1. Doral Financial

Shares of Doral Financial ( DRL) of San Juan, Puerto Rico, closed at $1.47 Monday, returning 54% year-to-date, following a 31% decline during 2011. The 12-month return for the shares has been 27%.

Doral's shares are heavily discounted, trading for just three times the consensus 2013 EPS estimate of 49 cents, and for half their tangible book value.

Doral had $1.9 billion in total assets as of Dec. 30 and reported fourth-quarter net income attributable to common shareholders of $9.2 million, or seven cents a share, compared to a loss of $38.5 million, or 30 cents a share, in the fourth quarter of 2010. The fourth-quarter profit included an $8.6 million income tax benefit.

The company's credit costs declined during the fourth quarter, but Doral was still saddled with nonperforming assets making up 9.62% of total assets as of Dec. 30, improving slightly from 9.86% a year earlier.

When asked during the company's fourth-quarter conference call how much in remaining deferred tax assets investors might look forward to recapturing, Doral CFO Bob Wahlman said that the DTA recapture was related to the performance of two of the company's Puerto Rico subsidiaries, which under the territory's law, file their tax returns independently. Depending on the performance of these subsidiaries, there may be additional tax benefit's boosting Doral's bottom line, but the CFO couldn't provide an estimate.

B. Riley analyst Joe Gladue rates Doral a "Buy," with a $3.75 price target, and said on Jan. 23 that the deferred tax valuation allowance "could add roughly $2.78 to tangible book value if it can be taken back onto the balance sheet," and that the company "took a big step forward" during the fourth quarter, and that if and when the company reaches its goal of sustained profitability, "should not only boost tangible book value, but the stock multiple as well."

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

>>To see these stocks in action, visit the 5 Cheap Bank Stocks With a Strong Earnings Future portfolio on Stockpickr.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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