As we approach the end of a tumultuous 2011, it's time to look back at the biggest winners and losers.

So in this series, that's exactly what we're doing, sector by sector. Today, let's look at the 10 biggest losers in thrifts. Although technically different from regional banks, the line between the two is gray. (Check out the list of the worst-performing regional banks.)

First, the banking sector's backstory for the year, and then the results.

The backstory
This year, we saw U.S. Treasuries get downgraded from AAA status while Congress played politics instead of fixing the budget, a domestic economy that has been recovering from its financial crisis in fits and starts, big trouble in Europe, and a Chinese economy that doesn't seem so bulletproof.

The daily volatility in the banking industry has been tremendous because the economic crisis over the past few years has been largely driven by the financial industry and because the banking industry as a whole holds a great deal of sovereign debt.

However, global issues affect the biggest banks more than they do most regional banks and thrifts. Size in banking is usually directly proportional to the level of complexity and opacity in a bank's balance sheet. Giant Wall Street banks such as Goldman Sachs and Citigroup represent the extreme.

In addition, the smaller the bank, the more localized external factors tend to be. As an investor, you worry more about the local economy than about the economy of Greece. 

The 10 worst thrifts of 2011
For context, the S&P 500 is down 1.7% after factoring in dividends this year. In other words, the market has been basically flat, but these 10 thrifts have gotten slammed.

Bank Name

2011 Return

Price-to-Tangible Book Value

Flagstar Bancorp (NYSE: FBC) (72.1%) 0.3
Hudson City Bancorp (Nasdaq: HCBK) (50.7%) 0.6
Provident New York Bancorp (Nasdaq: PBNY) (37.5%) 0.9
Astoria Financial (37.4%) 0.7
First Niagara Financial Group (Nasdaq: FNFG) (35.8%) 1.1
New York Community Bancorp (NYSE: NYB) (32.1%) 1.7
WSFS Financial (25.9%) 0.8
Brookline Bancorp (Nasdaq: BRKL) (25.2%) 1.0
Washington Federal (22.6%) 0.9
Dime Community Bancshares (Nasdaq: DCOM) (17.6%) 1.3

Source: S&P Capital IQ. Return includes dividends, if any.

When we look at this list of the worst-performing thrifts, we should be looking for two things:

  1. Why the banks have fared so poorly.
  2. Whether there's opportunity.

I like to find small thrifts and banks that have shown a good track record of operational performance. I want to see good, conservative lending, profits and good returns on investment, and preferably a dividend.

Not surprisingly given the poor returns this year, there is some ugliness in many of these thrifts. Only three of the 10 have fully provisioned for their bad loans: First Niagara, Brookline, and Dime Community. Each of these pays a substantial dividend, and each is worth looking into further. One thing to note is that Brookline, though it has the lowest price-to-tangible-book value of the three, has the highest P/E ratio (17.0).

Beyond these three, let me leave you with a regional bank that has some of the best operational numbers I've ever seen. I wrote about it in our brand new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to take a free copy. Find out the name of the bank that I believe Warren Buffett would be interested in if he still had the financial flexibility to invest in small banks and thrifts.