Every Friday for 15 years, Michael Sanders deposited his paycheck in Perpetual Savings Bank and asked only one question: "What's my balance?"

So he took the teller by surprise when he walked into the Tysons Corner branch earlier this month and asked how Perpetual was doing.

"I've been hearing so much about the banks' problems and the S&Ls' problems, and I just felt compelled to ask," the 56-year-old accountant said. "I didn't want to withdraw my money or anything. I just wanted to be prepared if anything should happen."

Like numerous other Washington area depositors, Sanders has come to realize that he can no longer take the financial health of area banks and savings and loans for granted.

After nearly a decade of profuse profits and endless expansion, financial institutions here are experiencing their worst year ever, said industry observers, who blame the poor performance on the rapid decline in real estate values and a slowdown in the national and local economies.

This week, many bankers will finish tallying up their numbers and announce fourth-quarter and year-end 1990 results. Although some bankers and analysts said they're hopeful that 1991 will bring signs of improvement, fourth-quarter 1990 results, which began to be reported last week, provide little evidence that a turnaround is in sight. {See table, page 20.}

Dominion Bankshares Corp., Signet Banking Corp., Crestar Financial Corp. and the huge Atlanta-based C&S/Sovran Corp. released a litany of bad news, showing dramatic increases in troubled real estate loans and heavy losses.

The four institutions, which provide banking services throughout metropolitan Washington, said more problems lie ahead unless the real estate market and economic conditions improve. It is unclear what effect the Persian Gulf War will have on those prospects.

"The fourth quarter is going to be dismal, more dismal than the third," said David Penn, who follows area financial institutions for the Baltimore brokerage firm Legg Mason and Co. "A lot of banks are going to throw in the kitchen sink -- try to get all the bad news behind them -- but I still think we haven't hit bottom yet in the real estate market, and that's what is driving this downturn."

"From everything I've heard the fourth quarter is going to be far worse than anyone can imagine," said Rockville banking consultant Arnold Danielson. "My overall feeling is that 1991 is going to be an up year, but it won't seem like that for the next few weeks."

Sovran Bank/D.C. National President Robert Pincus, expressing a minority view, said he was optimistic that the performance of the region's banks would turn around soon.

"While we will continue to endure troubled times, I'm confident that because of the diversification of the Washington area economy ... the banking industry will stabilize and be an active, vibrant business in the not-so-distant future," he said. "What we have right now is a crisis of confidence, and hopefully market forces will improve."

High office-vacancy rates, financially troubled real estate developers, slowing home sales and cautious consumers are at the heart of much of the turmoil -- turning good debt into bad and profits into losses. Bankers have seen delinquent loans skyrocket, foreclosures increase and write-offs jump on loans that could not be collected.

While this has been bad news for banks, it could prove fatal for some S&Ls that do not have the financial stamina to withstand massive losses. The overall health of S&Ls here is much better than in many other parts of the country, but there still are dozens of thrifts facing an uphill struggle.

Three of the area's largest S&Ls -- Perpetual Savings Bank, Trustbank Savings and Chevy Chase Federal Savings Bank -- are having trouble staying profitable and meeting new standards set by President Bush's savings and loan reform bill.

Analysts said they expect all three to fail the new requirements for capital, the financial cushion that S&Ls must provide to protect against bad loans and an important measure of an S&L's well-being. The capital levels, set by the S&L legislation, increased a notch at the beginning of the year.

If an S&L does not comply with the capital rules, it is restricted from growing and often must receive regulatory approval for major business decisions. In addition, a capital-poor thrift must submit a business plan to federal regulators showing how it intends to improve its financial health. Failure to meet the objectives of the plan could result in federal takeover, although regulators take many factors into account before making such a decision.

Other area savings and loans that are struggling to comply with the new capital rules are Republic Federal Savings Bank of Rockville, John Hanson Savings Bank of Beltsville, Ameribanc Savings Bank of Annandale, First Citizens Savings Bank of Silver Spring, Equitable Federal Savings Bank of Wheaton and Jefferson Savings Bank of Warrenton, Va.

Two area S&Ls, United Savings Bank of Vienna and First Federal Savings Bank of Annapolis, failed last year and were taken over by the federal government -- the first such takeovers since the Maryland savings and loan crisis of 1985. A third S&L and one of the largest in Richmond, Heritage Savings Bank, also was seized by regulators.

Based on an analysis of performance through June, another 13 savings and loans in the region are operating on the brink of insolvency. However, none of these S&Ls operate branches in the Washington metropolitan area.

The Office of Thrift Supervision (OTS), which oversees the nation's thrift industry, has said publicly that seven thrifts in Virginia and six in Maryland have been targeted for government takeover. But the OTS has refused to identify those thrifts by name, adding to the climate of uncertainty.

The rapid decline of the health of the region's thrifts has surprised most analysts, who attribute the problems to a lethal combination of the slowdown in the local real estate market and the tougher standards imposed on the industry in 1989 following the national thrift crisis.

"It's been an astounding turnaround," said William Ferguson, head of the firm that analyzes thrift data for the federal government. "Ya'll were supposed to come out of this debacle looking OK. But I know differently now."

The rise in problem real estate loans has hit area S&Ls with a double whammy: it has limited their overall profitability and made it difficult for them to find investors to provide fresh capital.

