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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

10 Cheapest Bank Stocks to Forward Earnings (Update 3)

Stocks in this article: BAC C JPM WFC COF DFS OFG HMST EFSC BANC HBNK MNRK FDEF FNMA FMCC PNC USB I:BKX

3. Oriental Financial Group

OFG Chart OFG data by YCharts

Shares of Oriental Financial Group (OFG) of San Juan, Puerto Rico, closed at $16.20 Friday, returning 22% this year, following a 13% return during 2012. The shares trade for 1.2 times their reported March 31 tangible book value of $13.72, and for 7.9 times the consensus 2014 EPS estimate of 2.05. The consensus 2013 EPS estimate is $1.55.

With a quarterly payout of 6 cents, the shares have a dividend yield of 1.48%.

The company had $8.7 billion in total assets as of March 31 and reported first-quarter net income available to common shareholders of $17.7 million, or 37 cents a share, improving from a net loss of $23.3 million, or 53 cents a share, in the fourth quarter, and earnings to common shareholders of $9.5 million, or 23 cents a share, in the first quarter of 2012.

During the fourth quarter, Oriental Financial Group purchased the Puerto Rico banking operations of Banco Bilbao Vizcaya Argentaria SA (BBVA) for $500 million, with the funding coming from a combination of preferred and common stock offerings. The deal brought on roughly $4.8 billion in assets and $3.5 billion in deposits. Oriental's fourth-quarter results included $22.9 million in losses from balance sheet moves as part of the company's deleveraging plan and $5.0 million in merger related expenses.

As a result of the acquisition and deleveraging moves over the past year, Oriental Financial Group's net interest income increased to $92.6 million in the first quarter from $42.9 million in the first quarter of 2012, while its net interest margin expanded to 4.65% from 2.60% a year earlier.

On a tax-adjusted basis, the first-quarter net interest margin was a remarkable 5.03%, compared to 3.88% a year earlier.

Oriental's first-quarter ROA was 0.95% and its return on average common equity was 10.14%.

Jefferies analyst Emlen Harmon rates Oriental Financial Group a "buy," with a $20 price target, and said in a note to clients on April 30 that first-quarter results "were encouraging, with the company ahead of pace to deliver on guided $1.40 GAAP EPS in '13, and loan growth demonstrating the bank's ability to grow core earnings power."

Harmon estimates the company will earn $1.50 a share this year, with earnings growing to $1.85 a share in 2014.

Interested in more on Oriental Financial Group? See TheStreet Ratings' report card for this stock.

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