Baltimore Bancorp, whose existence was considered touch and go in 1991, earned a "neutral" rating and a large degree of legitimacy for its management strategy from a hometown investment house.

Alex, Brown & Sons, Baltimore, initiated coverage of the $2.3 billion-asset banking company this month with the neutral rating, saying speculators may want to accumulate the stock in their basket of takeover plays.

Baltimore Bancorp, owner of the Bank of Baltimore, has been the subject of takeover speculation in recent months, currently trading near its 52-week high of $13.

A high level of nonperforming assets, however, will eat at earnings for at least another year, Alex. Brown analyst John Heffern said.

Baltimore Bancorp went through a bitter proxy fight in the summer of 1991. In September of that year, shareholders voted out old management and brought in a new state of directors and management led by Baltimore businessman Edwin F. Hale Sr., who became chairman.

By the end of 1991, the company had lost more than $125 million for what Mr. Hale's team dubbed wrong strategies and bad loans made by prior management.

The company's nonperforming assets peaked at more than 13% in mid-1992, but have been falling steadily ever since. An artfully executed stockholders dividend reinvestment plan has raised almost #30 million since last fall, bringing the bank's tier 1 capital ratio to 6.77, up from 4.08% this time last year.

Other steps taken to meet capital adequacy targets, says Alex. Brown, involved allowing for the runoff of costly deposits, selling assets, and an exchange of $1.5 million in debt financing for equity.

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