The Riggs National Bank yesterday announced a 17.5 percent increase in earnings for 1979, but at the same time reported a fourth-quarter decline.

Profits in the October-December period dropped by 12.3 percent compared with 1978 as a result of a decision to set aside reserves of $900,000 to cover potential loan losses.

That decision, according to a statement by Washington's largest bank, is a result of "unsettled worldwide economic and political conditions that exist at this time."

The loan reserve move, combined with a Christmas bonus program for Riggs' employees, resulted in fourth-quarter operating profits of $4.134 million, compared with profits of $4.931 million for the same quarter in 1978.

In its unaudited report for the full year, Riggs reported profits after securities transactions of $21.7 million ($7.26 a share) compared with $18.3 million ($6.05) in 1978.

Riggs said the higher profits resulted from a 15 percent increase in earning assets, a higher net interest margin and a 13 percent increase in fees and other non-interest income.

Further, Riggs' assets jumped from $2.42 billion at the end of 1978 to $2.68 billion at the close of last year.

MCD Holdings Inc., of Seabrook, Md., reported profits of $765,587 (18 cents a share) in the year ended Sept. 30 compared with profits of $489,611 (12 cents) the previous year.

Revenues rose to $39 million from $30.5 million for the community development company.

Microdyne Corp. has also reported 1979 fiscal year periods of $2.2 million ($1.28 a share), a 140 percent increase over the firm's 1978 profits of $925,000 (60 cents).

The communications company reported an 86 percent sales increase for the year ending Nov. 9 to $13.2 million from $7.09 million.