Shares in Midlantic Corp. set a 52-week high in heavy trading on Tuesday.

The stock closed at $14.625, up $1.125 on the day. More than 770,000 shares changed hands, and the stock was among the most active over-the-counter stocks early in the day.

Tuesday's surge continued a rally that began of the Edison, N.J., day officials of the Edison, N.J., company held an upbeat meeting with securities analysts. The day before that meeting, the shares closed at $8.50.

Cost Cuts, Spinoffs

Midlantic, hard hit by troubled commercial real estate loans, told analysts of plans to cut costs, the possible sale of some upstate New York affiliates, and an improvement in the New Jersey economy.

Regarding Tuesday's jump, analysts said Lawrence W. Cohn, a Paine Webber Inc. bank analyst, promoted the stock to his firm's sales force.

"I spoke to the company yesterday and reduced my estimated loss to $1 from $2 share" for the year, Mr. Cohn, said.

Mr. Cohn said Midlantic's second-quarter earnings may also exceed expectations. For the quarter, Mr.Cohn still foresees a 40-cent-a-share loss. But that's better than the 79-cent loss of the first quarter.

Tuesday's gain may also have been sparked by traders covering short positions in Midlantic's stock. Short-sellers increased positions by 136,473 shares to more than five million shares from May 15 to June 15, as the price climbed past $13. This was the fourth-largest short position on the over-the-counter market in the period.

Mr. Cohn said it could take Midlantic several years to reduce its $600 million portfolio of foreclosed property. But he said that if Midlantic cuts non-performing assets to a normal level of 1% to 2% of assets, from nearly 10% now, it could earn $3.50 a share or more a year.

"While the pace of improvement is not 100% clear, there's an enormous amount of earning power in this bank once it gets healthy," Mr. Cohn said.

He said the bank's problems peaked in the second quarter of last year when nonperforming loans stood at $1.393 billion.

Since then, the portfolio of bad loans has declined to $1.164 billion. Mr. Cohn said another $100 million reduction in bad loans may have occurred in the second quarter.

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