This article was originally published March 5.

Investing in financial stocks right now is not for the squeamish, but there are some potential bargains for investors willing to do extra homework on capital strength, asset quality, prospects for securities writedowns during 2009 and dividend yields.

An analysis of the 20 largest U.S. bank and thrift holding companies by market capitalization shows how far the mighty -- like


(C) - Get Report


Bank of America

(BAC) - Get Report

-- have fallen, but also uncovers some lesser-known players -- like

Hudson City Bancorp



Capitol Federal Financial

(CFFN) - Get Report

-- who have weathered the storm relatively well.

It might be a surprise to see some of these names among the 20 largest publicly traded U.S. bank and thrift holding companies by market capitalization. But the weight of the credit crisis has rearranged the list by eliminating large companies through failures like

Washington Mutual

, and acquisitions like

National City




Many of the companies that have moved up the rankings exhibit similar qualities: Attractive, safe yields, low ratios of nonperforming loans and debit securities to core capital and loan loss reserves and limited loan losses during 2008.

Before the financial crisis began, many investors were of the opinion that, for a healthy bank or thrift holding company, a price-to-book ratio below 2 was attractive. The events of the past year and a half have put book values under suspicion, but the ratio can still come in handy when considering investing in some of the healthier companies on the list.

Below is a list of the 20 largest U.S. holding companies by market capitalization:

Since gathering the data is never as cut-and-dry as we would like, here are a couple of points that need to be made about the table:

Capital infusions received from the Treasury through the Troubled Assets Relief Program (TARP) during the first quarter of 2009 are not included.

This is very important when considering the capital exposure to troubled assets for a company like Bank of America, which received $10 billion in TARP money after the acquisition of Merrill Lynch, followed another $20 billion.

We used different data for thrift holding companies.

For bank holding companies, the table includes data from Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) filed with the

Federal Reserve


Since thrift holding companies don't file a uniform set of numbers at the holding company level, we used thrift financial report data for the companies' main subsidiaries:

  • For People's United Financial (PBCT) - Get Report, the data is for People's United Bank of Bridgeport, Conn, although People's United holds several other thrifts, which are much smaller.
  • For Hudson City Bancorp, we used data for Hudson City Savings Bank.
  • For TFS Financial Corp (TFSL) - Get Report, the data is for Third Federal Savings and Loan of Cleveland, Ohio.
  • For Capitol Federal Financial, the data is for Capitol Federal Savings Bank of Topeka, Kan.

The ratio of nonperforming loans and debit securities to core capital and loan loss reserves (here adjusted for government-guaranteed loan balances) is also known as the "Texas Ratio." A level over 20% is often considered excessive, and two holding companies, Bank of America and

SunTrust Banks

(STI) - Get Report

had Texas ratios exceeding 20% as of Dec. 31.

Of course, the additional $30 billion in funds Bank of America received through the Troubled Asset Relief Program during the first quarter of 2009 are not included in the Texas ratio. After March 31 numbers become available, when we factor in the additional capital new assets from the Merrill acquisition and the government's backstop on losses from some of the Merrill assets, the company's financial picture will change.

Northern Trust

Northern Trust

(NTRS) - Get Report

had the lowest Texas ratio on the list, coming in at 1.76%. Its strong standing is reflected in its share price and price-to-book ratio, as both are fairly expensive.

Northern Trust's numbers reflect its primary role as a private bank, with loans comprising only 37% of total assets as of Dec. 31. Nonperforming assets comprised just 0.15% of total assets -- the best overall asset quality ratio on the list.

Still, the company's price-to-book ratio of 2.48 looks quite high in the current environment, and its $1.6 billion infusion of TARP money illustrates the headline risk associated with taking the government's money, especially for a company whose business model requires it to "wine and dine" wealthy clients.

Following the media's indignation over its continued sponsorship of the Northern Trust Open golf tournament in Los Angeles, the company said Friday it would repay the Treasury all of the TARP money as soon as possible.

If Northern Trust could repay the money, it would also leave open the possibility of a dividend increase. TARP recipients must first win Treasury approval for any increase in dividends on common shares for three years after being handed the money. Northern trust's quarterly dividend is 28 cents, for a not-particularly-attractive yield of 2.06% at Tuesday's market close.

Capitol Federal and Hudson City

Two bank holding companies with strong, safe dividends include Capitol Federal Financial and Hudson City Bancorp.

