The Virginian-Pilot
                             THE VIRGINIAN-PILOT 
              Copyright (c) 1994, Landmark Communications, Inc.

DATE: Wednesday, July 20, 1994               TAG: 9407200422
SECTION: BUSINESS                 PAGE: D2   EDITION: FINAL 
SOURCE: By TOM SHEAN, STAFF WRITER 
                                             LENGTH: Long  :  101 lines

SIGNET'S NET INCOME UP 25 PERCENT BUT ITS PER-SHARE INCREASE OF 24 PERCENT DOESN'T MEET ANALYSTS' EXPECTATIONS.

Helped by continued expansion of its credit-card activity and a decline in troubled assets, Signet Banking Corp. said Tuesday that its second-quarter net income climbed 25 percent from the year-earlier period.

But a 24 percent increase in per-share earnings failed to meet expectations among some securities analysts, and Signet's shares tumbled 4 1/2 in heavy trading to close at 36 3/8.

Meanwhile, Commerce Bank said its net income for the June 30 quarter rose 12 percent. The Virginia Beach-based community bank attributed its record earnings for the quarter to growth in loans and a wider spread between the cost of funds and the yield on loans and investments.

However, Jefferson Bankshares Inc. reported that its second-quarter net income was unchanged from the year-earlier period, partly because of one-time expenses during the recent quarter.

Richmond-based Signet, which has emphasized credit-card marketing and lending as part of a long-term strategy, said its net income for the three months ended June 30 totaled $50.39 million. That compared with $40.44 million in the year-earlier period.

Its per-share earnings for the recent quarter were 88 cents, up from 71 cents.

Although Signet posted strong results for the second quarter, its per-share earnings were ``modestly below the consensus expectation'' among analysts, said Guy W. Ford, a banking analyst in Norfolk with the securities firm Scott & Stringfellow Inc.

Signet's net interest margin came under pressure during the recent quarter and the company's non-interest expenses were higher than expected, Ford noted.

``It's clear that there is a little bit of fraying in the credit-card business,'' he said. With conditions in the card industry becoming more competitive, ``it cannot be as profitable going forward as it has been in the past.''

Signet's income from fees and other non-interest sources - the biggest source of its earnings - soared 68 percent to $136.16 million. One ingredient of its non-interest income, credit-card servicing income, had more than doubled from the year-earlier quarter to $77.47 million.

Signet's managed credit-card portfolio, which includes card loans that have been packaged and sold as securities and loans awaiting to be packaged and sold, amounted to $6.59 billion on June 30. That was almost twice the portfolio's $3.4 billion size at mid-1993.

Second-quarter earnings also benefited from a significantly smaller provision for loan losses, which dropped to $3 million from $9.01 million in the 1993 second quarter.

Signet, whose financial condition was battered in the late 1980s and early 1990s by losses on sour real estate loans, cut its non-performing assets by 40 percent during the past year to $77.66 million on June 30.

As a percent of loans and foreclosed properties, Signet's non-performing assets dropped to 1.35 percent from 2.2 percent.

The company's return on average assets, a measure of bank profitability, was 1.76 percent for the recent quarter, up from 1.39 percent in the 1993 second quarter.

For the six months through June 30, Signet earned $103.5 million, a 31 percent increase from $78.71 million for the first half of 1993. Per-share earnings were $1.81, compared with $1.39 in the January-through-June period of 1993.

Meanwhile, Commerce Bank said it earned $1.84 million in the April-through-June period, compared with $1.65 million in the comparable three months of 1993. Earnings per share, fully diluted, were 63 cents, up from 57 cents.

Commerce, which agreed in late June to a merger offer from the Wilson, N.C.-based bank holding company BB&T Financial Corp., said its net interest income increased 9 percent to $7.15 million, while non-interest income rose almost 8 percent to $2.36 million.

Its mortgage-brokerage income fell more than 37 percent from the 1993 second quarter but its service charges on deposit accounts and its credit-card merchant fees increased from the year-earlier quarter, the bank said.

Like Signet, Commerce also reduced its second-quarter provision for loan losses, which helped earnings.

Separately, Charlottesville-based Jefferson Bankshares said it earned $5.95 million in the June 30 quarter, compared with $5.93 million in the year-earlier period. Per-share earnings slipped to 40 cents from 41 cents.

Jefferson said it booked a pre-tax gain of $1.2 million during the quarter from the sale of securities, but part of this was offset by non-recurring expenses of $654,000, it said.

The company's return on average assets declined to 1.27 percent from 1.32 percent in the 1993 second quarter.

For the six months through June, Jefferson's net income fell 7 percent to $11 million from $11.85 million in the first half of 1993. Per-share earnings were 75 cents, down from 82 cents. ILLUSTRATION: Graphic

HOW THEY FARED

Three banking concerns' net income for the quarter.

Signet Banking Corp.

Up 25%

Commerce Bank

Up 12%

Jefferson Bankshares Inc. Unchanged

by CNB