Chicago Corp. on Thursday sliced its investment rating for Mark Twain Bancshares to "hold" from "buy", saying shares of the St. Louis bank have reached their price target and are now fairly valued.

It was the second such downgrade for the stock in three weeks. Alex. Brown & Sons Inc. cut its rating to "buy" from "strong buy" on July 15, also citing the price.

After Thursday's move, Mark Twain shares were off 50 cents to $28 in late-afternoon trading. Earlier in the day the stock had slumped as much as $1.25.

Chicago Corp. bank analyst Christine A. Pavel said there is no change in the fundamental outlook for Mark Twain, which has a record of strong profits, and she did not reduce earnings estimates.

But she noted that the stock has gained 280% in value since October 1990, the most recent low point for bank stocks, compared with a 164% gain for other banks traded in the over-the-counter market. The Standard & Poor's Corp. 500 stock index rose 43% in the period.

So far this year Mark Twain shares have risen 24%, in line with the 22% gain for other over-the-counter bank stocks and much better than the S&P 500, which is ahead 3%.

"During the last month, however, Mark Twain has been hovering around our target price of $29," Ms. Pavel said. "We think the market is valuing the stock appropriately."

The stock has been trading at 216% of its per-share book value, compared with 161% of book value on average for other mid-western regional banks, Ms. Pavel noted.

Analyst Mark Alpert of Alex. Brown similarly said his rating change was based "solely on the rich valuation of this equity compared to other banks." But he also said he feels Mark Twain shares deserve a premium valuation, since the company's 13% annual growth rate in per-share earnings should remain "well above the group average."

Ms. Pavel said she expects the bank to earn $2.23 per share this year and $2.47 next year. Mr. Alpert anticipates $2.21 this year and $2.53 in 1994.

Business for Mark Twain has slowed in the past month because of severe flooding around St. Louis, she noted, "but will likely pick up somewhat late into the third quarter, when rebuilding begins."

Mark Twain had a robust second quarter. Earnings were 55 cents per share, up 24% from a year earlier. Return on assets was an impressive 1.4%, return on equity a solid 18.23%.

Loans grew 4.2% from a year earlier, Ms. Pavel said, but the growth "came primarily from attracting three relatively large credits away from a competitor."

However, fee income rocketed 30% from a year earlier, driven by increases of 83% in the bank's brokerage division and 42% for its mortgage business. The figures exclude a gain from the sale of the bank's credit card portfolio during the quarter to NBD Bancorp, Detroit.

Asset quality was strong, with nonperforming assets amounting to just 1.58% of loans and foreclosed real estate. Net chargeoffs were 0.13% of loans.

Mark Twain shareholders have enjoyed two dividend increases this year. The annual rate now, 84 cents per share, is 21% ahead of last year's rate.

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