By BILL ATKINSON

BRISTOL, Va. -- Cecil R. McCullar, president and chief executive of Charter Federal Savings Bank, sat behind his office desk on the afternoon of last July 9 anxiously awaiting the phone call that would save the troubled thrift.

Charter, with its $693 million in assets, was nearly in the grave: It had a negative tangible capital position of $12.7 million, $41 million in goodwill that would have to be written off, and little time before the regulators took action.

Shortly after lunch, Mr. McCullar's phone rang, and with it came a commitment of about $5 million, the remaining chunk of $42 million raised in a rights offering.

"It was quite a relief," said Mr. McCullar, who is built like a linebacker and speaks in a deep, booming voice. "I called a meeting of our supervisors to let them know. I couldn't conduct it. I couldn't speak. I was emotionally distraught."

Given Up for Dead

Mr. McCullar and Charter's board accomplished what many banking executives in desperate situations have failed to do - save an institution from slipping into the abyss of insolvency. Not only did they fight the government in court to prevent a takeover, but they coaxed the regulators into giving them more time to raise funds, and persuaded investors to gamble on a community bank that many saw as busted beyond repair.

"It was a remarkable success for a company ... that had negative tangible capital and generally was perceived to have a limited chance of survival," said Rock Tonkel, a former official with the Office of Thrift Supervision.

"The deck was stacked against them," said James Maybry, managing director of Wheat First Butcher Singer, a Richmond-based brokerage firm that advised Charter in the offering. "A lot of people would have bet against them a year ago."

Stock Price Climbs

The investors' gamble has paid off thus far. Charter's stock is trading in the $12 range, up about $2 since the rights offering. It hit a high of $15 3/8 in October. The thrift earned $7.4 million for the first nine months of its fiscal year, which ended March 31, compared with a $38 million loss a year ago.

Nonperforming assets have been trimmed by about $4 million, to $16.5 million, and assets increased to $724 million after four straight years of decline.

"I'm very pleased," said Robert E. Torray, president of the Bethesda, Md.-investment management firm bearing his name, who increased his stake in the company recently to 16% from about 11.55%. "I think the price was extremely attractive ... relative to the value of the franchise."

Intangible Assets

Investors were sold on Charter for several reasons: It had two straight profitable quarters. a solid franchise on the Virginia-/Tennessee border, two directors who had committed $10 million of their own money, and 57-year-old Cecil R. McCullar, better known as "Andy," was running the show.

Mr. McCullar had big-bank experience and was well known in southwestern Virginia. For nearly two years he managed 500 employees and 43 branches as retail executive for Dominion Bank. But Dominion was acquired in September 1992 by First Union Corp., and Mr. McCullar was dumped March 1, 1993. Two weeks later he joined Charter.

"I recommended him highly for the job," said Ted Testerman, who owns men's clothing stores in Bristol and is a Charter stockholder. "I thought Andy was a good operator for the bank."

"After he became CEO it gave me a little more comfort in investing," said Bill Brammer, treasurer of Bassett Furniture Industries Inc., Bassett Va.

Four Yards and Dust

Mr. McCullar's gameplan for Charter isn't full of razzle-dazzle, either. Since taking charge a year ago, he continues to position Charter as a one-to-four family, consumer, and small busines lender. He also wants to make his branches more competitive and fill in gaps in Charter's sprawling 26-office network, which stretches from Roanoke, Va., to Knoxville, Tenn., by opening new branches and making an acquisition in the next year or two.

"Our goal is to hold it in the road and not get fancy," he said.

Woes Called Manageable

Mr. McCullar has several problems to overcome, but industry observers say they are manageable. For one, sour loans are 3.34% of total loans. The thrift also agreed to guarantee repayment of principal and interest on municipal bond issues of moderate and low-income housing projects in Florida and Kansas. It has an $18 million exposure, but hopes to be out of the agreement in the near future.

"Once they get those straggling nonperforming assets worked out they've got a great franchise," said Faith Barnes, an associate bank analyst with Wheat First.

Sees Training Needed

One of Mr. McCullar's immediate goals is to make Charter branches more competitive. When he was, hired branch employees hadn't been trained in years and raises were inconsistent. He wants to develop a sales culture and teach branch employees to sell more than one product to customers.

"We are going to hold people accountable for producing a certain amount of income," Mr. McCullar said.

With Mr. McCullar's local connections and commercial banking experience, Charter might be able to cherry pick customers from First Union.

"They have an opportunity there in terms of being the hometown bank," Ms. Barnes said.

An '80s Speedster

Mr. McCullar's plan for Charter is vastly different from the rapid growth and diversification stategy prior management had crafted. From 1982 to 1987 the 74-year-old thrift nearly tripled in size, growing to $897 million through five acquisitions. The acquisitions packed $66 million in goodwill onto the books.

Charter also made hotel, apartment and shopping center loans in Florida, Georgia, and Louisiana. And it financed automobile leases and issued credit cards.

In 1989, Charter began restructuring after President Bush signed tougher laws governing thrifts. It discontinued construction lending, sold its credit card receivables and auto-leasing business, shut nine offices, and trimmed its work force by nearly 100 people.

$3.4 Million Embezzlement

From 1989 to 1991 Charter lost $26 million. Besides the losses, a scandal surfaced in 1990 when a bank employee was caught embezzling $3.4 million from customer accounts. The bank recovered nearly $2 million, mainly from insurance. The same year Charter failed to satisfy capital requirements and the regulator requested that the thrift be placed under conservatorship.

But Charter filed a suit against the agency in 1991 that drew national attention. It alleged that the government had reneged on its promise to let the thrift count goodwill as capital. In August 1991, a U.S. District Court in Virginia issued a ruling that prevented the agency from seizing the thrift.

But the ruling was overturned a year later by a federal appeals court, which stayed its decision pending a ruling by the Supreme Court. In March 1993, the justices declined to hear the case.

A Close-Run Thing

The suit may have bought Charter time. Eleven days before the Supreme Court rejected the case, the thrift hired Mr. McCullar. One of his first acts was to announce the $41 million write-off. Another was to persuade OTS officals in Atlanta to give the thrift 90 days to raise money.

In June Mr. McCullar and Richard W. Buchanan, Charter's executive vice president of finance and administration, hit the road in an effort to raise money. The effort looked promising when during a warm-up session Mr. McCullar and Mr. Buchanan raised $1 million from investors in Bristol.

The two spent eight weeks on the road and met with about 40 investor groups. In a single day they made five presentations in New York, Pittsburgh, and Baltimore, Mr. McCullar said.

'It Was a Blur'

"Hell, we went to a place north of Philadelphia we didn't know where we were," Mr. McCullar said. "It was a blur."

At this stage of his career, Mr. McCullar never thought he'd be scrambling to save a thrift. He thought he'd be working at a large regional.

"It cost me 10 years of my life," he quipped. "I felt the risk was worth the potential opportunity."

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