Charter One Financial Inc., one of the most expansion-minded thrifts in the country, is moving beyond its Midwest roots.

The Cleveland-based company agreed Wednesday to buy RCSB Financial Inc., parent of New York's Rochester Community Savings Bank, in a stock swap worth about $635 million.

Charter One has $13.9 billion of assets and 174 branches in Ohio and Michigan. RCSB has $4 billion of assets and 36 branches in upstate New York.

"It's a very logical extension eastward for our company," said Charter One chief executive Charles John Koch.

The deal, scheduled to close in the fourth quarter, would vault Charter One to seventh place in thrift assets, from 13th at yearend.

Observers said the deal will also accelerate Charter One's drive to transform itself from a mortgage lender to a consumer bank.

"Rochester is well-known for its auto-lending expertise, and this will help Charter One," said Caren Mayer, thrift analyst at Montgomery Securities, San Francisco.

Charter One is to exchange 0.91 share for each RCSB share. At about $42.50 per share, the deal price is a 25% premium over RCSB's price Wednesday afternoon. The deal is expected to add 3% to 5% to Charter One's earnings within a year of closing.

Charter One is paying two times book value and 16 times Rochester Community's earnings for the last 12 months. The merger is being accounted for as a pooling-of-interests.

Charter One had made 15 purchases since 1981. In 1995 it expanded into Michigan, buying FirstFed Michigan Corp. for $1.3 billion. Last year it bought 21 branches in Michigan from First Nationwide Bank. It also made a bid for Standard Federal Bancorp, but withdrew its offer for the Troy, Mich., thrift, which was sold to ABN Amro N.V. for $1.9 billion in November.

Bank stocks plummeted Wednesday after the Commerce Department released lower-than-expected trade deficit figures, reigniting fears of inflation.

The Standard & Poor's Bank index fell 2.12%, while the Dow Jones industrial average declined 0.17%. The S&P 500 declined 0.27% and the Nasdaq bank index 0.15%.

The biggest losers among bank stocks included Wells Fargo & Co., down $7.625 to $258; BankAmerica Corp., down $3.125 to $114.375, and Citicorp, off $3.375 to $116.75.

Gainers included State Street Boston, up $1.125 to $90.125, Northern Trust Corp., up 37.5 cents to $47.50, and PNC Corp., which rose 25 cents to $41.625.

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