Charter Federal Savings Bank, the back-from-near-death Virginia thrift famous for taking on the federal government, is again worried about some of its assets.

But this time interest rates, not government-granted goodwill, are to blame. In addition, the $736 million-asset Bristol, Va., thrift isn't in a fight for its life about it.

Charter Federal added $2.4 million to its loan and foreclosed-property loss reserves, pushing net income for the Dec. 31 quarter down 38% to $1.6 million.

For the first six months of its fiscal year, net income fell 24% to $3.7 million.

On top of the margin squeeze that most thrifts are having to deal with in this season of rising interest rates, Charter's management is concerned that some borrowers won't be able to stomach the increased expense on their prime-tied loans.

"That's the gist of it," said Douglas D. Deppen, chief financial officer. "What we're concerned about is the more speculative stuff."

Mr. Deppen said that when interest rates rise, the increased borrowing costs could push already marginal borrowers over the edge and into default. He said the bank's primary concern is for commercial borrowers.

C.R. McCullar, chief executive, said the increased loss provision would likely be a one-time event.

"Management feels the need to further increase provisions in the future should be significantly reduced," he said. "We will, however, continue to closely monitor its asset quality and make additional provisions in the future, if warranted."

Nonperforming assets have fallen, however, from 2.34% a year ago to 2.92%.

Charter Federal, with an equity-to-assets ratio of 6.15%, is still well capitalized. It's a stark change from three years ago.

Charter spent much of the early '90s with little or no regulatory capital while it fought with the Office of Thrift Supervision over the treatment of goodwill capital.

Though Charter never won the legal fight with the government, the court battles extended its life enough for it to raise $42 million in a stock rights offering in July 1993. Since then, the company has been on a slow but steady trip back from the brink.

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