WASHINGTON -- Charter Federal Savings Bank is back from the dead.
The $720 million-asset Virginia thrift, left insolvent this spring when it lost a battle with regulators over supervisory goodwill, raised $44 million in a rights offering completed Thursday.
"I guess we are the only bank in America that has been allowed to operate with negative net worth," said Cecil R. "Andy" McCullar, Charter Federal's president and CEO. "We are all deliriously happy," he said.
Regulators are happy too.
"We are delighted, obviously," anytime an institution that is undercapitalized manages to raise capital, said Jonathan L. Fiechter, acting director of the Office of Thrift Supervision.
Charter Federal, he said, "was able to demonstrate sufficient earnings potential that the market saw value in that institution."
On March 29, the Supreme Court refused to hear Charter Federal's argument that it should be allowed to count supervisory goodwill as capital.
Two days later, the 73-year-old thrift, based in Bristol, Va., wrote off $41.1 million of the intangible asset, which left its core capital at negative 1.76% although it continued to earn a profit.
Now that the rights offering has been completed, Charter has 4.53% core and 9.78% risk-based capital.
"It is a landmark recapitalization," said Jim C. Mabry, managing director at Wheat, First Securities Inc., the Richmond investment banking firm that advised Charter.
He said Charter Federal's rights offering was successful because the company's only problem was capital. Charter "had low levels of nonperforming assets, it had high earnings, and it had a management team that was very credible," Mr. Mabry said.
Charter Federal has 26 branches in Southwestern Virginia and Northeastern Tennessee. The federally chartered, stock-owned thrift has not paid a dividend since 1988, and does not plan to until its core capital level hits 5% and its risk-based capital is 10%. Then it would qualify for the "well-capitalized" category under federal capital regulations.
"We're making pretty doggone good money," Mr. McCullar said. But he does not yet want to pay a dividend because, he said, "We want to continue to build our war chest and enhance our capital ratios."