan and lease losses		(374,236	)		(383,733	)


	6/30/04		12/31/03
	(Dollars in thousands)
Loans and leases, net(1)	$	32,605,516	$	28,250,448

Portfolio of loans serviced for others	$	15,104,799	$	16,877,169

(1)

Includes loans held for sale.

Loan and Lease Activity (Figure 5)


	Three Months Ended				Six Months Ended
	6/30/04		6/30/03		6/30/04		6/30/03
	(Dollars in thousands)
Originations:
Real estate:
Permanent:
One-to-four family	$	1,807,730	$	3,555,968	$	2,969,276	$	6,651,686
Multifamily		100,048		57,451		176,040		108,891
Commercial		134,427		60,226		262,697		150,439

Total permanent loans		2,042,205		3,673,645		3,408,013		6,911,016

Construction:
One-to-four family		68,310		53,537		157,161		89,093
Multifamily		36,545		7,613		67,286		26,896
Commercial		123,846		30,246		241,079		41,076

Total construction loans		228,701		91,396		465,526		157,065

Total real estate loans originated		2,270,906		3,765,041		3,873,539		7,068,081

Retail consumer		1,628,263		1,209,221		2,682,292		2,288,511
Automobile		739,204		1,026,245		1,403,840		2,007,359
Consumer finance		189,048		122,839		294,681		224,766
Leases		122,334		73,946		277,613		175,517
Corporate banking		677,889		473,677		1,193,153		922,003

Total loans and leases originated		5,627,644		6,670,969		9,725,118		12,686,237

Acquired through business combinations and purchases		1,088,706		403,324		1,559,178		407,089

Sales and principal reductions:
Loans sold		605,930		885,179		920,390		1,648,230
Loans exchanged for mortgage backed securities		51,929		2,346,609		124,678		5,765,725
Principal reductions		3,180,918		3,260,094		5,787,110		6,285,924

Total sales and principal reductions		3,838,777		6,491,882		6,832,178		13,699,879

Increase (decrease) before net items	$	2,877,573	$	582,411	$	4,452,118	$	(606,553	)

Investment and Mortgage-Backed Securities

Figures 6 and 7 summarize our investment and mortgage-backed securities portfolios at June 30, 2004 and December 31, 2003. The amounts reflected represent the fair value of securities available for sale and the amortized cost of securities held to maturity.

Investment Securities (Figure 6)


	6/30/04			12/31/03
	(Dollars in thousands)
Available for Sale
U.S. Treasury and agency securities	$	55,333		$	101,406
Securities of U.S. states and political subdivisions		38,131			40,180
Corporate capital trust		84,738			115,908
Other securities		12,432			15,766

Total investment securities available for sale		190,634			273,260

Held to Maturity
Securities of U.S. states and political subdivisions		3,407			3,480
Corporate capital trust and other securities		25			25

Total investment securities held to maturity		3,432			3,505

Total	$	194,066		$	276,765

Weighted average rate		5.88	%		5.48	%

Mortgage-Backed Securities (Figure 7)


	6/30/04			12/10/03
	(Dollars in thousands)
Available for Sale
Participation certificates:
U.S. government and agency issues	$	5,552,108		$	9,670,524
Collateralized mortgage obligations:
U.S. government and agency issues		237,790			511,601
Private issues		6,879			11,673

Total mortgage-backed securities available for sale		5,796,777			10,193,798

Held to Maturity
Participation certificates:
U.S. government and agency issues		139,566			186,740
Private issues		15,787			20,454
Collateralized mortgage obligations:
U.S. government and agency issues		19,720			25,994
Private issues		10,554			18,261

Total mortgage-backed securities held to maturity		185,627			251,449

Total	$	5,982,404		$	10,445,247

Weighted average rate		4.41	%		4.57	%

Asset Quality

The allowance for loan and lease losses totaled $374.2 million at June 30, 2004, which was 1.13% of total loans and leases at June 30, 2004, and represented 5.3 years coverage of annualized second quarter 2004 net charge-offs.

