OFG BANCORP — Annual Report 2011

Jun 29, 2011

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK REPURCHASE SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One):

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

*For the fiscal year ended* December 31, 2010****

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

*For the transition period from* ____ to ______

Commission file number 001-12647

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

c/o Oriental Bank and Trust 997 San Roberto Street, Oriental Center 10 th Floor Professional Office Park San Juan, Puerto Rico 00926

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

ORIENTAL FINANCIAL GROUP INC.

997 San Roberto Street, Oriental Center 10 th Floor Professional Office Park San Juan, Puerto Rico 00926

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ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

TABLE OF CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2010 and 2009	2
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 2010	3
Notes to Financial Statements	4 — 14
Supplemental Schedules:
Schedule I — Schedule H, Line 4a — Schedule of Delinquent Participant
Contributions for the Year Ended December 31, 2010	15
Schedule II — Schedule H, Line 4i — Schedule of Assets (Held at Year End) as
of December 31, 2010	16
Signatures	17
EX-23 CONSENT OF KPMG LLP	19

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Report of Independent Registered Public Accounting Firm

The Participants and the 1165(e) Retirement Plan Committee Oriental Financial Group, Inc. CODA Profit Sharing Plan:

We have audited the accompanying statements of net assets available for benefits of Oriental Financial Group, Inc. CODA Profit Sharing Plan (the Plan) as of December 31, 2010 and 2009, and the related statement of changes in net assets available for benefits for the year ended December 31, 2010. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2010 and 2009, and the changes in net assets available for benefits for the year ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4a — Schedule of Delinquent Participant Contributions for the year ended December 31, 2010 and Schedule H, Line 4i — Schedule of Assets (Held at End of Year) as of December 31, 2010 are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

The supplemental Schedule H, Line 4i — Schedule of Assets (Held at End of Year) as of December 31, 2010 that accompanies the Plan’s financial statements does not disclose the historical cost of nonparticipant directed plan assets held by the Plan trustee. Disclosure of this information is required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.

/s/ KPMG LLP

San Juan, Puerto Rico June 29, 2011

Stamp No. 10040 of the Puerto Rico Society of Certified Public Accountants was affixed to the record copy of this report.

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ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

Statements of Net Assets Available for Benefits

December 31, 2010 and 2009

	2010	2009
Assets:
Cash and investments:
Cash	$ 1,611	$ 1,720
Investments:
Money market instruments	87,542	88,660
Common stock	3,284,061	2,684,527
Insurance Company Investment Contracts:
Pooled separate accounts	3,212,583	2,634,200
Stable value fund	1,558,616	1,454,264
Total cash and investments	8,144,413	6,863,371
Receivables:
Participants’ contributions	48,321	43,244
Employer’s contributions	5,668	5,602
Dividends receivable	13,147	9,943
Other	1,098	5,308
Total receivables	68,234	64,097
Total assets	$ 8,212,647	$ 6,927,468
Liabilities:
Other liabilities	$ 22,545	$ 10,735
Total liabilities	22,545	10,735
Net assets available for benefits	$ 8,190,102	$ 6,916,733

See accompanying notes to financial statements.

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ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

Statement of Changes in Net Assets Available for Benefits

Year ended December 31, 2010

Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments	$ 761,966
Dividends	42,598
Interest and other	43,293
Total investment income	847,857
Contributions:
Participants	682,914
Employer	190,249
Total contributions	873,163
Total additions	1,721,020
Deductions from net assets attributed to:
Benefits and withdrawals	423,239
Administrative fees	24,412
Total deductions	447,651
Net increase	1,273,369
Net assets available for benefits at beginning of year	6,916,733
Net assets available for benefits at end of year	$ 8,190,102

See accompanying notes to financial statements.

