Oriental Financial Group Inc. reported Thursday net income of $14.6 million for 2012, equal to $0.35 per common share results, and is predicting a strong 2013 attributed to its acquisition of BBVA Puerto Rico, which “has created a larger, diversified and growth oriented banking platform.”
“Oriental is now in a very solid position, financially and operationally, to realize the benefits of the combination with BBVA PR,” said Oriental President José Rafael Fernández.
“Now that the 4Q12 transition quarter is behind us, we look forward to generating income available to common shareholders for 2013 of around $1.40 per share, based on our initial outlook.”
The $500 million buyout of BBVA in December 2012 and related deleveraging of the investment securities portfolio have transformed Oriental in line with its major strategies, he said.
Due to a higher than originally estimated valuation for BBVA PR, there was almost no dilution to book value per share. As a result, estimated time to earn back tangible book value has been significantly reduced, he noted.
“We want to thank our customers for their continuing support, placing their trust in our ability to serve them. We also want to thank our employees for their enthusiasm and contribution,” Fernández added. “Employee morale is high, and integration is well underway. We’re very pleased with the momentum that we have as an organization and the initial progress that we’ve made deploying our lending and deposit gathering initiatives.”
Among other results of the buyout, Oriental cited quarter-over-quarter increases in: non-covered loan balances, to $4.8 billion from $1.2 billion, up 305 percent; diversity among loan categories, with commercial loans representing 39 percent of non-covered gross loans versus 28 percent; residential mortgages representing 34 percent versus 65 percent; and auto/consumer loans representing 27 percent versus 7 percent reported for the quarter ended Sept. 30, 2012.
The bank also reported a 157 percent increase in deposits, to $5.7 billion from $2.2 billion; a 29 percent decline in investment securities balances, to $2.2 billion from $3.2 billion; and a 12 percent increase in stockholders’ equity, to $863.6 million from $771.7 million as a result of the $77 million in new capital raised during the fourth quarter of 2012.
However, when comparing year-over-year results, Oriental reported a net loss to common shareholders of $23.3 million for the quarter ended Dec. 31, 2012, equal to ($0.53) per common share, and net income available to common shareholders for 2012 of $14.6 million, equal to $0.35 per common share.
Oriental incurred in merger and restructuring expenses of $5 million in integration and other contractually required activities necessary to transition from BBVA PR’s infrastructure and branding. Combined with costs incurred primarily in the second half of 2012, non-interest expenses related to the acquisition totaled $7.1 million in 2012, the bank said.
“Unencumbered by legacy issues, Oriental is poised to realize its potential as one of Puerto Rico’s leading banking institutions, with our strong capital and significantly improved market position,” Fernández said.
Through its acquisition, Oriental saw a 250 percent increase in its customer base, more than doubled its branch network, to 64 from 28, reaching more markets with “minimal overlap” and expanded access to customer segments, such as corporate, institutional and auto lending.
This year, Oriental expects to benefit from higher loan balances and net interest margin; growth of non-interest income from wealth management, banking services and mortgage banking activities; reduced premium amortization on investment securities; and an absence of non-recurring costs associated with deleveraging the investment securities portfolio.