UJB Financial Corp. raised $60.8 million through a recent common stock offering, providing a war chest for acquisitions.

While Wall Street generally applauds banks that bolster capital, some analysts are concerned about earnings-per-share dilution from the sale and want the Princeton, N.J., company to concentrate on earnings.

UJB issued 3.4 million shares at $17.875 each. The lead manager was Merrill Lynch & Co.

Dilution Estimate

Some analysts believe UJB owes its shareholders profits first and expansion later. The earnings-per-share dilution from the stock sale could reach as high as 7%.

"It's disappointing that UJB made this decision to sell stock," said an analyst who asked for anonymity because his company was among the 24 underwriters of the sale. "The management fought tooth and nail to keep themselves independent, and now the first thing they do is go out and dilute shareholders."

Rather than seek acquisitions, the analyst said, UJB'S management should step up efforts to eliminate bad loans.

But Stephen J. Paluszek, an analyst with M.A. Schapiro & Co., another one of the underwriters, said "the decision to raise capital was not earningsdriven, nor should it be.

"Institutions with strong capital levels and balance sheets will be allowed to do things that other banks can't, including acquisitions. In the long run, it will help earnings."

Asset Purchases Planned

The shares raised UJB'S equity-to-assets ratio to 6.6% from an already healthy 6% at the end of the second quarter. The company said it planned to use the equity to buy deposits and assets, most likely from the Resolution Trust Corp. and Federal Deposit Insurance Corp.

"It wasn't like UJB was desperate to raise capital," said Livia Asher, a Merrill Lynch analyst. "Banks come to market to be a player in the consolidation of the industry, and you need high capital ratios for that."

Unlike UJB, rival First Fidelity Bancorp., Lawrenceville, N.J., has not been hamstrung by bad loans and has used its equity to gamer most RTC deals in the state. UJB wants to catch up, said analysts.

The success of the sale of common stock represented a vote of confidence from investors in UJB'S slow but visible turnaround. UJB, which recently fought off a fight for control of the board by dissident shareholder Chilmark Capital Corp., was never undercapitalized.

But the company, which lost $5.6 million in 1990 and was only marginally profitable in 1991, suffered from bad real estate loans. The dissidents believed shareholders would be better served if the company put itself up for sale.

The company now shows signs of digging itself out. The ratio of nonperforming assets to loans and foreclosed real estate is improving, falling the past four quarters. It stood at 6.17% at the end of the second quarter from 6.79% a year before.

"I think UJB'S credit problem is under control," said David Berry, an analyst with Keefe, Bruyette & Woods Inc.

For nearly a decade, the company has been viewed as a prime takeover candidate, situated at the crossroads of the New York-New Jersey-Pennsylvania markets. Sources close to CoreStates Financial Corp. chairman Terrence Larsen said his company is interested in acquiring UJB.

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