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ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2010 AND 2009

| (1) |
| --- |
| The following description of Oriental Financial Group, Inc. CODA Profit Sharing Plan (the
“Plan”) provides only general information. Participants should refer to the plan agreement
for a more complete description of the Plan’s provisions. |

(a)	General
	The Plan was organized on January 1, 1992 as a defined contribution plan originally
maintained by Oriental Bank and Trust (the “Bank”) for the benefit of its employees and
those of its affiliated companies, who are residents of Puerto Rico and are age 21 or
older. The Plan is intended to be a qualified plan pursuant to Section 1165(a) of the
Puerto Rico Internal Revenue Code of 1994, as amended (the “PRIRC”). It contains a cash
or deferred arrangement qualifying under Section 1165(e) of the PRIRC and is subject to
the provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). Effective January 1, 2011, the Plan is intended to be a qualified plan
pursuant to Sections 1081.01(a) and (d) of the Internal Revenue Code for a New Puerto
Rico, Act No.1 of January 31, 2011 (the “IRCPR”). The Employer intends to amend the
Plan in compliance with the provisions of Sections 1081.01(a) and (d) of IRCPR, and
intends to submit the Plan to the PR Treasury to obtain an updated favorable
determination letter as to the Plan’s Puerto Rico tax qualified status under the IRCPR.
	Effective January 1, 2005, the Plan was amended and restated in its entirety due to the
acquisition of Caribbean Pensions Consultants, Inc. (“CPC”), a U.S. based affiliated
company. Effective on said date, Oriental Financial Group Inc. (the “Employer”) became
the sponsor of the Plan. In addition, effective January 1, 2005, the Plan is also
intended to be a qualified plan pursuant to Sections 401(a) and (k) of the U.S.
Internal Revenue Code of 1986 (the “U.S. Code”), as amended.
	Effective January 1, 2009, the Plan was amended and restated to, among others, change
the name of the Plan from Oriental Bank & Trust CODA Profit Sharing Plan to Oriental
Financial Group, Inc. CODA Profit Sharing Plan, include automatic enrollment
provisions, and to be in compliance with the provisions of the U.S. Code. On June 18,
2010, the Puerto Rico Treasury Department (the “PR Treasury”) issued a favorable
determination letter as to the qualified status of the Plan under Sections 1165(a) and
(e) of the PRIRC effective January 1, 2009. On March 11, 2011, the U.S. Internal
Revenue Service issued a favorable determination letter as to the qualified status of
the Plan under Sections 401(a) and (k) of the U.S. Code.
(b)	Contributions
	Each year, participants may contribute an amount not to exceed the maximum deferral
amount specified by Puerto Rico tax law ($9,000 for tax years ended December 31, 2010
and 2009, respectively). Participants may also contribute amounts representing
distributions from other Puerto Rico and U.S. qualified defined benefit or contribution
plans. Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers pooled separate
accounts, a stable value fund, and shares of common stock of the Employer as investment
options for participants. The Employer currently matches 80% of the participant’s
contributions up to a maximum of $832 per year as discretionary matching contributions.
The Employer’s matching contributions are invested directly in the Employer’s common
stock. Contributions are subject to certain limitations.

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The IRCPR gradually increases the maximum allowable pre-tax contributions as follows:
For tax years:

Ending on or before December 31, 2011	$
Ending on or before December 31, 2012	$ 12,000
Ending on or before December 31, 2013	$ 15,000

(c)	Participant Accounts
	Each participant’s account is credited with the participant’s contribution and
allocations of (a) the Employer’s contribution and (b) Plan earnings, and charged with
an allocation of administrative fees. Allocations are based on participant earnings or
account balances. The benefit to which a participant is entitled is the benefit that
can be provided from the participant’s vested account.
(d)	Vesting
	Participants are immediately vested in their contributions plus actual earnings
thereon. The Employer’s contribution portion of their accounts plus actual earnings
thereon vest upon the occurrence of any of the following events: completion of three
years of credited service; attaining age 65; total disability while employed by the
Employer; or death while employed by the Employer.
(e)	Payment of Benefits
	On termination of service due to death, disability, or retirement, a participant may
elect to receive the value of the vested interest in his or her account in either a
lump-sum distribution, a fixed period that may not exceed the participant’s life
expectancy or through a fixed annuity contract. For termination of service for other
reasons, a participant may receive the value of the vested interest in his or her
account as a lump-sum distribution.
(f)	Loans to Participants
	The Plan does not allow for loans to participants.
(g)	Forfeited Accounts
	Employer contributions that are not vested upon termination of employment are forfeited
and may be used to reduce future contributions to the Plan by the Employer. For the
years ended December 31, 2010 and 2009, forfeitures totaling approximately $7,000 and
$6,000, respectively, were used to offset employer contributions.
(h)	Plan Termination
	Although it has not expressed any intent to do so, the Employer has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA. In the event of plan termination, participants will become
100% vested in their Employer’s contributions.