Analysis of the Allowance for Loan and Lease Losses (Figure 8)


	Three Months Ended						Six Months Ended
	6/30/04			6/30/03			6/30/04			6/30/03
	(Dollars in thousands)
Allowance for loan and lease losses:
Balance, beginning of period	$	384,842		$	355,926		$	383,733		$	328,017
Provision for loan and lease losses		7,160			35,360			25,776			96,831
Acquired through business combination		—			4,969			—			4,969
Loans and leases charged off:
One-to-four family		(1,763	)		(1,036	)		(2,590	)		(1,706	)
Commercial real estate		(6	)		(253	)		(878	)		(753	)
Retail consumer		(3,322	)		(2,596	)		(5,856	)		(6,074	)
Automobile		(9,698	)		(13,628	)		(23,377	)		(30,078	)
Consumer finance		(4,468	)		(3,975	)		(7,947	)		(8,512	)
Leases		—			(2,095	)		—			(8,156	)
Corporate banking		(4,979	)		(2,652	)		(7,495	)		(9,897	)

Total charge-offs		(24,236	)		(26,235	)		(48,143	)		(65,176	)

Recoveries:
One-to-four family		30			41			41			58
Commercial real estate		46			61			110			209
Retail consumer		752			548			1,386			981
Automobile		4,845			4,561			9,266			8,676
Consumer finance		370			235			598			340
Leases		—			606			433			999
Corporate banking		427			321			1,036			489

Total recoveries		6,470			6,373			12,870			11,752

Net loan and lease charge-offs		(17,766	)		(19,862	)		(35,273	)		(53,424	)

Balance, end of period	$	374,236		$	376,393		$	374,236		$	376,393

Net charge-offs to average loans and leases (annualized)		.23	%		.30	%		.23	%		.41	%

In determining the adequacy of the allowance for loan and lease losses, management reviews and evaluates the potential credit risk inherent in the loan and lease portfolio. All outstanding loans and leases are considered in this evaluation process. The evaluation process includes such factors as historical loss experience, credit scores,

delinquencies, loss migration analysis, concentration of credit and the current economic environment. If this evaluation process indicates a need for either a higher or lower allowance for loan and lease losses, that increase or reduction is made via the provision for loan and lease losses. This evaluation process is performed no less than quarterly and it is applied on a consistent basis. Based upon this analysis, management believes that the allowance for loan and lease losses at June 30, 2004 was adequate to absorb losses inherent in the loan and lease portfolio.

Figure 9 sets forth information concerning nonperforming and underperforming assets for the periods reported. Underperforming assets consist of (1) nonperforming assets (nonaccrual loans and leases, restructured real estate mortgage loans, and real estate acquired through foreclosure and other collateral owned) and (2) accruing loans and leases delinquent more than 90 days. At June 30, 2004, underperforming assets totaled $273.7 million, up from $251.2 million at December 31, 2003. The primary driver behind the increase was a $35.0 million nonaccrual loan for a shopping center under development. We believe the loan is well collateralized, and anticipate no material loss at this time.

Nonperforming and Underperforming Assets (Figure 9)


	6/30/04			12/31/03
	(Dollars in thousands)
Nonperforming assets:
Nonaccrual loans and leases:
Real estate mortgage loans:
One-to-four family	$	25,065		$	23,301
Multifamily and commercial		37,768			33,692
Construction and land		56,341			25,161

Total real estate mortgage loans		119,174			82,154
Retail consumer		11,988			9,818
Automobile		—			—
Consumer finance		38,667			42,843
Leases		4,161			6,360
Corporate banking		32,992			28,408

Total nonaccrual loans and leases		206,982			169,583
Restructured loans		—			474

Total nonperforming loans and leases		206,982			170,057
Real estate and other collateral owned		26,938			35,654

Total nonperforming assets	$	233,920		$	205,711

Ratio of:
Nonperforming loans and leases to total loans and leases		.63	%		.60	%
Nonperforming assets to total assets		.55			.48
Nonperforming assets to total loans, leases and real estate and other collateral owned		.72			.73
Allowance for loan and lease losses to:
Nonperforming loans and leases		180.81			225.65
Total loans and leases before allowance		1.13			1.34
Accruing loans and leases delinquent more than 90 days:
Real estate mortgage loans:
One-to-four family	$	18,083		$	21,549
Multifamily and commercial		—			—
Construction and land		—			—

Total real estate mortgage loans		18,083			21,549

Retail consumer		2,815			2,722
Automobile		2,124			2,771
Consumer finance		16,537			17,839
Leases		—			52
Corporate banking		261			522

Total accruing loans and leases delinquent more than 90 days	$	39,820		$	45,455

Total underperforming assets	$	273,740		$	251,166

Ratio of:
Underperforming assets to total assets		.64	%		.59	%
Underperforming assets to total loans, leases and real estate and other collateral owned		.84			.89

Loans and leases not reflected in the table above, but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of the borrower to comply with present repayment terms and that may result in disclosure of such loans and leases as underperforming assets in the future, are commonly referred to as “potential problem loans and leases.” The amount included in potential problem loans and leases results from an evaluation, on a loan-by-loan basis, of loans and leases classified as “substandard.” The amount of potential problem loans and leases was $31.4 million and $32.7 million at June 30, 2004 and December 31, 2003, respectively. The vast majority of our potential problem loans and leases, as well as our underperforming assets, are collateralized.

