Dissatisfied with their performance, two Northeastern community banks are seeking to boost earnings with top-to-bottom reorganizations.

Waterbury, Conn.-based Centerbank will consolidate operations into four major units, cut five senior executives from the payroll, and offer employees incentives to retire early.

In Pennsylvania, Johnstown-based USBancorp will shift three top executives as part of an effort to refocus on commercial lending, which it believes has been neglected, in its Pittsburgh market.

"Who wants to be part of a marginal operation?" said Centerbank chairman and chief executive officer Robert J. Narkis. "If it's clear that for whatever reason we can't justify a continuing existence without making high performance, it's time to question whether independence is the right answer for our shareholders and our employees."

The $3.1 billion-asset Centerbank announced plans earlier this month to flatten its management hierarchy, giving more lending and other decision- making power to its three regional presidents in Meriden, New Haven, and Waterbury.

The goals of the initiatives are to cut the bank's efficiency ratio, currently at 75.23%, and improve its return on assets and return on equity, which were 0.70% and 11.5%, respectively, at Dec. 31. Officials are aiming for the low 60% range for the efficiency ratio, an ROE of more than 15%, and an ROA that breaks 1%.

The efficiency ratio is the cost of generating $1 of revenue.

"What we're trying to do is make our company high performance through an intelligent, deliberate process," Mr. Narkis said.

But bank officials have also given themselves a deadline: if after two years the bank hasn't met its ROA and ROE goals, "we're going to review our strategic alternatives."

Bank officials also want to focus on assessing when Centerbank can best take advantage of technological innovations, such as a possible virtual branch on the Internet. That task will fall to the chief information officer, which is a new position.

"We want to adopt (technology) when it really makes sense to do so, after the bugs have been eliminated and when the need is clear, possibly earlier depending on what our competition is doing," Mr. Narkis said. "We don't want to go down a direction that later proves to be terribly premature."

Two top officials have already taken advantage of the early retirement benefits. The bank will also offer a voluntary severance package.

Meanwhile, the $1.8 billion-asset USBancorp is refocusing on the commercial banking market, especially in Pittsburgh, where two of its three subsidiaries operate with only 1% of the market share.

Officials are moving the president of its subsidiary, U.S. National Bank, to the holding company level to direct commercial lending and to prevent overlap between lending officers at all three subsidiaries.

And in an effort to coordinate the operations of the company's two Pittsburgh subsidiaries, Three Rivers Bank and Community Savings Bank, the company has appointed one official to head both.

"What we needed to have was a thorough coordination so we could be as efficient as possible in the commercial lending marketplace," said Terry K. Dunkle, chairman, president and chief executive of USBancorp. "We think in western Pennsylvania that our future growth will come from the greater Pittsburgh area."

USBancorp holds about 25% of the Johnstown market, about 65 miles east of Pittsburgh. The changes at USBancorp were driven by a lack of loan growth and a desire to improve earnings, reflected by a return on equity of 11.44%.

USBancorp has about $805 million in loans, with a growth rate of 2% to 3% in 1994. By contrast, the bank's competitors saw a 9% to 10% growth rate, Mr. Dunkle said.

Officials are hoping for an ROE of more than 13% some time in 1996. The company earned $3.9 million in the first quarter of 1995.

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