Portland, Ore.-based U.S. Bancorp, the largest bank in the Northwest, reported net income of $51.3 million in the second quarter, a 19% drop from the $63.6 million it earned in the same period last year.

Analysts remained bullish on the $21 billion-asset bank despite the setback. They said certain business lines, like mortgage servicing, have not performed up to last year's high levels. But the long-term outlook for U.S. Bancorp remains strong, they insisted, because those businesses will soon be sold off.

Historically, U.S. Bancorp relied heavily on volatile revenue sources, particularly equity investment gains and mortgage operations.

Shift to Retail Emphasis

But chairman and chief executive officer Gerry Cameron, who took over early this year, has focused attention on retail banking and small business lending.

Last year in the second quarter, U.S. Bancorp earned $12.8 million from its mortgage servicing operations and $7.2 million from equity gains, according to Thomas Therkauf, an analyst at Keefe, Bruyette & Woods.

Gains from mortgage sales and equity sales were essentially non-existent this year, Mr. Therkauf said. Even without those revenues the bank performed well, he said.

"Last year it reported 61 cents a share. Had it not generated those equity gains and other volatile revenues, they would have probably been around 47, 48 cents a share," he said.

Mr. Therkauf said the bank's earnings came in this quarter at 49 cents a share, one cent below his projection.

Loans Up, Problems Down

U.S. Bancorp showed growth in key areas at the end of the second quarter. Loan growth increased 2.3%, which on an annualized basis is more than 9% -- the best it has been in four years.

Problem assets declined 2.3%, not including a $100 million charge for nonperformers taken in the first quarter.

"The results in the second quarter begin to show the fundamental changes we are implementing at U.S. Bancorp," Mr. Cameron said.

Part of management's plan is to get its 69% efficiency ratio down to 59% by 1996. Analysts say this move is imperative in order for the bank to remain independent.

"At some point in time, U.S. Bancorp obviously is a takeover candidate: We've been down that road with these rumors before," said Frank Barcocy, an analyst at Advest Group.

Natwest Reports 11% Gain

Back East, Jersey City-based National Westminster Bancorp reported a $76.2 million net income for the second quarter, an 11% increase over the same period last year.

"We look forward to supplementing this organic growth with the planned addition of Citizens First Bancorp and Central Jersey Bancorp," said John Tugwell, chairman and chief executive of the $25 billion-asset bank.

"These acquisitions, combined with the opening of a new service center in Scranton [Pa.], will provide opportunities to improve our efficiency and build strong, sustainable revenue streams," he said.

Fourth Financial Up 35%

In other news, Fourth Financial Corp. earned $20.8 million in the second quarter, a 35% increase over the $15.4 million the bank earned in the same period last year.

Results were boosted by acquisitions and internal loan growth, according to Darrell Knudson, chairman and chief executive of the Wichita, Kan.-based bank.

Fourth Financial, with $7.65 billion in assets, also cited higher fee income and credit quality.

In Pennsylvania news, Harrisburg-based Dauphin Deposit Corp. earned $17.9 million in the second quarter, a 3% increase from $17.4 million last year.

Cephas will Join Board of directors At Dime Bancorp

NEW YORK -- Derrick D. Cephas, the former Superintendent of the New York State Banking department, has been elected to the board of directors of Dime Bancorp.

Just last week, the $9.37 billion-asset Dime said it would acquire Anchor Bancorp, creating a $20 billion-asset thrift, the forth largest in the country.

"Derrick brings us a perspective on where this industry is going," said Dime chairman and chief executive Richard D. Parsons.

Mr. Cephas, 42. left the Banking Department last month to join the Wall Street law firm of Cadwalader Wickersham & Taft as a partner.

While Banking Superintendent, Mr. Cephas was active in drafting a reform of community Reinvestment Act guidelines that would have used a mathematical formula to calculate banks' CRA ratings.

Mr. Cephas is the 12th member of the Dime's board, filling a vacant position.

--Jeanne Iida

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