SOURCES OF FUNDS

Deposits

Composition of Deposits (Figure 10)


	6/30/04					12/31/03
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
	(Dollars in thousands)
Checking accounts:
Interest-bearing	$	4,632,750		.73	%	$	5,666,346		.85	%
Noninterest-bearing		3,549,865		—			2,532,616		—

Total checking accounts		8,182,615		.41			8,198,962		.59
Money market and savings accounts		9,032,492		1.09			8,686,356		.97

Total transactions accounts		17,215,107		.77			16,885,318		.78
Certificates of deposit		10,013,453		2.85			10,318,001		2.97

Total deposits, net	$	27,228,560		1.53		$	27,203,319		1.61

Including the effect of interest rate swaps				1.39	%				1.49	%

Investment securities and mortgage-backed securities with a par value of $576.8 million at June 30, 2004 and $637.9 million at December 31, 2003, were pledged to secure public deposits and for other purposes required or permitted by law.

Borrowings

At June 30, 2004, borrowings consisted primarily of FHLB advances. These positions were secured by our investment in the stock of the FHLB, as well as $15.0 billion in certain real estate loans and $1.9 billion in mortgage-backed securities.

FHLB Advances (Figure 11)


	6/30/04					12/31/03
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
	(Dollars in thousands)
Short-term	$	3,824,100		1.40	%	$	1,719,800		1.43	%
Long-term:
Fixed rate advances		3,227,269		5.39			5,706,614		5.70
Variable rate advances		2,909,605		1.21			2,409,604		1.19

Total advances		9,960,974		2.64			9,836,018		3.85
Plus unamortized premium on advances		9,620		—			11,275		—

Total advances, net	$	9,970,594		2.61		$	9,847,293		3.81

Including the effect of interest rate swaps				2.98	%				3.89	%

On January 27, 2004, we prepaid $2.3 billion in fixed rate FHLB advances with a weighted average cost of 6.27%, and incurred a prepayment penalty of $164.5 million before tax. These FHLB advances were due to mature between June 2005 and January 2006.

Interest Rate Swaps

We use interest rate swaps as one of the tools to manage our interest rate risk profile (defined as the sensitivity of our earnings and economic value to changes in interest rates). We utilize fixed receipt callable interest rate swaps to convert certain longer-term callable certificates of deposit into short-term and medium-term variable instruments.

Under certain of these agreements totaling $280.0 million in notional principal amount, we have agreed to receive interest from the counterparty on a notional amount at a fixed rate defined in the agreement and to pay interest at a floating rate indexed to LIBOR during the entire term of the interest rate swap. In other agreements totaling $2.4 billion in notional principal amount, we have agreed to receive interest from the counterparty on a notional amount at a fixed rate defined in the agreement, and to pay interest at a fixed rate, converting to floating rate indexed to LIBOR after the first two years of the interest rate swap term. Such interest rate swaps are designated and qualify as fair value hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. We have assumed no ineffectiveness in the respective hedging relationships. Any gain or loss on the interest rate swap was offset by a gain or loss on the certificates of deposit during the period of change in fair values.

We utilize fixed payment interest rate swaps to convert certain floating rate FHLB advances into fixed rate instruments. Under these agreements totaling $1.9 billion in notional principal amount, we have agreed to pay interest to the counterparty on a notional principal amount at a fixed rate defined in the agreement and receive interest at a floating rate indexed to LIBOR. The amounts of interest exchanged are calculated on the basis of notional principal amounts. Such interest rate swaps are designated and qualify as cash flow hedges under SFAS No. 133. We have assumed no ineffectiveness in the respective hedging relationships. Any gain or loss on the interest rate swaps was offset by the expected future cash flows on the FHLB advances during the period of change in fair values.

We utilized a fixed receipt interest rate swap to convert our $400.0 million of subordinated notes into a variable instrument. Under this agreement, we have agreed to receive interest from the counterparty on a notional amount at a fixed rate defined in the agreement and to pay interest at a floating rate indexed to LIBOR. Such interest rate swap is designated and qualifies as a fair value hedge under SFAS No. 133. We have assumed no ineffectiveness in the hedging relationship. Any gain or loss on the interest rate swap was offset by a gain or loss on the subordinated notes during the period of change in fair values.

