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OFG Bancorp Message Board

  • john.macd john.macd Nov 24, 2009 5:12 PM Flag

    Good Position

    The stock is trading off mainly on fear of the non agency MBS positions and future potential OTTI associated with them. While this is possible they only own one ALT-A piece and a few prime jumbo collateral pieces. The credit support on all but the ALT A appear to be adequate and the loss severities on the ALT A look reasonable so far. They have written down around 25MM already and I would expect that to be enough but their auditors may be more conservative.

    Either way they have been able to significantly reduce their cost of funds (while still paying 2.50% on demand deposits and a whole lot of CDs still to roll off) and their NIM is in a good position. They originate quite a bit of mortgage loans every quarter (70MMish) and if they start to portfolio some of those that should offset prepayments on their agency MBS postions. Small purchases into the non agency MBS market is another option and their are some great deals out there to be had.

    Suffice it to say they have the ability to weather the storm of OTTI....they may even have some additional unrealiezed gains in the agency portfolio to offset small increases in write down....I suspect 60c a share per quarter is very reasonable for this balance sheet.

    None of this takes into account the weakness of their competition and the ability of this bank to increase market share in this environment.

    $2.40 '10 eps - 15x (bank industry avg) = 36, though the risks may keep it from trading this high I would expect at least 1.5x '10 book value....
    12.90 + 2.40 * 1.5 = 22.95

    This looks like a winner....

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OFG
17.32+0.40(+2.36%)Jul 24 4:08 PMEDT

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