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10 Best Bank Stocks of 2010

Stocks in this article: CBACJPMHBANZIONCSECATY

NEW YORK ( TheStreet) -- The banks with the best stock-price performance this year are a diverse group: There are some, like Western Alliance Bancshares (WAL), that were beaten down so low there was nowhere to go but up and others, like Texas Capital Bancshares (TCBI), which caters to the wealthy and happens to operate in one of the most economically viable areas of the U.S.

Though none of the top 10 performers are on the same playing field as Bank of America (BAC) or Citigroup (C), there's a relatively wide range of size.

The smallest, WesBanco (WSBC), has just $5.4 billion in assets and a market cap below $520 million. The largest, Huntington Bancshares (HBAN), has a large footprint throughout the Midwest, with $52.7 billion in assets and a market value of $4.7 billion.

Overall, the improvement in these banks' share prices can be attributed to improving fundamentals. Credit costs have declined, margins have improved and capital levels were bolstered by stock and bond offerings, while a few players moved from losses to profits in 2010.

Yet the incredible climb in these stock prices - Cathay General Bancorp (CATY) shareholders, for instance, have seen its value nearly double this year - also begs the question of whether there's any more value left to bid up. Wall Street doesn't appear to be especially bullish on any of the stocks, with most ratings weighted in hold and most prices trading above the average analyst estimate.

Huntington is one of the few stocks that has more buy ratings than hold or sell, with a price target above its current trading range. The bullishness was due, in part, to the fact that Huntington had yet to repay bailout funds - indicating more potential upside and an event that could provide a catalyst for its shares.

Yet on Monday, after Huntington announced that it would (finally) be repaying TARP with a $1.2 billion capital raise, its share price fell through the floor. Investors were either concerned about dilution - the capital raise was more heavily weighted in equity than some had expected - or simply selling on the news.

Others are trading so far above consensus price targets that either Wall Street's valuation metrics are far afield from reality or the rally is about to end. First Commonwealth Financial (FCF), for instance, has an average price target of $6.10, though it has recently been trading around $7. Similarly, Wunderlich Securities downgraded Texas Capital from buy to hold on Dec. 3, citing valuation concerns.

Whether the stocks are overvalued or still have room to soar, here's TheStreet's list of the 10 best bank stocks of 2010, based on year-to-date share price performance, as of the close on Dec. 8:

Terms

For each of the 10 bank holding companies discussed on the following pages, we'll be looking at capital strength, earnings quality and asset quality. For an explanation of those terms you can click on the box below.

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