Additionally, in 2002, we entered into $575.0 million of fixed payment and variable receipt interest rate swaps related to the issuance of the subordinated notes discussed above. However, these interest rate swaps did not qualify for hedge accounting under SFAS No. 133. For the three months ended June 30, 2004, the net unrealized loss attributed to these interest rate swaps decreased $6.5 million to an ending balance of $6.2 million. The corresponding interest rate swap liabilities were recognized in our Consolidated Statement of Financial Condition at June 30, 2004 under the caption “Accrued expenses and other liabilities.” On May 15, 2004, $375.0 million of these interest rate swaps matured.

Information on the interest rate swaps, by maturity date, is as follows:

Interest Rate Swaps (Figure 12)


	6/30/04								12/31/03
	Notional		Receiving			Paying			Notional		Receiving			Paying
	Principal		Interest			Interest			Principal		Interest			Interest
	Amount		Rate			Rate			Amount		Rate			Rate
	(Dollars in thousands)
Fixed Payment and Fixed Receipt(1)
2007	$	825,000		4.14	%		2.58	%	$	1,005,000		4.31	%		2.75	%
2008		940,000		3.65			1.99			940,000		3.65			1.99
2009		585,000		4.02			2.39			—		—			—

Total	$	2,350,000		3.92	%		2.30	%	$	1,945,000		3.99	%		2.38	%

Fixed Payment and Variable Receipt
2004	$	—		—	%		—	%	$	375,000		1.18	%		3.66	%
2006		1,609,605		1.20			3.08			609,605		1.16			3.57
2007		500,000		1.18			2.95			—		—			—

Total	$	2,109,605		1.20	%(2)		3.05	%	$	984,605		1.17	%(2)		3.60	%

Variable Payment and Fixed Receipt
2005	$	80,000		2.27	%		1.46	%	$	230,000		2.29	%		1.17	%
2006		200,000		2.51			1.28			—		—			—
2012		400,000		5.76			1.25			400,000		5.76			1.18

Total	$	680,000		4.39	%		1.28	%(2)	$	630,000		4.49	%		1.18	%(2)

(1)		Converts to variable payment indexed to LIBOR after the first two years of the interest rate swap agreement.

(2)		Rates are based upon LIBOR.

Additionally, as of June 30, 2004, we have entered into forward fixed payment and variable receipt interest rate swaps totaling $2.0 billion in notional principal amount that are not reflected in the table above. Under these agreements, we have agreed to pay interest to the counterparty on a notional principal amount at a fixed rate defined in the agreement and receive interest at a floating rate indexed to LIBOR. Settlements under these forward interest rate swaps begin between August 2004 and January 2005. The forward interest rate swaps mature between January 2007 and August 2007. The weighted average fixed payment rate on these forward interest rate swaps is 3.18%. The forward interest rate swaps will convert certain floating rate FHLB advances into fixed rate instruments. Such interest rate swaps are designated and qualify as cash flow hedges under SFAS No. 133.

Information on these forward interest rate swaps, by effective date, is as follows:

Forward Interest Rate Swaps (Figure 13)


			Paying
	Notional		Interest
	Amount		Rate
	(Dollars in thousands)
Fixed Payment and Variable Receipt Forward
Interest Rate Swaps Effective Date:
Third quarter 2004	$	1,000,000		2.79	%
First quarter 2005		1,000,000		3.57	%

Total	$	2,000,000		3.18	%

In January 2004, we terminated $1.0 billion of our forward interest rate swaps. A deferred after-tax loss of $8.4 million was included in other comprehensive income and will be amortized over the next 24 months as the related interest expense on FHLB advances is recognized.

The fair value of our interest rate swap contracts is estimated as the difference in the present value of future cash flows between our existing agreements and current market rate agreements of the same duration. Information on the fair values of the interest rate swaps is as follows:

Fair Value of Interest Rate Swaps (Figure 14)


	6/30/04			12/31/03
	(Dollars in thousands)
Unrealized gain (loss):
Fair value hedges	$	11,194		$	44,750
Cash flow hedges		33,180			(10,495	)
Unhedged interest rate swaps		(6,154	)		(14,151	)

Total fair value	$	38,220		$	20,104

The net benefit of interest rate swaps included in interest expense is as follows:

Net Benefit of Interest Risk Management (Figure 15)


	Three Months Ended						Six Months Ended
	6/30/04			6/30/03			6/30/04			6/30/03
				(Dollars in thousands)
Interest expense (income):
Deposits	$	(10,168	)	$	(7,408	)	$	(19,116	)	$	(17,190	)
FHLB advances		7,009			2,335			10,043			4,579
Subordinated notes		(4,566	)		(4,434	)		(9,165	)		(8,825	)
Unhedged interest rate swaps		2,884			3,860			6,982			7,658

Total net benefit	$	(4,841	)	$	(5,647	)	$	(11,256	)	$	(13,778	)

