A flurry of trading in Bristol, Va.-based Charter Federal Savings Bank stock at the end of last week sparked rumors of a takeover.

On Friday, 87,500 shares changed hands, representing a 1035% jump above its average daily trading volume. This was on top of the 50,000 that had been traded the previous day. The two-day total was about 50% more than the stock's activity for all of January.

By Tuesday morning the stock price, which had hovered around $10 most of last month, had climbed to $13.25.

"There's a little smoke over there," said Merrill H. Ross, equity analyst at Wheat First Butcher Singer in Richmond. "There are some rumors going around."

Those rumors consisted of talks with large banks from Virginia, Tennessee, and North Carolina.

The candidates mentioned by analysts were First Virginia Banks Inc. of Falls Church, Crestar Financial Corp. of Richmond, and First Union Corp. and NationsBank Corp., both of Charlotte, N.C. From Memphis, Union Planters Corp. and First Tennessee National Corp. were listed as possible suitors.

Charter Federal officials confirmed Tuesday that they they are "evaluating strategic alternatives" in order to maximize shareholder value. This includes selling the bank, they said.

"First Union is possible because they've been very active in acquiring thrifts," said David M. West, first vice president of Davenport & Co. in Richmond. "They obviously feel very comfortable with that."

The $737 million-asset Charter Federal, which is one of the largest thrifts in the state, offers an unusual two-state franchise to a potential acquirer, analysts said. Nine of its 26 branches are in Tennessee.

"There is some value to that," said Vernon C. Plack, bank analyst at Scott & Stringfellow in Richmond. "And they've done a good job of turning it around. I'm sure that's attracted some attention."

Just a year and a half ago, Charter Federal was nearly insolvent and on the verge of being seized by regulators. In a move that attracted nationwide publicity, the company bought some time by suing the government to stay out of conservatorship.

A $42 million rights offering in July 1993 and new management have helped bring the thrift back to profitability.

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