Capitol Federal Financial, like Northern Trust, has a high price-to-book ratio of 2.91, perhaps reflecting its stellar 2.26% Texas ratio.

The company's main subsidiary, Capitol Federal Savings, is primarily a mortgage lender and performed well during 2008, with earnings increasing throughout the year. Net income for the S&L subsidiary for 2008 was $58.1 million, or a return on average assets (ROA) of 0.72% and return on average equity (ROE) of 7.89%.

While these would not be stellar numbers in a strong economy, they certainly stood out last year, and the ROE also reflected the S&L's strong capital position, with a tier-1 leverage ratio of 9.95% and a risk-based capital ratio of 22.96% as of Dec. 31, all while not applying for any TARP money. The S&L's nonperforming assets ratio was a low 0.28% as of Dec. 31, and net charge-offs (actual loan losses) for 2008 were a miniscule 0.03% of average loans.

Shares returned a negative 20.69% year-to-date as of Tuesday's close, according to


, but returned a positive 7.75% from a year earlier. The dividend is very attractive, at 50 cents per quarter, for a yield of 5.59% based on Tuesday's market close. Plus, it seems quite safe with such strong asset quality and excess capital.

Hudson City Bancorp also had a strong 2008, with main subsidiary Hudson City Savings Bank earning $436 million, for an ROA of 0.89% and ROE of 10.07%.

Hudson City didn't apply to participate in TARP, and the thrift subsidiary remained well capitalized. With excess capital and strong asset quality, the holding company's quarterly dividend of 14 cents per common share seems safe, with an attractive dividend yield of 5.52% at Tuesday's close. The company's price-to-book ratio of 1.52 also made it appear less expensive than several other strong holding companies on the list.

New York Community

New York Community Bancorp

( NYB) has been battered because of $104 million in impairment charges on securities during 2008, including $42 million related to the bankruptcy of

Lehman Brothers

. The company also took $285 million in charges related to the repositioning of its wholesale debt, as it prepaid $4 billion in wholesale borrowings and replaced them with $3.8 billion in lower-cost borrowings. Net income for 2008 was $78 million, down from $279 million in 2007.

On a more positive note, New York Community maintained strong asset quality through 2008. The multifamily lending specialist's nonperforming assets ratio was a low 0.35% and its ratio of net charge-offs to average loans was just 0.03% for the year.

The company's multifamily lending activity is not the type of condominium project lending that got

Corus Bancorp

( CORS) into so much trouble. New York Community's multifamily loans are primarily to companies operating apartment houses whose tenants are mainly working-class families who continue to pay rent. The company's multifamily loan portfolio grew 12% year-over-year, to $15.7 billion as of Dec. 31.

New York Community's price-to-book ratio was just 0.76 at Tuesday's market close, with the 25-cent quarterly dividend on common shares yielding 10.80%. The market clearly doesn't trust the company to continue paying at that rate without additional significant impairment charges on securities.

With the company raising $339 million through an oversubscribed common stock offering in May, New York Community was still quite well capitalized as of Dec. 31, with a tier-1 leverage ratio of 7.84% and a risk-based capital ratio of 11.96%. In the company's fourth quarter earnings conference call, CEO Joseph Ficalora said "I'm very confident about the dividend we pay."

While New York Community remains a speculative play, the stock might turn out to be a bargain here for investors with intermediate- to long-term horizons, considering the strength of the core multifamily lending business, provided there are no big surprises in 2009.

Other Attractive Holding Companies

Several other holding companies on the list declined to apply for TARP money, while maintaining decent earnings and ending 2008 with low levels of exposure to problem assets.

People's United Bank's 15-cent quarterly dividend on common shares translated to a yield of 3.50% as of Tuesday's market close. While this yield isn't as attractive as the yields for Capital Federal Financial and Hudson City, People's United's price-to-book ratio was just 1.11 at Tuesday's close.

Commerce Bancshares

(CBSH) - Get Report

of Kansas City's dividend yield of 2.99% appears safe. Shares had returned a negative 27% year-to-date as of Tuesday's close, with a 1-year negative return of 16%.


Cullen Frost Bankers

(CFR) - Get Report

of San Antonio's price to book ratio was 1.36 at Tuesday's market close, with common shares yielding 4.26%.

Philip W. van Doorn joined Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.