Federal regulators have rejected the second of two suitors for Independence Federal Savings Bank, leaving the money-losing District institution pursuing a strategy to survive as an independent thrift.

In a rare rebuke for two solvent institutions, the Office of Thrift Supervision denied Carver Bancorp Inc.'s application to buy Independence for $33 million, saying the deal would have taxed the combined institution's financial resources because of Independence's ongoing losses. The OTS also said it doubted the ability of New York-based Carver to manage a company with operations in two cities.

Last month, the OTS ordered Morton A. Bender to cease his efforts to merge Independence with ColomboBank, a Rockville institution owned by Bender, citing Colombo's non-compliance with banking regulations.

"We are disappointed that Carver's application was denied by the OTS," Independence acting chief executive Thomas L. Batties said last night. "However, the bank is prepared and able and willing to move forward independently if necessary. . . . We'll forge forward under our own existing business plan."

Batties said Independence will move "toward a more traditional community banking model that we believe will be successful."

Among its initiatives is a plan for more robust residential, consumer and commercial lending. Independence's loan portfolio has shrunk in recent years.

In a statement, Carver chief executive Deborah C. Wright said Carver continues to "believe in the strategic rationale of this potential combination" but acknowledged that it may be impossible to address the OTS's concerns.

A spokesman for Carver, which retains a 9.7 percent interest in Independence, declined to comment beyond the written statement.

Carver's statement said the OTS cited Independence's losses in the last year, especially because of legal expenses from its fight with Bender.

Bender owns 20 percent of Independence and has fought with its management and board in and out of court for more than two years as he sought to gain control of the thrift.

But in its order rejecting the merger, the OTS cited a variety of concerns. The agency said Carver would have "significant difficulties" integrating Independence into its operation.

"The applicants have not adequately demonstrated their ability to successfully undertake the acquisition of a troubled institution in a distant market," said the order, signed by Scott M. Albinson, managing director of the OTS's Office of Examinations, Supervision and Consumer Protection.

The Carver merger was in trouble before the regulator rejected it. The deal, first agreed to in March, was billed as the beginning of Carver's strategy to move its minority-based banking initiatives to a new market. Both Carver and Independence were founded by blacks and maintain deep roots in their respective cities' minority populations.

Last month, Carver executives began to have second thoughts about the $21-a-share price they had agreed to pay Independence's shareholders. In a letter to Batties, Wright cited Independence's losses related to its Bender litigation in seeking to renegotiate the price. Independence rejected that offer and declared Carver in material breach of the agreement. The merger contract, however, is now nullified with the OTS action.

Independence's financial condition worsened in the first half of the year. According to filings with the Office of Thrift Supervision, Independence continues to shrink and lose money.

Its retained loan portfolio, made up mostly of single-family mortgages and student loans, fell by $5 million in the year ended June 30, to $67 million. It lost $1.2 million in the first six months of the year, largely because its legal expenses were more than $2 million higher than in the comparable period of 2003.

Before the late afternoon announcement of the OTS decision, Independence stock closed yesterday at $17.01, unchanged.