Everyone told Robert Zalokar that First Virginia Bank would not survive the go-go 1980s. The Wall Street analysts told him, his fellow bankers told him and even his neighbors lectured him. But the First Virginia chairman just never listened.

A tortoise among hares, Zalokar had built his reputation as a conservative, nuts-and-bolts banker -- and he wasn't about to change. To his critics, however, he was old-fashioned, stubborn, even stupid for passing up the big-bucks real estate deals that had catapulted other Washington area banks to the big time.

What a difference a decade makes.

Today, while nearly every major bank in the Washington area is being hammered by collapsing commercial real estate loans, First Virginia Banks Inc. is winning kudos from industry observers for its slow-but-steady banking philosophy, one shared by only a handful of other major regional banks.

The leaders of these maverick institutions, like Central Fidelity of Richmond and Mercantile Bankshares Corp. of Baltimore, tend to think alike.

"Banking isn't a glamorous business," said Carroll L. Saine, chairman and chief executive officer of Central Fidelity. "If you're operating a bank profitably and correctly, it should be the dullest, most boring business around. When you get too aggressive, sooner or later you pay the piper for it."

"We don't take on an area just because it seems to be popular at any given time," Zalokar added. "We never have, and we never will."

It was a lonely and mundane road these bankers plodded along, made up of hundreds of thousands of small, less-risky loans to consumers and businesses. There were no quick profits, no big fees and no spectacular mega-mergers. But there was always a sense of confidence that one day the high-flying practices would catch up with the competition.

"There's an end to every party," said Zalokar. "I've been waiting for the end of this one for years."

These days, as Zalokar gazes out the picture window on the top floor of First Virginia's 12-story bank building on Arlington Boulevard in Fairfax County, he sees the ravaged spoils of the decade past in the mammoth construction cranes and towering office complexes spread across the suburban horizon -- all decorated by a forest of "For Lease" signs.

The Washington area's high commercial-office vacancy rates and plummeting real estate values are wreaking havoc on Zalokar's competitors. Last month, the area's largest bank company, MNC Financial Inc., reported a staggering $242 million loss for the first nine months of the year, which it blamed on the real estate slump. To survive the turmoil, the parent of American Security Bank and Maryland National Bank has put its valued credit card business on the auction block.

Although MNC has been hit the hardest, a litany of lenders including Perpetual Savings Bank FSB, Dominion Bank, Sovran Financial Corp., Riggs National Corp., Signet Banking Corp., Crestar Financial Corp., Columbia First Bank, Ameribanc and Madison National Bank all have reported big losses or declining profits because of their exposure to the troubled real estate market.

But Zalokar never followed this crowd. His age-old banking philosophy told him not to.

"I had the chance," he said. "I had developers coming in here, offering me deals. But they didn't want to put their own cash into the projects and they wanted it 100 percent financed. They didn't even have tenants lined up."

"I told 'em, 'Well, I'd be glad to finance you, but it's gonna be on my terms.' Of course, when they heard the terms, they stormed out."

Much of the praise Zalokar receives today centers around the relatively paltry amount that First Virginia has lent to developers. While other bankers bet their fortunes on a real estate market they believed would never collapse, First Virginia's chairman never committed more than a tiny fraction of his loans to real estate construction.

For example, last year, First Virginia had invested $100 million in real estate development, 3 percent of the $3.2 billion of loans that it made that year.

That's a pittance compared with the $4 billion that MNC Financial had committed to developers last year.

"Admittedly, there was a lot of money that was being made on real estate loans," Zalokar said. "But I wouldn't say I missed out."

For decades, First Virginia Bank had been a consumer-oriented shop. And Zalokar, who began his career in 1951 as a federal bank regulator with the Federal Deposit Insurance Corp. (FDIC), did no differently.

In his five years as chairman, Zalokar has placed his bets on automobile loans, credit cards, home equity loans, home mortgages and business loans, which add up to nearly 70 percent of First Virginia's loan portfolio. The money to finance these lending activities comes from deposits at First Virginia's 306 branches in Virginia, Maryland and Tennessee and not from borrowing from outside sources.

"First Virginia is banking the old-fashioned way," said David West, who follows the bank's performance for the Wheat First Securities brokerage in Richmond. "They've always stood out among typical commercial banks today. Zalokar is very risk-averse."

In the past, analysts have argued that such a business strategy would doom First Virginia to failure. In today's competitive banking environment, where enticing depositors with high interest rates is costly, low-risk loans just don't earn enough money, they said.

But time and again, First Virginia has proven these nay-sayers wrong.

The bank's return on assets, the amount of money it earns on loans and investments and one of the most coveted measures of performance, has consistently ranked among the highest in the nation. Today, the ratio stands at 1.27 percent -- anything above 1 percent is considered outstanding.

But success does not stop there. While other banks are reporting skyrocketing loan delinquency rates, First Virginia's delinquency rates remain below average in all loan categories. (But just to be prudent, Zalokar has squirreled away money to protect against defaults.)

And while bankers nationwide are scrambling to raise capital, the cushion the banks must have on hand to protect the FDIC fund from losses, First Virginia's capital level is more than 9 percent, which is higher than any of its Virginia competitors and far above federally mandated minimums.

