First Bank System shares were off $2.75 at $75.50 per share on the New York Stock Exchange. The deal is subject to regulatory and shareholder approval and is expected to close before October. John F. Grundhofer, chairman and chief executive of First Bank, will be president and chief executive of the new company. U.S. Bancorp chairman and chief executive Gerry B. Cameron will serve as chairman until his retirement in 1998. Jim Bellessa Jr., an analyst at D.A. Davidson & Co. in Great Falls, Mont., said Grundhofer put a wavering First Bank back on its feet. The bank has also pursued a number of small mergers, closing 24 in the six years Grundhofer has been in charge. Bellessa said a major deal was necessary to expand First Bank's geographic footprint. Although not national, U.S. Bancorp could become a good brand name if additional mergers take the bank into more states. First Bank System has $36.5 billion in assets with 374 offices in 11 Midwestern and Plains states.