(FORTUNE Magazine) – Buy a bank stock now? Not on your life, most investors would say. While banks haven't bled to death like many savings and loans, they have had their own nasty surprises in real estate. As the supply of new office buildings and condominiums has outstripped demand, some developers have gone broke, leaving many banks with piles of bad loans. In last year's fourth quarter nearly 2,500 institutions -- almost one-fifth of all banks -- lost money. ''It's ugly out there,'' says James McDermott, director of research at Keefe Bruyette & Woods (for more bad banking news, see Money & Markets). What better time, contrarians might ask, to move in? Right now investors have a rare opportunity to buy shares in a few select institutions whose stock price premiums have shriveled amid the whole group's plunge. These banks, all in the Middle Atlantic region, are distinguished by their extreme safety and impressive profitability. All have a near-invisible proportion of nonperforming loans -- those that earn no interest, whose payments are more than 90 days overdue, or that have had to be renegotiated. At the same time, these institutions enjoy an unusually high return on assets, a measure of how efficiently a bank grinds out profits on the capital it uses. Their secret? Conservative lending policies and strong, lasting relationships with customers. Among the most highly regarded is Baltimore's Mercantile Bankshares, which has boosted its dividend annually for more than a decade. Risk is a dirty word here. ''It lends money to people who don't need it,'' says Charles Allmon, president and chairman of the Growth Stock Outlook Trust, a closed-end mutual fund that is eyeing the shares. In addition, the bank has a steady source of profits in its large trust department, which accounts for over 9% of earnings. Just south of the Potomac sits another respected institution, First Virginia Banks of Falls Church, Virginia. Again, management takes few chances. Construction loans represent only 3% of the total portfolio compared with 10% to 12% for most Southeastern banks. Says Richard Stillinger of Keefe Bruyette & Woods, who recommends the stock: ''First Virginia is a kind of haven for investors in today's environment.'' So too, say analysts, is Citizens Bancorp of Laurel, Maryland. Like its Virginia cousin, Citizens focuses on consumer loans. But there's another plus: a management whose interests are closely allied with those of shareholders. The bank's chairman, Alfred H. Smith Jr., and his brother Harry, a director, together own 8.7% of the stock. Wilmington Trust, a Delaware bank, has increased earnings at a 23% annual rate since the mid-Eighties. Most of that growth has come from Wilmington's investment management business, which runs or acts as custodian for a cool $105 billion. Says Lacy Shockley of Smith Barney, ''Wilmington is a group of money managers masquerading as a bank.''

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: PILLARS OF STRENGTH This Baltimore landmark dating from 1886 is a branch of Mercantile Bankshares, one of the supersafe institutions below that have avoided the bad loans plaguing their industry.