The oldest and largest bank in the nation's capital has just recorded its first profitable year of the decade, but some analysts believe Riggs National Corp. still has to prove itself.

The company, known for handling the banking business of Presidents and diplomats, earned $34 million in 1994 - a dramatic swing into the black from the previous year, when it lost $94 million.

Other numbers, particularly the 77% decline in non-performing assets from a high of $330 million in 1991, suggest that the bank has turned the corner from its recent suffering brought on by the area's real estate crunch five years ago.

"This is absolutely a turnaround," said Rob Schwartzberg, vice president of research at Friedman, Billings, Ramsey & Co., an Arlington Va.-based firm that participated in the bank's equity offering in 1993. "Their earnings are right on track."

Not everyone is as confident.

"I don't think the bank has been improved that much," said John J. Mason, an analyst at Interstate/Johnson Lane in Atlanta. "It hasn't set the stage for any major advances into Virginia or Maryland, which should have been done. Anyone can stop losing money if the real estate market improves, but what are you going to do for me next year."

Merrill H. Ross, an equity analyst at Wheat First Butcher Singer in Richmond, Va., believes Riggs' assets are underdeployed, as evidenced by its high deposit-to-loan ratio of $1.40 of deposits for every $1 in loans.

"They've proven they can run a profit, but I want to see whether they can generate good business through their branches," Ms. Ross said. "That's what I've always felt is the issue with Riggs. They need to prove their franchise's value."

Bank officials attributed the improved numbers to the sale of foreclosed real estate and from payments on nonaccrual and renegotiated loans. Riggs has also installed a new management team, led by Fred L. Bollerer, who took over the top spot at the company's principal entity, the Riggs National Bank of Washington, last summer.

The better performance also stemmed from a cut in expenses, most notably a 25% reduction in personnel over the past two years. Noninterest expenses of $200 million, while a third less than three years ago, are still high for a company of Riggs' size, bank officials noted.

"We still have a ways to go to be as efficient as we want to be," said James E. Day, director of communications.. "We hope to make further progress this year."

The $4.5 billion-asset Riggs, which has 60 branches in the greater Washington area and suburbs as well as operations in London and Paris, has been dogged by a myriad of problems.

For one, the company has undergone several leadership shuffles in recent years, including the abrupt resignation last spring of a widely respected turnaround expert, Paul Homan. Mr. Homan, who was president of the bank for less than a year, reportedly left as a result of personality differences with the company's chairman, Joe L. Allbritton.

In addition, in the fourth quarter the holding company took a $1.2 million securities loss on Orange County municipal bonds that its money market fund had purchased last summer. The holding company bought the $10 million in bonds from its fund on Dec. 9, shortly after the California county declared bankruptcy, in order to maintain the asset value of the fund.

The bonds are still paying interest, however, and the bank believes they will be redeemed at their full value. They will mature this summer.

Another setback occurred last fall when Walt Disney Co. dropped its plans to build a theme park in Haymarket, Va., due to local opposition.

When Disney vanished, so did bids for the 900-acre farm Riggs owns near the proposed site. The carrying value, as high as around $25 million at one point, is probably about a third of that now, Mr. Mason said.

The bank would not comment on the status of the land holding.

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