Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 5, 1991 TAG: 9102050218
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Medium
Charter's suit for an injunction against the OTS and the Federal Deposit Insurance Corp. was filed in U.S. District Court in Abingdon after the regulatory office disapproved the thrift's capital plan.
The suit attempts to head off government appointment of a conservator or a receiver for Charter.
Charter, with operating branches in the Roanoke and New River valleys, said that it expects to be in full compliance with the government's existing capital requirements by June 30, 1994.
But if the petition for an injunction is not successful, Charter said it fears that disapproval of the capital plan will lead to a federal prohibition against making new loans or investments and to further restrictions.
A key issue in the suit is Charter's complaint that the Office of Thrift Supervision has refused to permit Charter to include customer "good will" as an asset for regulatory capital purposes.
Charter said this refusal is a breach of a contract with the federal government made during the 1980s, when Charter acquired weaker savings and loan associations at the government's request.
Charter was hurt when Congress abolished good will as an asset for thrifts that had bailed out weaker institutions.
Charter has been on the government's list of institutions that do not meet new standards for capital strength. The company was formed in 1982 by a merger of First Federal of Bristol, a healthy thrift, with Peoples Federal Savings and Loan of Roanoke and First Federal of New River Valley, both of which were operating with negative net worth.
Seven years later, Charter had to write off $6.22 million for bad credit accounts it acquired from another thrift in East Tennessee.
Under its capital plan, required by federal legislation, Charter has been reducing its assets and liabilities. The company also laid off executives and other employees to reduce operational costs a year ago.
If the injunction is granted, Charter said it expects to continue operations with no new regulatory operating limits.
The Office of Thrift Supervision recently has taken over two other thrifts that do business in the Roanoke area - TrustBank Savings, which has two branches in the Roanoke Valley, and CorEast, which operates out of Richmond but is legally based in Roanoke.
Charter Federal also has been trying to recover $2.5 million that it claims was embezzled by Cheryl Benson Perry, a former vice president in the savings bank's office in downtown Roanoke. Charter has sued Perry to recover the money.
Charter also announced Monday that its most recent quarterly loss was smaller than the loss in the previous quarter and in the same quarter one year ago. In the quarter ending Dec. 30, Charter said it lost $652,000, compared with a loss of $955,000 in the quarter ending Sept. 30 and a loss of $4.7 million in the quarter ending a year ago.
As of June 30, 1990, Charter management said it had $74.3 million in substandard loans, $6 million in loans whose repayment was doubtful and $2.2 million was marked off as a loss.
by CNB