deposits and related revenue
Aggressive organizations not only take advantage of opportunities, they create their own. With the disruption in the equities markets, it was easy to predict significant fund flows into depository institutions. But few banks could take full advantage of this unique turn of events as successfully as Charter One. As a result, we posted organic retail deposit growth of 17% and a 48% rate in core deposits – again among the best in banking. + This kind of success only adds franchise value if we continue to monitor and enhance the profitability of each customer relationship. While aggressively attracting new customers, we also were effective at encouraging retention and improving the overall profitability of our household base. In addition to being a key element in strengthening our company, deposit growth yielded another benefit: a 20% increase in deposit-related revenue. This was the fifth consecutive year that we reported growth of deposit-related revenue in excess of 20%, and we’re projecting an additional 20% in 2002.

record asset generation and balance sheet management
This year’s interest rate environment drove residential lending volumes to extraordinary levels. More than any other time in recent memory, we saw the importance of residential mortgage production in providing flexibility in our balance sheet and to serve as a natural hedge against various market risks. We generated $9.2 billion in retail originations, far exceeding our portfolio goals, leading us to create $5.3 billion in new mortgage-backed securities. Additionally, sales of such mortgage-backed securities generated a record level of gains. These gains helped provide a cushion against a modest increase in credit costs associated with the softening economy and accelerated mortgage servicing amortization costs associated with higher prepayment rates. + The residential mortgage origination process helped us in other ways, too. It provided us with opportunities to cross-sell profitable home equity lines of credit (60% of all new loans) and high-balance core deposit accounts (26% of new loans). Indeed, despite this year’s refinance environment where it was very difficult to increase home equity lines, we posted a 33% increase, to $2 billion in outstandings. Our loan officers also opened nearly $200 million in new high-balance core deposit accounts. + Additionally, we continued to make significant progress in our long-stated goal to lessen our dependence on single-family loans. While the total loan portfolio increased by 7%, non-single-family loans jumped 19% and now represent 61% of our total portfolio.

fortress-like balance sheet
We have always prided ourselves on our strong balance sheet and our conservative accounting policies. Together, they represent true balance sheet integrity. Our consumer banking success last year led to an even stronger balance sheet: deposit growth improved our loan-to-deposit ratio to 102% from 122%, and we moved the reserve ratio to .98% of loans from .78%. Additionally, our internal capital generation rate allowed us to repurchase 4.3 million common shares and end the year with 7.7% capital and 6.7% tangible capital.

outlook
In closing, we have confidence in our business strategy, and believe we are poised to deliver terrific results in 2002 and beyond to our customers, employees and share-holders. Furthermore, we expect to accomplish this in a conservative manner that reflects our commitment to an organization built on an aggressive sales culture, obsessive execution and measurable results. The importance of these to our success is discussed in the following pages of this year’s annual report. As you read ahead, it becomes obvious that we have an exceptional group of employees dedicated to delivering exceptional results. On behalf of the Board of Directors, I thank them for making Charter One all that it is. I’d also like to recognize our Directors for their counsel and support. We are fortunate to have such a talented and experienced group of men and women helping guide our direction. And, above all, I thank our shareholders for embracing and believing in Charter One and our prospects.

Charles John Koch
Chairman, President and Chief Executive Officer
February 22, 2002