Like children who've gorged on too much Halloween candy, the region's banks that binged on real estate loans in the 1980s are suffering from upset stomachs. But like the kids, they'll survive.

In the first three months of this year, 45 banks in the region weighed in with losses and dozens more reported declining profits because of problems in their real estate loan portfolios. Loans that are not being paid on time skyrocketed during the quarter and actual write-offs on loans that could not be collected also jumped.

The trend worsened from March to June, according to the Federal Deposit Insurance Corp., which said that during that period real estate loan troubles grew faster in Maryland and the District than anywhere else in the nation.

Banking experts predict, however, that their relatively strong overall financial health and sound management will keep the region's banks afloat.

Still, they warn that hard times are ahead, a point underscored by recently released statistics that show bank profits turning to losses and good debt turning to bad.

That could be unpleasant news for everybody. The health of the local banking system is considered a barometer of the health of the local economy, and performance of area financial institutions during the first half of the year shows no turnaround is in sight.

To make matters worse, banks already have tightened their lending standards to reduce the risk of default, and as the local economy weakens, they are likely to tighten up even more.

The ensuing "credit crunch" will only heighten the economic slowdown.

But as distressed as the situation may be getting, it still doesn't spell the end for banks, as it could for more than a dozen savings and loans in the region that do not have the financial stamina to withstand an economic slowdown.

"What we're seeing at the banks, by and large, is some indigestion problems and heartburn as a result of the downturn {in local real estate markets}," said Bert Ely, an Alexandria-based banking and thrift consultant. "I don't think it's going to take anybody down, but some will clearly be struggling."

The end of the decade-long development boom has hit nearly every bank in town and left bankers reeling.

Only a handful of institutions that declined to take part in the real estate lending frenzy -- such as First Virginia Banks Inc. and Central Fidelity Banks Inc. -- have avoided the difficulties. But where lending to developers was big business, bigger problems have followed.

For example, a steady diet of real estate lending at MNC Financial Inc., the parent of American Security, Maryland National and Equitable banks, resulted in a $75 million loss in the second quarter -- the largest loss yet attributed to the weak commercial real estate market.

The glut of office space, the slowdown in home sales and the financial woes of area developers such as Conrad Cafritz -- who is trying to reach agreements with the banks that lent him more than $1 billion in an effort to avoid entering bankruptcy proceedings -- have all wreaked havoc on MNC's $4 billion of outstanding real estate loans.

Like many local banks hit hard by the softening real estate market in recent months, MNC has virtually stopped making loans for commercial development. And loan officers who once focused on lending to area developers are now focusing on restructuring payments for problem debt.

"It seems that MNC is the one having the most distress," Ely said. "But it's my sense that they'll come through -- though they may come through somewhat chastened."

Other large institutions feeling the heat are Signet Banking Corp., Crestar Financial Corp., Riggs National Corp., Dominion Bankshares Corp., James Madison Ltd. and Sovran Financial Corp., which recently merged with Citizens & Southern Corp. of Atlanta.

Smaller institutions, like Bank Potomac of Herndon, Columbia National Bank of the District and First Bank of Frederick, Md., also are getting squeezed.

And in some ways, their problems may be more severe since they lack the size and diversity that would help them work through tough times.

All of these institutions have shored up their cash reserves in recent months to protect against future loan problems.

But analysts said it's difficult to tell whether the banks' reserves are adequate.

"You just can't tell if somebody has taken enough of a precaution," said Elisabeth Albert Hayes, a banking analyst with Johnston Lemon & Co.

"Even the banks aren't real sure anymore. A lot of bankers are trying to gear up for the worst, but it's not clear yet just how bad it's going to get."

As of June, 4.75 percent of all real estate loans made by District banks were more than 90 days past due, along with 2.06 percent of the real estate loans of Maryland banks and 1.81 percent of those of Virginia banks.

Less than 1 percent is considered a healthy ratio.

Analysts said they don't expect those percentages to improve in the third quarter, which ends Sept. 30.

And many experts predict it will be at least 12 to 18 months before area institutions get back on their feet.

But none of those predictions takes into account a national recession, which analysts said is now the biggest threat facing area bankers.

A severe recession could exhaust banks' financial resources, already weakened by real estate loan losses.

At the very least, such a downturn would worsen the problems and spread them into other loan portfolios.

Many banks have rushed into the home equity and consumer lending markets following the downturn in real estate, Hayes said. If unemployment rises and consumers fail to keep up with their payments, she said, "banks could be thrown into turmoil."

Another uncertainty facing area institutions is the conflict in the Middle East, which could offer a plus to banks in the form of more business to local government contractors -- but an even greater negative, in the form of higher interest rates.

The last time the outlook for local banks was this dismal was during the recession of the mid-1970s.

Back then, the concerns focused mainly on loans to real estate investment trusts.

But analysts said the magnitude of those problems pales in comparison with today's troubles.

"This generation of bankers has never seen anything quite like this," said Anthony Davis of Wheat, First Securities in Richmond. "There's never been a real estate cycle like the one in Washington in the 1980s. And there will probably never be one quite like it again."

Federal regulators, meanwhile, have cracked down hard on local lenders in recent months, forcing many to change the way they do business.

For example, some area lenders once made loans to developers on the basis of their net worth, without paying much attention to the number of projects the developer had under construction.

The result: a developer personally guarantees dozens of loans for dozens of properties, but his net worth isn't enough to cover all of them, so the bank is left with the risk.

But regulators, who remember all too well that this kind of lending led to the collapse of dozens of Texas savings and loans, have put a stop to such deals.

When making loans, banks also would often in clude money in the loan that the borrower would use to pay the interest.

Such deals were especially common for developers who lacked income from the property under construction to pay interest on their debt.

The developer would use the "interest carry" in the loan to pay the debt until the property itself started generating profits.

But the Office of the Comptroller of the Currency, which oversees national banks, has criticized these types of loans, saying they are very risky, especially in a deteriorating real estate market.

As a result, banks have stopped offering them, even though area bankers said they disagree with the OCC's assessment.

"It's a different world out there today," Hayes said. And many area bankers agree.

As one local banker put it, "a handshake just won't do anymore."