The quarter ended June 30 was one of rebound for Washington area companies compared with the same quarter last year. An analysis by The Washington Post of 80 companies based in the District, Maryland or Virginia reveals that two-thirds of them reported growth in earnings, and many beat analysts' expectations.

Only about one-fifth of them reported lower profits.

"It has been a terrific year for companies," said Chuck Hill, director of research at First Call, a corporate research company. "Those who had been hurt by the recession overseas bounced back in the June quarter."

To be sure, the going has been good for the economy for quite some time now. Second-quarter performance was better compared not only with last year's second quarter, but also with the first quarter of this year.

"The local earnings figure fit the national picture," said David Orr, chief economist at First Union Corp.

For the local companies, a number of factors seem to have helped. "Continued consumer confidence, continued federal spending and the nascent market recovery in Asia and Europe were pivotal to earnings growth," said Anirban Basu, senior economist at RESI, an economic research institute at Towson University near Baltimore.

Among the top-performing sectors were financial services, real estate, hospitality and information technology. For instance, Capital One Financial Corp. of Falls Church reported a 31 percent jump in earnings to $87.5 million; Baltimore-based Legg Mason Inc. did even better, increasing earnings 35 percent to $32.8 million.

Commercial banks reported relatively modest earnings growth in the quarter. First Virginia Banks Inc. of Falls Church earned only 5.5 percent more in the quarter than the same period last year; Provident Bankshares Corp. of Baltimore had a 13 percent ($11 million vs. $9.7 million) increase, and Baltimore-based Mercantile Bankshares Corp. increased earnings 6.4 percent.

"A lot of companies in financial services did restructuring last year, which has helped improve their earnings," said Mark Zandi, chief economist at RSA Dismal Sciences.

Interestingly, however, the earnings growth in the second quarter was higher than the first quarter's. For example, Provident's earnings grew 11 percent in the first quarter from the same period in 1998, while earnings grew 13 percent in the second quarter.

The relatively modest earnings growth for banks in the second quarter came despite a slight increase in net interest margins, the key driver of bank profitability. But analysts say the results were in line with estimates.

"The numbers the banks reported were close to what the market expected," said David West, senior vice president at Davenport & Co.

Realty companies reported stellar profits. Charles E. Smith Residential Realty Inc. of Arlington grew its bottom line by 60 percent to $11.21 million, and Columbia-based home builder Ryland Group Inc. doubled its quarterly income over last year's second quarter.

Courtesy of a hot summer, utility companies also did well. Potomac Electric Power Co. (Pepco) of Washington boosted earnings by 14 percent, as did Columbia Energy Group of Herndon. The odd man out was Arlington-based power generator AES Corp.; its second-quarter earnings held steady at $71 million. That, however, was better than the $13 million loss it reported in the first quarter of this year.

"Utilities are using their cash reserves to enter new high-growth industries," noted Basu of RESI.

But the drivers of growth in the area were the information technology and services companies. Dulles-based Internet bigwig America Online Inc. reported a whopping 169 percent increase in quarterly earnings -- from $58 million last year to $156 million this year. (June ends the company's fourth fiscal quarter.) Network Solutions Inc. of Herndon came close with a 132 percent increase in net earnings. Beltsville-based Micros Systems Inc. -- which makes point-of-sale computer systems -- notched a 62 percent gain in profits over the June 1998 quarter.

A few factors appear to have fueled the high-tech growth. One is the continued robust spending on new technology and technology upgrades, partly in response to the Y2K glitch.

"It's the general force and surge of technology spending that's driving the growth," said Orr of First Union.

Analysts expect a slight moderation in earnings in the third quarter. But even those figures are expected to look good in comparison to the third quarter of 1998. And, of course, a gain in retail sales is almost certain in the last quarter. The reason: millennium fever and the Y2K scare, both of which are expected to send consumers into a buying frenzy.

A more discernible moderation in earnings is expected next year. The increase in interest rates and the increasing labor shortage are among the reasons. Also, next year's earnings growth will look less robust in comparison to this year's.

CAPTION: Quarterly Results (This graphic was not available)