Liquidity

Our principal sources of funds are deposits, advances from the FHLB of Cincinnati, federal funds purchased and repurchase agreements, repayments and maturities of loans and securities, proceeds from the sale of loans and securities and funds provided by operations. While scheduled loan, security and interest-bearing deposit amortization and maturity are relatively predictable sources of funds, deposit flows and loan and mortgage-backed securities repayments are greatly influenced by economic conditions, the general level of interest rates and competition. We utilize particular sources of funds based on comparative costs and availability. We generally

manage the pricing of deposits to maintain a steady deposit balance, but from time to time may decide to supplement deposits with longer term and/or lower cost alternative sources of funds such as FHLB advances and federal funds purchased and repurchase agreements. We may, from time to time, decide to price deposits aggressively for strategic reasons which may result in significant deposit inflows.

Contractual Obligations

A comprehensive table of significant fixed and determinable contractual obligations to third parties by payment date was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003. There have been no material changes to that disclosure, except for our prepayment of $2.3 billion in fixed rate FHLB advances on January 27, 2004. See “Borrowings” above for further discussion.

Off-Balance Sheet Arrangements

In the ordinary course of business, we enter into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, standby letters of credit and commitments to purchase or sell assets. Such financial instruments are recorded in the financial statements when they are funded or the related fees are incurred or received. We anticipate that we will have sufficient funds available to meet our commitments. As of June 30, 2004, there were outstanding commitments to originate $2.1 billion of mortgage loans and other loans and leases, all at market rates. Terms of the commitments extend up to nine months, but are generally less than two months. Additionally, there were outstanding unfunded consumer lines of credit of $5.5 billion and corporate banking lines of credit of $403.4 million as of June 30, 2004. Substantially all of the consumer loans, including consumer lines of credit, are secured by equity in the borrowers’ residences. We do not expect all of these lines to be used by the borrowers. Outstanding letters of credit totaled $149.1 million as of June 30, 2004.

Capital and Dividends

Charter One, a financial holding company, is subject to regulation by the Federal Reserve Board (“FRB”) under the Bank Holding Company Act of 1956 as amended, and the regulations of the FRB, including various capital requirements. The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by each regulator that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines, specific capital guidelines must be met that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The institution’s capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require Charter One and the Bank to individually maintain minimum amounts and ratios (set forth in the table below) of total and tier 1 capital to risk-weighted assets, and of tier 1 capital to average assets. The actual regulatory capital ratios calculated for Charter One and the Bank, along with the capital amounts and ratios for capital adequacy purposes and the amounts required to be categorized as “well capitalized,” are as follows:

Regulatory Capital (Figure 16)


	6/30/04
											To Be “Well Capitalized”
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Charter One:
Total capital to risk-weighted assets	$	3,670,891		11.28	%	$	2,603,789		³8.00	%	$	3,254,737		³10.00	%
Tier 1 capital to risk-weighted assets		2,898,327		8.90			1,301,895		³4.00			1,952,842		³6.00
Tier 1 capital to average assets		2,898,327		6.86			1,689,577		³4.00			N/A		N/A
Charter One Bank:
Total capital to risk-weighted assets		3,603,196		11.08			2,602,760		³8.00			3,253,450		³10.00
Tier 1 capital to risk-weighted assets		2,638,076		8.11			1,301,380		³4.00			1,952,070		³ 6.00
Tier 1 capital to average assets		2,638,076		6.24			1,690,404		³4.00			2,113,005		³5.00


	12/31/03
									To Be “Well Capitalized”
						For Capital			Under Prompt Corrective
	Actual					Adequacy Purposes			Action Provisions
	Amount		Ratio			Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Charter One:
Total capital to risk-weighted assets	$	3,573,655		11.68	%	$	2,448,394	³8.00%	$	3,060,493	³ 10.00%
Tier 1 capital to risk-weighted assets		2,790,462		9.12			1,224,197	³4.00		1,836,296	³ 6.00
Tier 1 capital to average assets		2,790,462		6.50			1,716,047	³4.00		N/A	N/A
Charter One Bank:
Total capital to risk-weighted assets		3,525,567		11.52			2,447,262	³8.00		3,059,077	³ 10.00
Tier 1 capital to risk-weighted assets		2,409,716		7.88			1,223,631	³4.00		1,835,446	³ 6.00
Tier 1 capital to average assets		2,409,716		5.65			1,706,068	³4.00		2,132,585	³ 5.00

Management believes that, as of June 30, 2004, Charter One and the Bank individually met the capital adequacy requirements to which they were subject. Events beyond management’s control, such as fluctuations in interest rates or a downturn in the economy in areas in which the institution’s loans and securities are concentrated could adversely affect future earnings and, consequently, the institution’s ability to meet its future capital requirements.

