When Richmond, Va.-based Signet Banking Corp. agreed this week to be bought by First Union Corp. for a lofty 3.5 times book value, it made a bank in Cleveland very happy.

National City Corp. holds more than a million shares of Signet stock.

The Cleveland banking company, which picks its bank stocks based on takeover potential, estimates it will receive a $30 million pretax gain on its Signet stock, said Robert G. Siefers, National City's chief financial officer.

Playing the consolidation game has been a profitable business at National City. The company was also a shareholder in California Federal Bank, Dauphin Deposit Corp., U.S. Bancorp, and Great Western Financial Corp., all of which were sold or agreed to sales this year.

Realized gains from its $800 million bank stock fund total $40 million so far this year, excluding Signet, Mr. Siefers said.

Signet seemed like a logical bank to be acquired, Mr. Siefers said. It had market share in Washington, D.C., Baltimore, and Richmond, all markets in which major companies (such as First Union) would like to do business. The size of $12 billion-asset Signet also made it vulnerable.

"We determined midsize institutions were under more pressure to consolidate than smaller banks," Mr. Siefers said.

The price of Signet stock hovered in the lower $20's during the past four years, when National City was accumulating it. Signet agreed to be bought for $53.59 a share.

"We certainly were gratified one of our investments was going to pay off in a significant manner," Mr. Siefers said. "I can't say the price is surprising in this kind of environment. It certainly was a full price."

National City uses gains from its bank stock fund to offset extraordinary charges, including those resulting from its own acquisitions. In the second quarter, National City said $31 million in gains from the stock fund had offset $33 million of costs incurred in the consolidation of its six Ohio bank charters into one.

Mr. Siefers wouldn't disclose names of other bank holdings, but he said he's focused on banks with $5 billion to $20 billion of assets. He views the Midwest and Southeast as the most logical places for further consolidation.

In general, said analyst Joseph Duwan of Keefe, Bruyette & Woods Inc., the company is patient about its investments: "They buy and hold. They're willing to wait for the home run. And Signet certainly was a home run."

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