Charter One Financial Inc. seems pretty glad it made that move into Chicago two years ago.

The $33 billion-asset Cleveland thrift company entered the market in 1999 with its purchase of St. Paul Bancorp. Last year, the 58 branches that came with that deal brought in nearly 25% of the company’s deposit volume, said Charles J. Koch, chairman and chief executive, during a conference in New York on Thursday. In the first quarter the new Chicago branches accounted for $750 million of mortgages and consumer loans. “To say volume is exploding in Chicago is an understatement,” Mr. Koch said in his presentation at the UBS Warburg financial services conference.

The acquisition of St. Paul is not the end for Charter One’s expansionist ambitions in the Chicago market.

The company expects to close a deal for Alliance Bancorp this summer. In that transaction Charter One is to pick up 19 branches, $1.2 billion of deposits, and $2 billion of assets in Chicago.

The company has pinned much of this year’s growth plans on the area’s vibrant business. Several competitors also see opportunities there, including Cincinnati’s Fifth Third Bancorp, which has been expanding into Chicago by acquisition during the past year.

If the $245 million Alliance deal is completed Charter One would have $5 billion of deposits and 77 branches in the metropolitan area, making it the sixth-largest retail banking operation in Chicago.

The entrance into Chicago is one reason Charter One reported record earnings for the first quarter, Mr. Koch said. Earnings per share of 54 cents were 8% higher than the year earlier. Mr. Koch said he is comfortable with analysts’ earnings estimate of $2.31 per share for the year.

“For 2001 we are quite bullish,” he said. “We think net margins will continue to improve. Our focus is on retail banking. It is a space that is not too crowded.”

The company increased core deposits by $1.2 billion in the first quarter, exceeding its goal for the year, he said.

Charter One also plans to reduce the number of one- to four-family mortgages on its balance sheet, said Richard Neu, chief financial officer and treasurer.

“We think we have too many mortgages on the books and too much interest rate risk,” Mr. Neu said. “We will get a better optimized mix.”

The company has used cross-selling to boost its retail banking revenues. For example, mortgage loan officers and branch-based retail brokers are encouraged to sell deposit accounts. Charter One plans to continue capitalizing on retail banking, where revenue rose 30% from the first quarter of 2000.

“Retail deposits are the heart of the value of a franchise,” Mr. Koch said.

Shares of Charter One fell 0.10%. The American Banker index of 225 bank stocks rose 0.10%, and the Dow Jones industrial average rose 0.63%.

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