Quarterly Stock Prices and Dividends (Figure 17)


	Three Months Ended
	6/30/04		3/31/04		12/31/03		9/30/03		6/30/03
Market price of common stock (NYSE: CF)
High	$	44.82	$	37.96	$	34.87	$	33.20	$	32.59
Low		33.10		32.91		30.31		30.10		27.24
Close		44.19		35.36		34.55		30.60		31.18
Dividends declared and paid		.29		.26		.26		.26		.24

ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

Management considers our interest-sensitivity profile when deciding on sources of funds. At June 30, 2004, our one-year gap was a negative 5.32% of total interest-earning assets.

A comprehensive qualitative and quantitative analysis regarding market risk was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003. The assumptions used in our model have been updated as of June 30, 2004. The table below indicates the estimated impact on net interest income under the various interest rate scenarios as a percentage of base case net interest income projections.


Changes in	Estimated Percentage Change
Interest Rates	in Future Net Interest Income
(basis points) (1)	12 Months
+200 over one year		(1.38	)%
+100 over one year		(.24	)
- 100 over one year		(.48	)

(1)

In general, short and long-term rates are assumed to increase or decrease, in parallel fashion, across all four quarters and then remain unchanged. However, the rates paid on core deposits are assumed to reprice at only half the increment.

Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies.

ITEM 4. Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Section 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of June 30, 2004 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods

specified in the SEC’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended June 30, 2004, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

PART II – OTHER INFORMATION

ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On April 23, 2002, the Company’s Board of Directors authorized management to repurchase up to 10% of the Company’s outstanding common stock, or approximately 22 million shares, under a program of open market purchases or privately negotiated transactions. The plan does not have an expiration date. Information on the shares purchased during the first and second quarters of 2004 is as follows.

Quarterly Stock Repurchase Activity (Figure 18)


					Total Number of		Maximum Number of
					Shares Purchased		Shares that May Yet
	Total Number of		Average Price		As Part of Publicly		Be Purchased
	Shares Purchased		Per Share		Announced Plan		Under the Plan
January 1, 2004 – January 31, 2004		—		—		—		6,424,163	(1)
February 1, 2004 – February 29, 2004		1,715,900	$	35.72		1,715,900		4,708,263
March 1, 2004 – March 31, 2004		21,200		36.41		21,200		4,687,063

First quarter 2004		1,737,100		35.73		1,737,100

April 1, 2004 – April 30, 2004		—		—		—		4,687,063
May 1, 2004 – May 31, 2004		—		—		—		4,687,063
June 1, 2004 – June 30, 2004		—		—		—		4,687,063

Second quarter 2004		—		—		—

Total		1,737,100	$	35.73		1,737,100

(1)

Amount represents the number of shares available to be repurchased under the plan as of December 31, 2003.

ITEM 4. Submission of Matters to a Vote of Security Holders

(a) (b) (c) The Company held its annual meeting of shareholders on April 21, 2004. The following matters were voted on at the meeting:


	For		Withheld
1. The election of six directors, set forth below, with terms ending in 2007:
Patrick J. Agnew		181,975,886		9,270,513
Denise Marie Fugo		182,529,324		8,717,074
Charles J. Koch		187,292,843		3,953,556
Ronald F. Poe		176,666,837		14,579,562
Jerome L. Schostak		179,696,126		11,550,272
Mark Shaevsky		176,721,167		14,525,232

The following are the names of the directors (and remaining terms) whose terms continued after the meeting:

Phillip Wm. Fisher (term ending 2006)
Mark D. Grossi (term ending 2006)
Karen R. Hitchcock (term ending 2006)
John D. Koch (term ending 2006)
Michael P. Morley (term ending 2006)
Joseph C. Scully (term ending 2006)
John P. Tierney (term ending 2006)
Herbert G. Chorbajian (term ending 2005)

Barbara J. Mahone (term ending 2005)
Richard W. Neu (term ending 2005)
Victor A. Ptak (term ending 2005)
Melvin J. Rachal (term ending 2005)
Leonard S. Simon (term ending 2005)


							Broker
	For		Against		Abstain		Non-Votes
2. Approval of the proposed amendments to the Charter One Financial, Inc. 1997 Stock Option and Incentive Plan.		135,827,157		16,021,098		2,984,746		36,413,396
3. Ratification of the appointment of Deloitte & Touche LLP as Charter One Financial, Inc.’s independent auditors for the year ending December 31, 2004.		173,595,381		15,267,702		2,383,315		—

ITEM 5. Other Information

Cash Dividend – On July 21, 2004, the Company’s Board of Directors declared a regular quarterly cash dividend of $.29 per share. The cash dividend is payable August 20, 2004 to shareholders of record on August 6, 2004.

