Shareholder activists are often humored by management, but at Onbancorp, the upstate New York banking company, the sense of humor has been slow to appear.

The bank continues to press a lawsuit it launched nearly a year ago against shareholder Seymour Holtzman after he disseminated an unflattering cartoon to express his view that the company should be sold.

The sketch depicted Onbancorp's directors and suggested that they regarded the $5.5 billion-asset company as "their piggy bank."

Mr. Holtzman, Onbancorp's largest noninstitutional shareholder, has since changed his stance, and this year shareholders voted to support the company's continued independence.

But the lawsuit goes on. It alleges that Mr. Holtzman violated federal laws by distributing false and misleading information about the company and its directors.

"This is a frivolous lawsuit," said Charles Garcia, an attorney for Mr. Holtzman. "Mr. Holtzman retracted his proposal to fight the bank last year. So why are they spending what we think is $4 million in legal fees? This is corporate waste."

Officials at Onbancorp could not be reached for comment, but a source said the company "is confident" about its actions.

Nevertheless, other shareholders and analysts are also beginning to wonder how long the matter should be pursued.

"There are better ways to be spending shareholder money," said one, who asked not to be identified. "What do they want out of him, an apology? Just get one."

"I am happy with the performance of the bank," said shareholder Bob Ostrowski. "But I would like to see the lawsuits come to an end. They are expensive."

Dr. Thomas Baker, a Wilkes-Barre, Pa., physician who is a former investor in Onbancorp, also expressed puzzlement about the suit.

"I just wonder how they are going to justify this to the shareholders," said Dr. Baker-who sold all of his shares in the company last year because he felt "management was unresponsive to shareholder proposals."

"If I were still a shareholder I would be pounding the table at the annual meeting demanding to know why the bank is still suing," he said.

But it seems unlikely that any shareholder will be doing that.

While some have focused on the bank's mounting legal fees, others have been watching the bank's stock price ratchet up.

Thursday the bank's shares set a 52-week high, after surging 17% in the last six months.

Analysts also note that the company's performance has greatly improved in the year since the tempest began.

"The bank is doing just fine," said analyst Marni Pont of Keefe, Bruyette & Woods Inc. "I expect them to come in on their earnings estimates in the third quarter."

Ms. Pont pointed out that the company has instituted two buyback programs that have helped boost its stock price and has restructured its balance sheet and bolstered its return on equity to 15%.

"All the promises that they have made they have kept," said Ms. Pont. "So far the lawsuit doesn't seem to be affecting the bottom line."

Dendra Lambert, an assistant analyst at J.J.B. Hillard, W.L. Lyons, agreed that the bank is headed in the right direction. On Friday she and head analyst Alan Morel released a favorable report on the company, urging clients to buy the shares.

"The company is undervalued, which makes it a great buying opportunity," said Ms. Lambert, noting that Onbancorp was the third most undervalued bank in Hillard Lyons' universe of 229 banks.

"The firm can achieve more revenues, and they are diversifying into more areas, such as commercial loans and trusts," she said.

Ms. Lambert said that the 12-month target price for the company is $70; she expects it to be $109 by 2001.

Nevertheless, some observers remain skeptical about the company.

"Shareholders should hold a party for Mr. Holtzman, because it was probably his activism that forced them to better manage the bank," said Dr. Baker. "If Onbancorp wins this lawsuit, it could have a dramatic impact on shareholder activism in general."

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