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Tickers in this Article: VLY, BNCL, STBA, HCBK, C, BAC, FNM, FRE
The financial debacle has led to the bankruptcy of large firms that have been around for more than a century, and in the process, has cut the Dow Jones U.S. Financial Index in half from the 2007 high. So, were any financial stocks able to weather the storm, and should investors be looking to them now as buying opportunities? (Sometimes there's a lot of money to be made by buying a stock on the cheap. Other times cheap stocks should be avoided. To that end, be sure to check out Value Traps: Bargain Hunters Beware!)

The Great Northeast
As an East Coast guy, I am somewhat biased to the way things are here (fast paced) and our food (cheese steaks), but now I am even leaning toward our regional banks. Even as some of the big-name banks such as Citigroup (NYSE:C) and Bank of America (NYSE:BAC) struggle, a handful of regional banks based in the Northeast have been able to shrug off much of the credit crisis. This may be the result of many factors, but mainly it has to do with their lack of exposure to highly leveraged and complicated structure investments dealing with mortgages.

On the other side of the argument, new mortgages have fallen dramatically, which is a large part of the regional banks' business. That being said, mortgage rates fell below 6% for the first time in months after the government bailout of Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). Any rebound in the economy will likely lead to more lending and a bottom in the housing market, which will result in more mortgage applications.

Jersey Boys
Hudson City Bancorp (Nasdaq:HCBK) is one of very few banks that hit a new 52-week high in September as the markets were floundering. The New Jersey-based bank has more than 120 branches and concentrates on the New York metro area. The reason for the outperformance is twofold. First, its location in and around New York City helps shelter it from problem areas; and second, it does not deal with subprime mortgages or CDOs. The 2.4% annual dividend is an added bonus. (Want to learn more about the subprime crisis? Check out Who Is To Blame For The Subprime Crisis?)

Valley National Bancorp (NYSE:VLY) is another New Jersey bank that has taken advantage of the same factors for outperformance in its 193 branches in the New York City surrounding area. The one concern with VLY is its exposure to preferred shares of FNM and FRE. In early September, the bank acknowledged the holdings and that they could lead to a one-time third-quarter charge ("if recognized"). Aside from that, the company has real estate valued at more than $200 million. This I view as a good thing, because if the real estate market turns in the coming year, it will benefit VLY. The dividend yield is 3.3%.

Keystone Banks
Based in western Pennsylvania, S&T Bancorp (Nasdaq:STBA) has 55 branches that offer anything from retail checking accounts to mortgages for residential and commercial loans. About two-thirds of its loan portfolio is commercial, which is a benefit in this market environment. Its rural location has also helped keep STBA from the real estate boom and bust. The company may not be a household name, but it was recognized as one of the country's best bank brands by Bancography. The dividend yield is 3.3%.

Located in the city of brotherly love, Beneficial Mutual Bancorp (Nasdaq:BNCL) serves the Philadelphia and South Jersey area with 72 branches. In addition to typical banking services, BNCL offers mutual funds and consulting as well as annuities. On top of strong stock performance, its most recent earnings report was solid. For Q2, its net income rose nearly 50% from Q1. Investors also need to be aware that the company does not pay a dividend. (Interested in learning more about dividends? Be sure to check out Dividend Facts You May Not Know.)

Bottom Line
The current financial debacle is bound to create some opportunities. The key, however, will be to do proper research and to select the right stocks.

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