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits: See Index to Exhibits.

(b) Reports on Form 8-K:

On April 5, 2004, the Company filed a report on Form 8-K correcting its proxy statement for its April 21, 2004 annual meeting of shareholders. Additionally, the Company clarified its disclosure regarding the total tax fees paid to its principal independent auditors.

On April 19, 2004, the Company filed a report on Form 8-K containing its earnings release dated April 19, 2004.

On May 5, 2004, the Company filed a report on Form 8-K announcing that it had entered into Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Citizens Financial Group, Inc., a Delaware corporation (“Citizens”), Cardinal Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Citizens, and, solely with respect to Article 11 of the Merger Agreement, The Royal Bank of Scotland Group plc, a public limited liability company incorporated under the laws of Scotland and an indirect parent of Citizens.

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: August 10, 2004		/s/ Charles John Koch

		Charles John Koch
		Chairman of the Board, President and Chief
		Executive Officer
		(Duly Authorized Officer and Principal
		Executive Officer)
Date: August 10, 2004		/s/ Richard W. Neu

		Richard W. Neu
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal
		Financial and Accounting Officer)

INDEX TO EXHIBITS


EXHIBIT
NUMBER		DESCRIPTION
2.1		Agreement and Plan of Merger, dated as of May 4, 2004, by and between Charter One Financial, Inc., Citizens Financial Group, Inc., Cardinal Acquisition Corp. and, solely with respect to Article 11 of the Agreement, The Royal Bank of Scotland Group plc, filed on May 10, 2004 as Exhibit 2.1 to Registrant’s Report on Form 8-K (File No. 001-15495), is incorporated herein by reference.

3.1		Registrant’s Second Restated Certificate of Incorporation, as amended and currently in effect, filed as Exhibit 3.1 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 001-15495), is incorporated herein by reference.

3.2		Registrant’s Bylaws, as amended and restated and currently in effect, filed as Exhibit 3.2 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 001-15495), is incorporated herein by reference.

4.1		Form of Certificate of Common Stock, as currently in effect, filed as Exhibit 4.1 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 001-15495), is incorporated herein by reference.

4.2		Amended and Restated Stockholder Protection Rights Agreement, dated October 20, 1999, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.), as rights agent, filed as Exhibit 2 to the Company’s Registration Statement on Form 8-A/A filed on October 30, 1999 (File No. 001-15495), is incorporated herein by reference.

4.3		The Registrant hereby agrees to furnish to the Securities and Exchange Commission, upon request, with copies of all instruments defining rights of holders of long-term debt of Charter One and its consolidated subsidiaries.

10.1		Registrant’s Long-Term Stock Incentive Plan, filed on January 22, 1988 as Exhibit 10.1 to Registrant’s Registration Statement on Form S-1 (File No. 33-16207), is incorporated herein by reference.

10.2		Registrant’s Directors’ Stock Option Plan, filed on January 22, 1988 as Exhibit 10.2 to Registrant’s Registration Statement on Form S-1 (File No. 33-16207), is incorporated herein by reference.

10.3		Charter One Bank, F.S.B. Executive Incentive Goal Achievement Plan, filed as Exhibit 10.8 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 000-16311) is incorporated herein by reference.

10.4		First American Savings Bank, F.S.B. Nonqualified Retirement Plan and First Amendment thereto, filed as Exhibit 10.17 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 000-16311), are incorporated herein by reference.

10.5		Amendment 1, dated May 3, 1996, to Forms of Supplemental Retirement Agreements, dated October 31, 1995, between Charter One and Charles John Koch, Richard W. Neu, John David Koch, Mark D. Grossi, and Robert J. Vana filed as Exhibit 10.7 to the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 000-16311), is incorporated herein by reference. The Agreements, originally filed on July 25, 1995 as Exhibits 10.4 and 10.5 to Registrant’s Registration Statement on Form S-4 (File No. 33-61273), are incorporated herein by reference.

10.6		Amended and Restated Employment Agreements, effective August 1, 1999, between Charter One Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and Robert J. Vana filed as Exhibit 10.8 to Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-16311), is incorporated herein by reference.

10.7		Alliance Bancorp 1997 Long-Term Incentive Stock Benefit Plan, filed as an attachment to the proxy statement for the annual meeting of stockholders of Alliance held on May 28, 1997 (File No. 000-20082), is incorporated herein by reference.

10.8		Hinsdale Financial Corporation 1994 Incentive Stock Option Plan, filed as an attachment to the proxy statement for the annual meeting of stockholders of Alliance held on February 8, 1995 (File No. 000-20082), is incorporated herein by reference.


