Charter One Financial Inc. said Tuesday that it would buy 14 branches, $400 million of deposits, and $120 million of commercial loans from Chittenden Corp. of Burlington, Vt.

The transaction, which would also include a $42.5 million, or 10.5%, deposit premium, would expand Charter One's presence in the state beyond the 12 branches it acquired last year in its deal for Albank Financial Corp.

"This is a very attractive deal that steps up Charter One's presence in the Northeast and puts them on the road to building a premier U.S. franchise up there," said Thomas O'Donnell, an analyst at Salomon Smith Barney in New York.

The deal would also raise Cleveland-based Charter One from fifth place to third in Vermont deposit market share, behind Chittenden and No. 1- ranked Banknorth Group of Burlington.

Analysts described the deal as a "classic move" for Charter One, which tends to buy into slow-growing, established markets away from major cities. These areas tend to be populated by "very solid, hardworking, low-credit- risk citizens that have the same ethic as the people in Charter One's home markets," Mr. O'Donnell said.

The $24.6 billion-asset Charter One also has branches in Ohio, Michigan, New York, and Massachusetts.

"They can get better margins and better penetration in these kinds of markets," said Charlotte A. Chamberlain of Jefferies & Co. in Los Angeles.

Charter One is the first large regional institution to rank among the top five in Vermont deposit share.

Though the average banking customer in Vermont tends to shy away from large financial institutions, Ms. Chamberlain said, Charter One has the know-how to attract business.

"It is a market where the residents are looking for an institution that is not a behemoth, and Charter One is good at attracting those types of people," Ms. Chamberlain said.

The price for the branch package was also good, according to Mr. O'Donnell. Similar deals have required deposit premiums closer to 15%, he said.

Charter One said the transaction is expected to close in the fourth quarter. It should add roughly 2 cents per share to earnings in 2000, the thrift said.

Chittenden had been asked by federal regulators to divest the branches and deposits because of its own pending merger with Vermont Financial Services Corp. of Brattleboro. That transaction is scheduled to close by June 30.

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