In the absence of investors, executives of area institutions have gone to great lengths to boost their capital positions in other ways. Dozens of area savings and loans reduced their staffs, closed branches, cut lines of businesses, stopped making new loans and sold valuable assets in 1990, and analysts said more reductions are on line for 1991.

By cutting their size, thrifts don't need as much capital to meet federal standards.

"If Washington wants to survive this downturn, local S&Ls are going to have to shrink like crazy," Ferguson said. "Everybody's having trouble acquiring capital -- this will be the only way."

The answer for local banks is a little less dramatic.

"All the bankers have to do is hold on," said John Heffern of the brokerage firm Alex. Brown & Sons Inc. in Baltimore. "I don't think we're really talking any failures. It's going to be rough, but they should eventually pull out of this OK."

The most troubled bank company in the area, MNC Financial Inc., received a much-needed reprieve last week from federal regulators when it was given permission to borrow $271 million from its subsidiary banks, American Security and Maryland National.

MNC used that money to pay off debt and this week plans to sell stock in its prized credit card subsidiary, MBNA Corp., to raise the rest of the cash it will need to meet upcoming obligations. If the sale of the credit card operation is successful, MNC should be able to restore its banks to financial health and position itself to better withstand the downturn in the local economy.

In the first nine months of the year, MNC lost more than $240 million because of souring real estate loans. Analysts said they expect MNC, which has about $6 billion in real estate loans, to report further losses in the fourth quarter and into the year.

"It's far from over for MNC," said bank analyst Danielson, noting that the Baltimore-based firm loaned more money to real estate developers in the 1980s than any other bank company in the region. "But it would take at least five more quarters of bad earnings before MNC would be in danger of collapse -- if they manage to sell off the credit card company."

Analysts also expect Riggs National Bank and Madison National Bank, both District-based institutions that lent lots of money to local developers, to report heavy fourth-quarter real estate losses.

It seems, in fact, that the only banks not reporting disastrous results are those institutions that steered clear of the 1980s real estate binge -- a binge that has left the Washington area with enough vacant office space to last the next 3 1/2 years, according to some estimates.

Mercantile Bankshares of Baltimore, First Virginia Banks of Falls Church and Central Fidelity Banks of Richmond, institutions that were chastised by analysts in earlier years for their conservative operations and lack of go-go mentality, all managed to avoid the real estate fallout in 1990. Although all three banks say they're concerned about the effect of a national recession on future earnings, none is anticipating losses on par with banks that loaded up on construction loans.

"We feel very confident about the road ahead," said First Virginia Chairman Robert H. Zalokar. "While any softening in the economy could hurt our consumer loans a bit, we're ready for that when it happens."

William Harris, head of Crestar Bank of the District and recently elected president of the Washington Area Board of Trade, said he is "guardedly optimistic" about the future for all area financial institutions.

"I think 1991 is going to be a difficult year for the economy and for local banking," Harris said. "But having said that, I want to add that I think we'll come out of this a lot faster than most people think. There is an underlying strength in this economy that makes a world of difference for our future."

Harris said he expects to see a turnaround in the beginning of 1992, when office vacancy rates will be lower and pent-up consumer demand can spur the economy back to health.

Like many of his fellow bankers, Harris pinpoints the start of the economic decline to last March, when federal regulators began aggressively reviewing local banks' loan portfolios.

"I thought we entered 1990 with every belief that the economy was going to continue in its upward spiral, with the exception of real estate," Harris said. "And no one would have dreamed that that would fall off the cliff."

But when regulators began examining loans, the bankers say, the climate shifted dramatically.

Furious with the lack of record keeping, the lack of collateral and the massive overbuilding, bank and thrift regulators forced nearly every institution in the area to recognize millions of dollars in real estate loan losses virtually overnight.

Following the regulators' exams, banks and S&Ls in Washington lost nearly $71 million in the first six months of 1990. That loss compared with a $78 million profit in the 1989 half.

Maryland institutions' profits also plummeted, dropping 97 percent in the first half of the year to $8.5 million from $250 million posted in June 1989. For the same period, Virginia banks and savings and loans managed a $243 million profit, down 32 percent from the $357 million made a year ago.

Many area bankers say the harsh examinations were unrealistic, forcing them to recognize loan losses that didn't really exist. The regulators didn't see it that way, saying that falling real estate values meant loans that appeared healthy could turn into problems.

Bankers say the regulatory crackdown forced them to stop making real estate loans altogether, a contraction that sent area developers into a financial tailspin.

"The regulatory environment created fear," banker Pincus said. "When people are fearful, they pull back. That led to the credit crunch and a lack of confidence by the consumer."

Recently, bank regulators said they will issue new guidelines on examinations to help ease any unintended credit crunch.

Pincus was one of the of the first bankers to warn of the potential fallout from the 1990 regulatory reviews.

"I wish to God I had been wrong," Pincus said. "I really do."

Still, other bankers do not completely agree with Pincus's assessment.

The examiners' reviews "had a dramatic impact on dampening the local economy," Harris said. "But I don't put all of this at the feet of {Comptroller of the Currency and chief bank regulator} Bob Clarke. I think it was better that they forced us to go ahead and face the facts. It had to happen at some point, it was just a question of when."