EXHIBIT
NUMBER		DESCRIPTION
10.9		Hinsdale Financial Corporation 1992 Stock Option Plan for Outside Directors and the Hinsdale Financial Corporation 1992 Incentive Stock Option Plan, filed as attachments to the proxy statement for the annual meeting of stockholders of Alliance held on February 10, 1993 (File No. 000-20082) is incorporated herein by reference.

10.10		Charter One Financial, Inc. 1997 Stock Option and Incentive Plan, as amended and restated, filed as Exhibit 10.13 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-15495), is incorporated herein by reference.

10.11		1992 Stock-Based Compensation Plan of RCSB Financial, Inc., filed on October 8, 1997, as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33259), is incorporated herein by reference.

10.12		Home Federal Savings Bank Stock Compensation Program, filed on September 29, 1997 as an exhibit to Post-Effective Amendment Number One on Form S-8 to Form S-4 (File No. 333-33169), is incorporated herein by reference.

10.13		The RCSB Financial, Inc. Non-Employee Director Deferred Compensation Plan, as amended and restated on December 1, 1998, filed as Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 000-16311), is incorporated herein by reference.

10.14		ALBANK Financial Corporation 1992 Stock Incentive Plan for Key Employees, as amended and restated as of December 18, 1995, filed as Exhibit 10.11 to ALBANK’s Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 000-19843), is incorporated herein by reference.

10.15		ALBANK Financial Corporation 1995 Stock Incentive Plan for Outside Directors, filed as Exhibit 10.12.1 to ALBANK’s Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 000-19843), is incorporated herein by reference.

10.16		ALBANK Financial Corporation 1992 Stock Incentive Plan for Outside Directors, filed as an appendix to the Proxy Statement for the 1992 Annual Meeting of the Stockholders of ALBANK held on October 26, 1992 (File No. 001-19843), is incorporated herein by reference.

10.17		Employment Agreement, dated November 30, 1998, between Charter One Financial, Inc. and Herbert G. Chorbajian, filed as Exhibit 10.20 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 000-16311), is incorporated herein by reference.

10.18		Charter One Financial, Inc. Top Executive Incentive Goal Achievement Plan, filed as Appendix A to the Registrant’s Proxy Statement for the 2003 Annual Meeting of Shareholders held on April 22, 2003 (File No. 001-15495), is incorporated herein by reference.

10.19		Charter One Bank, N.A.’s Director Non-Stock Deferred Compensation Plan, filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-15495), is incorporated herein by reference.

10.20		Charter One Bank, N.A.’s Non-Stock Deferred Compensation Plan, filed as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-15495), is incorporated herein by reference.

10.21		Charter One Bank, N.A.’s Stock Deferred Compensation Plan, filed as Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-15495), is incorporated herein by reference.

10.22		Master Trust Agreement for Charter One Financial, Inc. Deferred Compensation Plans, filed as Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-15495), is incorporated herein by reference.

10.23		Amendment No. 1 to the amended and restated Charter One Financial, Inc. 1997 Stock Option and Incentive Plan, filed as Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-15495), is incorporated herein by reference.


EXHIBIT
NUMBER		DESCRIPTION
10.24		Charter One Financial, Inc. 2004 Senior Executive Stock Unit Deferred Compensation Plan and Charter One Financial, Inc. 2004 Senior Executive Cash Deferred Compensation Plan, effective February 1, 2004, filed as Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-15495), is incorporated herein by reference.

10.25		Charter One Financial, Inc. 2004 Senior Executive Stock Unit Deferred Compensation Plan Agreements, effective February 1, 2004, between Charter One Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and Robert J. Vana, filed as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-15495), is incorporated herein by reference.

10.26		Amendment 2, dated July 31, 2002 (but effective March 20, 2001), to Forms of Supplemental Retirement Agreements between Charter One Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and Robert J. Vana, filed as Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-15495), is incorporated herein by reference.

10.27		Amendment 3, dated February 1, 2004, to Forms of Supplemental Retirement Agreements between Charter One Financial, Inc. and Charles John Koch, Richard W. Neu, John D. Koch, Mark D. Grossi, and Robert J. Vana, filed as Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-15495), is incorporated herein by reference.

11		Statement Regarding Computation of Per Share Earnings

31.1		Certification Required by Securities Exchange Act of 1934 Rule 13a-14(a) (Chief Executive Officer)

31.2		Certification Required by Securities Exchange Act of 1934 Rule 13a-14(a) (Chief Financial Officer)

32		Certifications Required by Section 1350 of Title 18 of the United States Code

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CHARTER ONE FINANCIAL INC 10-Q