The parent company of Riggs National Bank, hit hard by the Washington area's slumping commercial real estate market, said yesterday its profits fell 97 percent in the third quarter and 78 percent in the first nine months of the year.

In contrast, Richmond-based Central Fidelity Banks Inc., bucking the downward trend for banks, reported higher third-quarter profits, a dividend increase and plans to buy back as much as 10 percent of its common stock.

Riggs's third-quarter profit totaled $343,000, compared with $10.7 million in the 1989 third quarter. Per-share earnings fell to 2 cents from 78 cents. Earnings fell to $7.1 million (51 cents a share) in the first nine months, compared with $31.9 million ($2.32) in the same period a year ago.

Riggs National Corp., parent of the District's biggest bank, said its nonperforming assets -- basically, loans that are past due or are already in default -- rose in the third quarter. Most of that involves its real estate loan portfolio. Riggs said its nonperforming loans totaled $68.7 million as of Sept. 30, or 1.71 percent of all its loans outstanding, nearly double year-ago levels.

Because of those problems, Riggs added $9.8 million in the third quarter to its fund that protects against loan losses. In the same quarter a year ago, it added only $900,000 to that reserve. In the first nine months, it added $23.7 million to its loan-loss reserve, $20.9 million more than it added in the same period last year.

Riggs also took a charge against its earnings of $4.4 million in the first nine months, recognizing that real estate it holds is worth less than loans outstanding on the property.

With the real estate market worsening, Riggs said, it may have to make more additions to its loan-loss reserve and again reduce the value of the properties it holds.

Also contributing to its declining profits were a $1.5 million pretax loss related to Riggs's acquisition of the deposits of the failed National Bank of Washington, a drop in net interest income and smaller gains from the sale of securities.

Riggs's stock closed at $13.12 1/2 on the over-the-counter market yesterday, down 12 1/2 cents.

While Riggs's earnings were plunging, Central Fidelity Banks, which has 195 branches across Virginia but a relatively small presence near Washington, said its results reflected the relative health of its real estate loan portfolio and a cost-cutting effort it began last year.

"We've avoided the big hits and the big loan losses," Central Fidelity Chairman Carroll L. Saine said of the bank's real estate portfolio.

Although some core measures of the bank's performance slipped, the results were strong given the environment banks are facing, said Chip Ford, an analyst with Scott and Stringfellow Inc. in Richmond. "It's a standout performance."

The bank earned $14.2 million in the third quarter, up 5 percent from a profit of $13.5 million in the year-ago third quarter. Per-share earnings rose to 95 cents from 88 cents.In the first nine months, Central Fidelity earned $42.5 million ($2.79), up 6 percent from $40 million ($2.60) in the first nine months of 1989. Central Fidelity's total assets stood at $5.7 billion as of Sept. 30, up 12.7 percent from the level of a year ago.

While its profits were rising, nonperforming loans also grew. Nonperforming assets were $41.4 million as of Sept. 30, or 1.16 percent of net loans. A year ago, the ratio was 0.79 percent. Loan write-offs also increased.

Central Fidelity boosted its reserve that protects against bad loans by more than $10 million, a much larger addition to the reserve than it had made in earlier quarters. "We don't think this real estate market's going to turn around any time soon," said Saine.

He added that Central Fidelity has focused on residential real estate lending and doesn't have the exposure to commercial real estate that other banks in the state have. The addition to loan-loss reserves was offset by a 48 percent gain in non-interest income.

Central Fidelity increased its dividend almost 9 percent, to 38 cents per share for the quarter, its second dividend boost in 1990.

It also said it planned to buy as many as 1.5 million of its common shares, or 10 percent of the total outstanding. "We think there's more value there than the market does," Saine said of the bank's recent stock prices. Its shares closed unchanged at $21.50 on the over-the-counter market yesterday.