Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, February 22, 1995 TAG: 9502220081
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
The thrift may have been being coy, however. What the company probably meant, said one securities analyst, was the institution definitely is for sale.
In a three-paragraph statement, Charter Federal reported that its board of directors was ``currently evaluating strategic alternatives in order to maximize shareholder value.'' One of those alternatives, the statement said, was the possible sale of the thrift.
The thrift also said it had hired Wheat First Butcher Singer, a Richmond investment banker, to help it evaluate its options.
What Tuesday's statement means is Charter Federal's board is probably planning to sell the institution ``plain and simple,'' said Vernon Plack, a securities analyst with Scott & Stringfellow, another Richmond investment firm. The fact the institution has hired an investment banker supports that conclusion, he said.
The banking industry continues to suffer from overcapacity, and bigger banks are now paying a premium for savings institutions, Plack said. The question facing Charter Federal, he said, is whether to give its shareholders a 30 percent return on their investment or wait and grow into that.
The volume of trading in Charter Federal stock was up last week, which indicates something is going on, Plack said. Because word about the thrift's plans was leaking out, it may have decided to release the statement to let everyone know it is weighing its alternatives, he said.
Plack said he guessed the thrift would sell for between $14 to $16 a share of common stock. That would put the value of its sale at $71.4 million to $81.6 million, based on 5.1 million shares outstanding. Charter Federal's stock, which trades on the Nasdaq market, was selling for $13.25 a share at the close of trading Tuesday, up $1 on trading of 36,900 shares.
Charter Federal declined to comment on its reasons for considering a sale and added that it would have nothing to say on any negotiations until it decides the time is right. Such silence follows regulations set by the Securities and Exchange Commission.
Charter Federal began operation in 1920 as a federally chartered stock savings bank in Bristol. It currently operates 26 offices in Southwest Virginia and Northeast Tennessee. At year's end, it had $737 million in assets, $518 million in deposits and $45.3 million in stockholders' equity.
The government threatened Charter Federal with seizure in 1993 after a federal appeals court ruled that the bank no longer could use an accounting method that the government had approved earlier to reward thrifts for taking over failed institutions. Under the changed rule, Charter Federal lacked sufficient capital to meet federal standards.
However, it survived a legal battle after it began earning money again and was able to sell stock to private investors, which increased its financial strength and enabled it to meet stricter government standards for capitalization.
Last month, Charter Federal announced net income for the second quarter of its 1995 fiscal year, ending Dec. 31, of $1.6 million, or 32 cents per share of common stock, compared with $2.6 million, or 50 cents per share, the preceding year. The quarterly results included the sale of its Danville branch office for $2.4 million and the addition of $2.4 million to its provision for loan losses in the face of rising interest rates.
For the first half, the thrift reported earnings of $3.7 million, or 72 cents per share, compared with $4.9 million, or $1.20 per share, a year earlier, including a $1 million gain from an accounting change.
On Friday, Charter Federal announced it had agreed to sell its downtown office to the Roanoke Regional Chamber of Commerce for $365,000.
by CNB