Financial stocks have been taking a beating recently. Some savings and loans stood out in my earlier examination of smaller banks, so we'll examine some more of them and try to determine which might be the best thrift of them all.

What is a savings and loan?
A savings and loan is a specific kind of bank that specializes in accepting savings deposits and making mortgages and other loans. Kind of easy to see how the name came about. Historically, they used the ability to pay more in interest on savings accounts to attract more customers, which may have ultimately led to the savings and loans crisis of the 1980s. The final cost of the crisis was $160 billion, including $132 billion from taxpayers.

Screening factors
We will rank and average the banks based on four factors: P/E ratio, P/B ratio, dividend yield, and net income margin. Only banks with a market cap over $300 million will be included.

Profitability is important, so my first screening will eliminate all banks without earnings over the past 12 months. My second factor is the P/B ratio, which indicates how close to book value a company is trading for. In the banking industry, a value of 1.5 is reasonable, and the adage I like is "buy at a half, sell at two." Only banks that pay a dividend will be included -- the higher, the better. Finally, net income margin will be used to find how much profit each bank makes from each dollar of sales.

My initial screen turned up 13 names, so I refined my screen to include only banks with more than a 3% dividend yield. That resulted in the following nine.


P/E Ratio (TTM)

P/B Ratio

Dividend Yield

Net Income Margin

New York Community Bancorp (NYSE: NYB) 11.1 1.01 7.8% 34.4%
Astoria Financial (NYSE: AF) 9.6 0.62 6.5% 17.2%
Dime Community Bancshares (Nasdaq: DCOM) 9.1 1.24 4.6% 30.8%
Flushing Financial (Nasdaq: FFIC) 9.6 0.99 4.1% 26.5%
First Niagara Financial Group (Nasdaq: FNFG) 13.1 0.66 7.2% 15.8%
Provident Financial Services (NYSE: PFS) 14.1 0.84 3.7% 21.5%
Brookline Bancorp (Nasdaq: BRKL) 17.6 0.97 4.1% 27%
People's United Financial (Nasdaq: PBCT) 27.5 0.82 5.1% 14.5%
Northwest Bancshares (Nasdaq: NWBI) 21.6 1.04 3.6% 18.5%
Average of All Savings and Loans 15.9 0.74 2.4% (1.6%)

Source:, TTM = trailing 12 months. Data as of Oct. 27, 2011.

The top two names on my list were also on my list of smaller banks, so I wasn't surprised to see them here. New York Community is currently the 37th largest bank holding company in the nation and primarily operates in metro New York, as well as New Jersey, Ohio, Florida, and Arizona.

Astoria Financial also operates in New York, though it's focused primarily on Long Island and other nearby counties, an area with a population exceeding that of 38 states. They have paid investors a dividend every quarter since August 1995. While the dividend has been stuck at its current level since 2009, it is paying only 62% of its earnings as dividends, meaning it has a bit of latitude if it wanted to increase payouts in the near future.

Regional opportunities abound!
Other fools point to great values in some of the larger banks, and I couldn't agree more. However, there are many great opportunities in some of the savings and loans. I will be paying special attention to New York Community and Astoria and adding them both to My Watchlist. Feel free to do the same.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.