Today, the analysts' bearish reports on First Virginia have all but disappeared, replaced with comments about its "extreme safety," its "excellent asset quality" and its "conservative lending policies and strong, lasting relationships with customers."

Perhaps the only major obstacle facing the bank today is a half-million-dollar civil verdict against the bank for its refusal to rehire a black maintenance worker after the worker complained of racial harassment. Zalokar said the bank is appealing the judge's ruling, which was made in July.

But even if the ruling is not overturned, analysts say First Virginia has plenty of money to deal with its problems.

"It's a cash-rich institution," West said. "I don't get to say that about many of them. Even if their entire real estate portfolio was wiped out, they'd have plenty of cushion."

Zalokar attributes the bank's performance to tight cost controls, prudent investments and solid management of lending activities. But he acknowledges that if the economy should slip into recession, he would not be immune to problems.

"We always suffer when there's a downturn," he said. "But we have staying power. We're ready for the worst if that's what should happen."

In the meantime, the 63-year old chairman is content to brag just a little bit.

A new advertising campaign aimed right at the heart of depositors' growing fears about bank failures touts First Virginia's "safety and soundness."

Customers are receiving brochures that highlight the bank's financial performance and promise "peace of mind."

And at a recent banking industry convention in Florida, where the nation's bank regulators sharply criticized the industry for lax management and lack of credibility, Zalokar said he couldn't hide a smile.

The performance has brought First Virginia recognition by the top banking and thrift analyst firm in the nation, Keefe, Bruyette & Woods Inc., which rate the Falls Church regional bank No. 1 on asset quality among Southeastern banks. (A bank's assets are mostly the loans it makes; the rating means the bank has few bad loans.)

The only other area institutions to rank among the Top 10 were First Virginia's fellow travelers on the hum-drum lending path, Mercantile Bankshares and Central Fidelity Banks.

The heads of these institutions share Zalokar's prudent, old-fashioned style and largely ignored the changes taking place in the banking industry.

Instead, they've stayed on their home turf, stuck to the low-risk loans, turned down eager merger partners and continued to depend on customer deposits for their business.

Their profits may not have been stellar, but these banks have earned steadily over the years. And today, they are the envy of all.

"It was a tough road to follow," said Saine of Central Fidelity. "Everybody was criticizing us in the mid-1980s. But we said we'd stick to our knitting and do what we do well."

Before he could set out on this course, however, Saine had to fight members of the bank's directors and a few senior managers, who insisted that Central Fidelity would be gone by 1990, eaten up by some larger banking giant.

"A couple of people wanted to go for the quick buck, for the size," Saine said. "They believed it was only a matter of time before we were acquired ...

"But we sold them on a strategy to increase the deposit base, to increase the branch network," he said.

"I told them the worst that could happen is that we'd fail and be acquired anyway," he said. "So as far as I was concerned, there was really nothing to lose."

Today, Saine is winning applause from his board for his emphasis on basic banking. At the end of this year, Central Fidelity expects to report its 16th consecutive year of profit, the best track record of any bank in the Southeast.

Although Central Fidelity has made a few more real estate loans that First Virginia, Saine said the bank has avoided the big hits by making smaller loans. 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.

Still, nonperforming real estate loans -- those that aren't paying interest or are in default -- are on the rise. But Saine said he has been prepared for that, too, and began cutting costs in 1988 "just in case things should sour."

Saine calculates that his aggressive cost controls saved Central Fidelity $21 million last year, giving him plenty of breathing room. The bank has reserved millions of dollars against the possibility that some loans will never be repaid, but because of the cost cuts, the reserves won't affect earnings -- as they have at so many other local institutions.

Although Saine and the other bankers said the performance of their institutions is proof their road was the right one, they are having a tough time convincing Wall Street.

Since Jan. 1, the value of First Virginia Bank's stock has plummeted 40 percent, Central Fidelity's has dropped 26 percent and Mercantile's is down 35 percent.

While the bank's performance in the stock market has not been good, it still is better than many of the major banks in the area that are suffering commercial real estate loan losses.

Analysts said investors are simply not discriminating between the "good and bad" banks in the Washington area.

"It doesn't matter who you are, you're going to get clobbered," said Kyle Legg, who keeps tabs on local banks for Alex. Brown Inc., a Baltimore-based investment banking firm. "The only thing investors are looking at is whether you have a dime in real estate, and if you do, you're out of luck."

To combat Central Fidelity's depressed stock price, Saine has increased the dividend twice this year.

The company also plans to buy back as many as 1.5 million shares, or 10 percent of the total stock outstanding.

"There's a lot more value there than the market is giving us credit for," Saine said. "We hope to show the market just how confident we are."

"It's very frustrating to know you're doing well, but the market doesn't believe you," Zalokar said. "It really makes you wonder what more you can do."

But whatever the doubts on Wall Street about conservative banking practices, they are not reflected among the rest of the banking industry, which has suddenly gone hog wild on the concept of "back-to-basics" banking.

From MNC Financial to the ailing Bank of Boston, the rhetoric is customer relationships, consumer loans and no more real estate.

"It happens every time," said Saine, who is not the least bit worried about the potential for more competition. "The banks get burned on Third World loans or leveraged buyouts or real estate, and suddenly they get religion.

"But then, something else comes along that's exciting, and they forget all about the boring stuff."