NEW YORK ( TheStreet) -- How to pick a winning horse?

"Which horse's name reminds you of a bad old western Grandpa would watch?"

I was nine years old, and this advice from my mother essentially revealed that handicapping was designed to "even the odds" just like the point spreads that are equally applied to the upcoming NFL playoff season.

The odds are considerably better - especially when coming out of a credit crisis - for investors looking for bank stock bargains.

Using data supplied by SNL Financial for publicly traded banks and thrifts, along deposit market share data supplied by the Federal Deposit Insurance Corp, TheStreet has selected an actively-traded bank or thrift to represent each of the eight cities whose teams will battle it out in the NFL's Wildcard Weekend, beginning on Saturday.

For each city, we selected the bank or thrift with the greatest deposit market share that was also headquartered in the same state and held by an actively-traded U.S. holding company. For Philadelphia, this approach excluded Citizens Bank of Pennsylvania, which is held by Royal Bank of Scotland ( RBS) and Sovereign Bank, which is not publicly traded.

For New Orleans, we excluded Whitney National Bank, which has the highest deposit market share in the city for any bank headquartered in Louisiana, since its parent company Whitney Holding Corp. ( WTNY) has agreed to be acquired by Hancock Holding Co. ( HBHC) of Gulfport, Miss. in a $1.4 billion deal.

Here are the four matchups, in order of the game schedules:


For each of the eight banks discussed on the following pages, we'll be looking at capital strength, earnings quality and asset quality. For an explanation of some of the terms you can click on the box below.

New Orleans Saints at Seattle Seahawks

The Saints - last year's Super Bowl champion, are a 10 ½-point favorite to knock-off the Seahawks, who are in the playoffs after winning the NFC West division despite having a 7 and 9 win/loss record.

While the Saints are an obvious pick to win the game, our matchup between IBERIABANK ( IBKC) of New Orleans and Washington Federal ( WFSL) of Seattle is a different story, since the companies are very well matched.

Both companies have benefitted from bargain purchases of failed banks from the FDIC. IBERIBANK's purchased Sterling Bank of Lantana, Fla. in July, for its fifth failed-bank acquisition since the current wave of failures began in 2008. Washington Federal picked up the failed Horizon Bank of Bellingham, Wash. from the FDIC in January.

Both companies are very strongly capitalized, with the pump primed for more acquisitions. IBERIABANK's tangible common equity ratio was 10.05% and Washington Federal's was 11.98%. A tangible common equity ratio of 7% is pretty good for a profitable bank.

A direct comparison of year-to-date earnings performance would be unfair, because Washington Federal booked a large gain on its bank acquisitions in the first quarter, while IBERIABANK did the same in the fourth quarter of 2009. For the third quarter of 2010, Washington Federal reported net income of $16 million, with a return on average assets (ROA) of 0.47%. IBERIBANK did slightly better, with $13.9 million in net income and an ROA of 0.52%. For earnings quality, Washington Federal's net interest margin was slightly better, at 3.18% during the third quarter, compared to 2.96% for IBERIABANK.

Where Washington Federal really shines is the efficiency ratio, which SNL Financial defines as noninterest expense (before expenses on foreclosed property, amortization of intangibles and goodwill impairments) divided by its revenue (excluding securities gains and nonrecurring items). Lower is better and Washington Federal's third-quarter efficiency ratio of 32.19% was third-best among 943 publicly traded U.S. banks and thrifts - excluding those traded on the Pink Sheets - according to SNL. IBERIABANK's third-quarter efficiency ratio was 74.83%.

So, with greater efficiency and a better net interest margin, why didn't Washington Federal report significantly better earnings than IBERIABANK during the third quarter? The answer lies in asset quality. For Washington Federal's main subsidiary Washington Federal S&L, the nonperforming assets ratio was 3.72% as of September 30 and its third-quarter provision for loan losses was $37.5 million. For IBERIABANK, the NPA ratio was 0.99% and the third quarter provision was $8 million.

In order to pick a winner between two strong holding companies excellently positioned to expand during an economic recovery, we're going with the cheaper stock according to price multiples. IBERIABANK's shares closed at $59.36 Tuesday and were trading for 1.5 times tangible book value and 22 times the 2011 consensus earnings estimate among analysts polled by Thomson Reuters of $2.67. The forward P/E declines to 17 times the 2012 consensus estimate of $3.57 a share.

Washington Federal closed at $16.69 Tuesday, down 14% over the previous year, and the shares were trading for 1.2 times tangible book value, 16 times the 2011 consensus earnings estimate of $1.07 and 12 times the 2012 EPS estimate of $1.43.

So our winner is Washington Federal.

