In buying Albank Financial Corp., Charter One Financial Inc. hopes to marry its strength in generating loans with Albank's surplus of cheap deposits. Leading the charge will be Charter One's chief lending officer, John D. Koch.

In an interview this week, Mr. Koch said he expects Charter One, which would have $23.6 billion of assets after the merger, to repeat the successes it enjoyed with its 1995 purchase of FirstFed Michigan and last year's deal for Rochester (N.Y.) Community Savings Bank.

When Charter One bought FirstFed, he said, the Michigan company held "a lowly sixth place" in mortgage production in its market. This year, Charter One ranks second in greater Detroit.

As for the Rochester thrift, just last year it ranked ninth among mortgage lenders in Rochester. This year, it has tripled its mortgage production in that market, to $260 million, making it the largest there.

"It's a pole vault over the competition," Mr. Koch said.

For a thrift, Albank has an unusually high proportion of core deposits- 46% of all deposits are checking accounts with an average cost of 4.05%. Upon completion of the merger, Charter One would be able to boost profits by funding a bigger portion of loans with deposits-66% at the combined company versus 60% at Charter One currently.

Charter One is also hoping that its retail bank loans will be as popular in Albank's upstate New York, Massachusetts, and Vermont branches as they have been in the Michigan, Ohio, and New York markets where it already operates.

Mr. Koch singled out two kinds of loan as examples of products Charter One has imported into new markets.

"Penny loans"-mortgages on which Charter One charges a penny in closing costs-have been very popular in its New York retail branches, Mr. Koch said.

New York homebuyers like them particularly, he said, because the state charges a mortgage filing tax, which Charter One pays, along with the traditional appraisal, title search, credit search, and other loan processing costs.

In return, Charter One charges a somewhat higher interest rate-currently a quarter percentage point higher than on conventional loans. And it slaps on a prepayment penalty to make sure it can recover its up-front costs if the borrower prepays.

"It takes a while for the competition to catch on" to the product's popularity, Mr. Koch said.

Charter One has also made a push this year in cross-selling home equity lines of credit, which combined with the first mortgage can equal up to 100% of a home's value, Mr. Koch said.

"People typically take out less," Mr. Koch said. But the option to borrow as much as 100% of the home's value "certainly gets the consumer's attention."

The lines of credit are approved at the same time as the first mortgage. Soon after getting the mortgage, the homebuyer can write checks against the account, often using the money to fix up the new home, Mr. Koch said.

The lines of credit have so far been offered through Charter One's retail branches and are just beginning to be offered through Charter One's Richmond, Va.-based mortgage company, he said.

On the most aggressive home equity loans-those which combined with a mortgage equal the home's value-Charter One offers a six-month teaser interest rate, after which the rate increases to the prime rate plus 1.75%.

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