When USBancorp acquired Johnstown Savings Bank in 1994, analyst Elizabeth Summers of Ryan, Beck & Co. thought the strategy so "egregious" she downgraded the Johnstown, Pa., holding company to "sell."

On Monday, however, she upgraded the company to "buy," from "hold," based on its better-than-expected first-quarter earnings and news of an upcoming dividend increase. This Friday, the company is expected to increase its dividend 11.1%, to 30 cents a share.

Ms. Summers said her 1996 earnings estimate of $3.45 leaves "plenty of room for a possible upward revision." Her 12-month target price for the stock is $39. The shares closed Monday at $33.187, up 31 cents.

Toward the end of 1994, USBancorp, which owns three western Pennsylvania thrifts and a trust company, began a restructuring that paid off this year in record first-quarter earnings. The restructuring included a 1995 wage freeze and 10% pay cuts for top officers.

Ms. Summers, who noted that nonperforming assets remain below 1% of total assets, also pointed to the recent trend in the stock's price. While the holding company's stock rose shortly after its first-quarter earnings were released, it later "pulled back," and USBancorp has not "participated in the rally that has driven up the rest of the stocks."

She remains cautious in her optimism because of past performance, Ms. Summers said. It appeared as if the company was doing "dilutive acquisitions every other year," she said, referring to the acquisition of Community Bancorp in 1992 and the Johnstown Savings deal two years later.

In the latter acquisition, she said, USBancorp paid "top dollar for an underperforming thrift in a slow growth market."

The holding company's low net interest margin also was troublesome, said Ms. Summers. It "always seemed to go down regardless of what was happening at other banks," she said. "The profitability was sub par, and it is still sub par."

Orlando B. Hanselman, chief financial officer of USBancorp, conceded that the company had been "performing inadequately." But since the restructuring, he said, its return on equity has reached 13%.

Mr. Hanselman said USBancorp is striving for a return on equity of 14% by late 1997 or early 1998.

Separately, Dain Bosworth Inc. downgraded Firstar Corp. to "hold" from "buy," based on price. Firstar closed at $48.375, up 37.5 cents.

Dain analyst Ben B. Crabtree said his earnings estimates and price target remain the same, but the stock's price "has gone up to the point where I couldn't see enough upside potential to recommend active purchase," he said. Mr. Crabtree added that if the stock fell below $45, he would reinstate his "buy" rating.

Everen Securities also cited price in downgrading Firstar to "intermediate market perform" from "outperform."

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