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10 Bank Stock Picks: Heroes vs. Zeros

8. Oriental Financial Group

Shares Oriental Financial Group (OFG) of San Juan, Puerto Rico, closed at $11.39 Friday, down 15% since Sept. 3, 2010. The company raised its quarterly dividend to six cents on Nov. 30, for a forward dividend yield of 2.11%.

The company also announced on Nov. 30 that as part of its authorized $70 million in share repurchases, it had bought back 2.1 million shares so far in the fourth quarter, for an average price of $10.33 a share, for a total cost of $21.7 million. Year-to-date repurchases totaled roughly $52 million.

The company had $7 billion in total assets as of Sept. 30, with 31 branches throughout the island territory.

Oriental reported third-quarter net income available to common shareholders of $15.6 million, or 35 cents a share, declining from $25.3 million in the second quarter but improving from a loss of $31.7 million a year earlier, when the company reported $14.7 million in impairment charges on securities and $22.6 million in losses on derivatives.

The earnings decline from the second quarter reflected "increased premium amortization in the third quarter of 2011 due to the decline in interest rates which caused an increase in pre-payments, versus a decrease in pre-payments and premium amortization in the second quarter of 2011," as well as lower investment securities balances.

Oriental's net interest margin narrowed to a tax-adjusted 2.57% during the third-quarter, from 3.33% the previous quarter and 3.63% a year earlier.

The shares trade for eight times the consensus 2012 EPS estimate of $1.42 among analysts polled by FactSet, and for 0.8 times tangible book value, according to SNL Financial.

All four analysts covering Oriental Financial Group rate the shares a buy.

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