New York Jets at Indianapolis Colts

The Colts are favored by three points, and it certainly appears likely that future Hall-of-Fame quarterback wizard Peyton Manning will pick apart the beloved Jets. However, JPMorgan Chase ( JPM) of New York is the clear winner in our bank matchup against Old National Bancorp ( ONB) of Evansville, Indiana.

Although it is a David vs. Goliath competition, since JPMorgan had over $2 trillion in assets as of September 30 compared to $7.5 billion for Old National, the pick isn't based on size, but rather on earnings performance, price multiples and analyst opinion.

For the first three quarters of 2010, JPMorgan earned $12.5 billion, for an ROA of 0.82%. Old National earned $32.5 million during the same period for an ROA of 0.57%.

JPMorgan's shares closed at $44.16 Tuesday, up 4% over the previous year, and the shares were trading for 10 times the consensus 2011 earnings estimate of $4.61 a share. The forward P/E based on the 2012 consensus EPS estimate of $5.41 is only 8, making the shares look like a bargain.

Old National Bancorp closed at $11.79 Tuesday, down 2% over the previous year and were trading for 20 times the consensus 2011 EPS estimate of 59 cents a share and 14 times the 2012 estimate of 86 cents a share.

JPMorgan has potential upside of 20% based on the mean price target of $52.78 among analysts polled by Thomson Reuters, while Old National's mean price target is $11.29, indicating potential downside, so JPMorgan's our winner, providing solace for Jet fans.

Baltimore Ravens at Kansas City Chiefs

The Chiefs are favored by 2 ½ points. We favor UMB Financial Corp. ( UMB) of Kansas City, Mo. over First Mariner Bancorp ( FMAR), which was selected to represent Baltimore, since it has the largest deposit market share of any publicly traded bank headquartered in Maryland.

First Mariner's main subsidiary, First Mariner Bank, was below well-well capitalized as of September 30, with a total risk-based capital ratio of 8.86%. This ratio needs to be at least 10% for most banks to be considered well-capitalized by regulators, and 8% for most to be considered adequately capitalized. Adequate is not good, especially in the current environment.

The bank subsidiary is operating under a September 2009 cease and desist order from the FDIC and the Maryland Commissioner of Financial Regulation, ordering the bank to achieve a total risk-based capital ratio of 11% by June 30, 2010, which the bank failed to do through September 30.

On the holding company level, First Mariner lost $12.7 million during the first three quarters of 2010 and had a tangible common equity ratio of just 2.91% as of September 30, according to SNL Financial. The holding company had $1.3 billion in total assets and a nonperforming assets ratio of 5.68% as of September 30.

UMB Financial on the other hand earned $72 million during the first three quarters of 2010, for an ROA of 0.88%, which was only exceeded by Washington Federal among the eight banks listed here. UMB's shares closed at $42.43 Tuesday, returning 10% over the previous year, and were trading for 18 times the 2011 consensus earnings estimate of $2.36 a share and 16 times the 2012 earnings estimate of $265 a share.

Although UMB Financial's shares look expensive, the company is in good shape, while investors in First Mariner face significant dilution of their shares if the company manages to raise the additional capital it needs.

Green Bay Packers at Philadelphia Eagles

The final wildcard matchup will feature two storied franchises, with the Packers favored by 2 ½ points. We also favor Green Bay's Associated Banc-Corp ( ASBC) over Beneficial Mutual Bancorp ( BNCL) of Philadelphia.

Both companies are well-capitalized, although Associated owes $525 million in TARP money. Associated had $22.5 billion in total assets as of September 30 and a nonperforming assets ratio of 3.52%, improving from 4.00% a year earlier. For the first three quarters, Associated posted a net loss of $37 million, or 22 cents a share, as it continued to build up loan loss reserves, although the company returned to profitability in the third quarter with net income to common shareholders of $6.9 million, or 4 cents a share.

Beneficial Mutual had $4.9 billion in assets as of September 30 and for its main subsidiary Beneficial Mutual Savings Bank, the NPA ratio was 2.21%, but the bank charged-off $57 million in loans during the third quarter. The holding company posted net losses of $21.7 million for the third quarter and $8.6 million for the first three quarters of 2010.

Beneficial Mutual's shares closed at $9.08 Tuesday, down 8% over the previous year. The shares were trading for 38 times the consensus 2011 earnings estimate of 24 cents a share, and 28 times the consensus 2012 EPS estimate of 32 cents.

Associated Banc-Corp's shares closed at $15 Tuesday, up 30% over the previous year. The shares were trading at a high forward P/E of 25 based on the 2011 consensus earnings estimate of 61 cents a share, but the forward P/E drops to a reasonable 13 based on the 2012 consensus estimate of $1.16 a share.

While both companies are "earnings challenged," the clear pick between the two is Associated, because it is projected to have much stronger earnings improvement over the next two years.


-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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.