(2)
Following are the significant accounting policies followed by the Plan:

(a)
The accompanying financial statements have been prepared under the accrual method of
accounting.

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| | Investment contracts held by a defined contribution plan are required to be reported at
fair value. However, for a defined contribution plan attributable to fully
benefit-responsive investment contracts, such as the stable value fund, the contract
value is the relevant measurement attribute for that portion of the net assets
available for plan benefits since it is the amount participants would receive if they
were to initiate permitted transactions under the terms of the Plan. The statement of
net assets available for benefits presents the fair value of the investment contracts.
For the stable value fund, the contract value of each participant account approximates
the fair value of its share. |
| --- | --- |
| (b) | Use of Estimates |
| | The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires the plan administrator to make estimates and assumptions
that affect the reported amounts of assets and liabilities and changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ from those
estimates. |
| (c) | Risks and Uncertainties |
| | The Plan invests in various investment instruments. Investment securities are exposed
to various risks, such as interest rate, credit, and market risks. Due to the level of
risk associated with certain investment securities, it is reasonably possible that
changes in the values of investment securities will occur in the near term and that
such changes could materially affect participants’ account balances and the amounts
reported in the statements of net assets available for plan benefits. |
| (d) | Investments Valuation and Income Recognition |
| | The pooled separate accounts with Transamerica Life Insurance Company (“Transamerica”)
are stated at fair value as reported to the plan by Transamerica, based on the quoted
market prices of the underlying mutual funds. The unit value of the pooled separate
account is calculated by dividing the total value of the assets of the separate account
by the number of units in the separate account. For separate accounts that invest
exclusively in mutual funds, the total value of the assets of the separate account is
based on the net asset value (NAV), or price per share, of the underlying mutual fund.
The mutual fund calculates its NAV by dividing the mutual fund’s net assets by the
mutual fund’s outstanding number of shares. Those separate accounts investing in mutual
funds or equity securities are measured using quoted prices in active markets for
identical assets. Those separate accounts directly investing in fixed maturity
securities are measured based on the pricing data provided by outside valuation service
providers who in turn generally use the mean of bid and ask prices but may also use
alternative observable pricing inputs for certain securities. The stable value fund is
valued at contract value, and is based on its beginning balance plus any deposit and
credited interest, less any withdrawals, charges, or expenses, a measurement which
approximates fair value. Shares of common stock are valued at quoted closing market
prices. Money market instruments are stated at fair value, which approximates cost plus
accumulated interest earnings less distributions to date. |
| | Purchases and sales of securities are recorded on a trade-date basis. Interest income
is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net
appreciation includes the Plan’s gains and losses on investments bought and sold as
well as held during the year. |
| (e) | Payments of Benefits |
| | Benefits are recorded when paid. |

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(f)	Plan Expenses
	Under the group annuity contract entered with Transamerica, contract asset charges are
assessed each month based on the actual combined balance of all separate accounts and
the stable value fund. These charges are presented as administrative fees in the
statement of changes in net assets available for benefits.
	Administrative expenses, including trustee, legal, auditing, and other fees, may be
paid out of the invested assets unless paid by the Employer. Expenses paid and absorbed
by the Employer during the year ended December 31, 2010 amounted to approximately
$23,500.
(g)	Subsequent Events
	The Plan has evaluated other events subsequent to the statement of net assets available
for benefits date and prior to filing of this Annual Report on Form 11-K for the year
ended December 31, 2010 and has adjusted and disclosed those events that have occurred
that would require adjustment or disclosure in the financial statements.
(h)	Accounting Standards Adopted During the Year:
	Defined Contribution Pension Plans — FASB Accounting Standards Update 2010-25, “Plan
Accounting — Defined Contribution Pension Plans (FASB ASC Topic 962) — Reporting
Loans to Participants by Defined Contribution Pension Plans”, issued in September 2010,
requires that participant loans be classified as notes receivable from participants,
which are segregated from plan investments and measured at their unpaid principal
balance plus any accrued but unpaid. This update is effective for fiscal years ending
after December 15, 2010 and should be applied retrospectively to all prior periods
presented. The implementation of this guidance did not have an impact in the Plan’s
audited financial statements.
	Fair Value Measurements and Disclosures — FASB Accounting Standards Update 2010-06,
“Fair Value Measurements and Disclosures (FASB ASC Topic 820) — Improving Disclosures
about Fair Value Measurements”, issued in January 2010, requires new disclosures and
clarifies some existing disclosure requirements about fair value measurements as set
forth in FASB ASC Subtopic 820-10. This update amends Subtopic 820-10 and now requires
a reporting entity to disclose separately the amounts of significant transfers in and
out of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfer. Also, in the reconciliation for fair value measurements using significant
unobservable inputs (Level 3), a reporting entity should present separately information
about purchases, sales, issuances and settlements. In addition, this update clarifies
existing disclosures as follows: (i) for purposes of reporting fair value measurement
for each class of assets and liabilities, a reporting entity needs to use judgment in
determining the appropriate classes of assets and liabilities, and (ii) a reporting
entity should provide disclosures about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair value measurements. This
update is effective for interim and annual reporting periods beginning after December
15, 2009 except for the disclosures about purchases, sales, issuances, and settlements
in the roll-forward of activity in Level 3 fair value measurements. Those disclosures
are effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. The Plan believes that the implementation of this
disclosure guidance will not have a material impact in the Plan’s audited financial
statements.

