Safe and Sound

Oriental Bank

San Juan, PR
4
Star Rating
Oriental Bank is an FDIC-insured bank founded in 1965 and currently headquartered in San Juan, PR. The bank has equity of $941.2 million on $6.15 billion in assets, according to December 31, 2017, regulatory filings.

With 1,381 full-time employees, the bank holds loans and leases worth $4.06 billion, including real estate loans of $2.31 billion. U.S. bank customers currently have $4.81 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Oriental Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is experiencing economic trouble. Therefore, when it comes to measuring an a bank's financial strength, capital is important. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Oriental Bank achieved a score of 18 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Oriental Bank's Tier 1 capital ratio was 18.63 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Oriental Bank held equity amounting to 15.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a future failure.

Oriental Bank scored 28 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 5.54 percent of Oriental Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Oriental Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Oriental Bank scored 12 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Oriental Bank was 5.52 percent, below the national average of 8.10 percent.

The bank earned net income of $51.6 million on total equity of $941.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.82 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.