3. Oriental Financial Group ( OFG) of San Juan, P.R., purchased the failed Eurobank, also of San Juan, from the FDIC on April 30. The acquisition included 22 branches, $785 million in retail deposits and $1.7 billion in assets, with the FDIC agreeing to absorb 80% of losses on acquired loans. The transaction grew Oriental's balance sheet 26% to roughly $8.2 billion.

Oriental also raised $200 million in a preferred share offering, with the shares subject to mandatory conversion to common stock, pending shareholder approval.

Sterne Agee analyst Adam Barkstrom estimates that after the conversion, Oriental's tangible book value will be $12.60 per common share. Shares closed at $13.25 Tuesday, down 21% in May, but up 23% year to date.

Barkstrom said on May 3 that the shares were "fairly valued" at $16.72, or roughly 10 times Sterne Agee's "normalized" earnings estimate of $1.70. With shares dropping so much since that report was published and selling for just six times the 2011 consensus earnings estimate of $1.88 among analysts polled by Thomson First Call, Oriental Financial looks like a bargain.

Oriental Financial has stood out among Puerto Rico banks through the real estate crisis, with the best credit quality by far, with a nonperforming assets ratio staying well below 2.5%, and very light loan losses. The company's low-risk acquisition of Eurobank has positioned itself for growth when the Puerto Rico economy recovers, and because the capital raise is behind it, patient investors should be rewarded.

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