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Oriental Financial Group Inc.

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Look outside the box when investing in banks. Oriental Financial Group Inc. (OFG - Free Report) doesn't have the big name of other banks, but it is expected to grow earnings by 89.1% in 2012. This Zacks #1 Rank (Strong Buy) is also still cheap, with a forward P/E of 9.7.

Oriental Financial Group is a diversified financial holding company headquartered in San Juan, Puerto Rico. It operates under U.S. and Puerto Rico banking laws and regulations. The bank provides a range of mortgage, commercial and consumer banking services from its 30 financial centers in Puerto Rico.

It also handles financial planning, trust, insurance, investment brokerage and investment banking services.

Strong Growth in Core Lending, Banking and Wealth Management in Q4

On Jan 30, Oriental Financial Group reported its fourth quarter results and actually missed on earnings by 56 cents. The bank reported a loss of 31 cents compared to the consensus of a profit of 25 cents.

The loss was attributed to a collateralized debt obligation (CDO). Oriental Financial saw a $15 million charge on the CDO, a $2.4 million write-down of interest receivable on delinquent residential mortgage loans, and a $2.4 million write-down on foreclosed properties and other non-performing real estate assets.

The bank sold the CDO in January 2012 for $10.5 million because it no longer fit with the bank's strategy.

There were positive results in the quarter as well however, which portends for better things going forward.

Commercial loan production rose 38% in the fourth quarter.

Banking and wealth management are also starting to pop. Revenue in those segments rose 9.8% to $12.4 million from the third quarter.

Wealth management revenue climbed 10% due to increased brokerage and trust business.

Banking service revenue rose 14.6% due to the use of more commercial products and services.

Earnings Expected to Nearly Double in 2012

The analysts are very bullish on 2012.

1 estimate has moved higher in the last month, pushing the 2012 Zacks Consensus Estimate up to $1.27 from $1.21 per share.

That is earnings growth of 89.1% as the company only made 67 cents in 2011.

Small Bank With Big Value

Unlike other sectors, the financials have struggled to get to new highs in 2012. Oriental Financial Group is no exception. It is still well off its recent 2-year high.

But that means its valuations are still attractive.

In addition to a P/E under 10, it has a price-to-book of 0.8. A bank with a P/B under 2.0 is usually considered a value.

Another good fundamental to look at with banks is the return on equity (ROE). Normally, an investor would want to see a ROE above 10% but Oriental Financial Group's is just 5.3%.

Dividend Increased in 2011

Oriental Financial Group made it a point to give back to shareholders in 2011. Cash dividends were up 23.5$ in 2011 to 21 cents per share compared to 2010.

The dividend is currently yielding 1.8%.

If you want to invest in the financials, look beyond the big "too-big-to-fail" banks. Sometimes the small banks can be hidden gems.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.

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