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| (i) |
| --- |
| Fair Value Measurements — FASB Accounting Standards Update 2011-04, “Fair Value
Measurement (FASB ASC Topic 820) — Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRSs”, issued in May 2011, changes the
wording used to describe many of the requirements in U.S. GAAP for measuring fair value
and for disclosing information about fair value measurements. For many of the
requirements, the Board does not intend for the amendments in this Update to result in
a change in the application of the requirements in Topic 820. Some of the amendments
clarify the Board’s intent about the application of existing fair value measurement
requirements. Other amendments change a particular principle or requirement for
measuring fair value or for disclosing information about fair value measurements. This
update is effective for interim and annual reporting periods beginning after December
15, 2011. Early application by public entities is not permitted. The Plan believes that
the implementation of this guidance will not have a material impact in the Plan’s
audited financial statements. |
| Other accounting standards that have been issued by FASB or other standards-setting
bodies are not expected to have a material impact on the Plan’s statement of net asset
available for benefits, and the related statement of changes in net assets available
for benefits. |

(3)
The following presents investments as of December 31, 2010 and 2009 that represent 5% or more
of the Plan’s net assets.

	2010	2009
Nonparticipant-directed investments:
Oriental Financial Group Inc. — common stock;
262,935 and 248,567 shares, respectively	$ 3,284,061	$ 2,684,527
Participant-directed investments:
Pooled separate accounts:
Columbia Marsico 21st Century
46,389 and 49,823 units, respectively	665,961	611,567
Janus Overseas Ret Opt
6,730 and 3,783 units, respectively *	466,454	220,920
Loomis Sayles Inv Grade Bond
12,821 and 12,949 units, respectively **	382,251	347,537
Stable value fund:
Transamerica Stable Value
87,700 and 84,058 units, respectively	1,558,616	1,454,264

*	Represents 5% or more of the Plan’s net assets in 2010 only.
**	Represents 5% or more of the Plan’s net assets in 2009 only.

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During 2010, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:

Oriental Financial Group Inc. — common stock	$
Pooled separate accounts	375,285
Total	$ 761,966

| Transamerica offers a stable value fund that the participant may elect to transfer all or
part of its funds. The stable value fund is considered to be a fully benefit-responsive
investment contract. Contract value is the relevant measurement attribute for that portion of
the net assets available for benefits. Contract value, as reported by Transamerica, is the
beginning balance plus any deposit and credited interest, less any withdrawals, charges or
expenses, a measurement which approximates fair value. Participants may ordinarily direct
the withdrawal or transfer of all or a portion of their investment at contract value. |
| --- |
| There are no reserves against contract value for credit risk of Transamerica or otherwise.
The contract value of the investment contract at December 31, 2010 and 2009 was $1,558,616
and $1,454,264, respectively. This investment seeks to protect against any loss of principal
while providing returns in excess of money market funds and one-year U.S. Treasury bills. The
investment has a portfolio investment rate design in which all deposits are credited with the
same interest rate, credited on a daily basis, and with no set maturity. The effective
credited interest rate is set monthly and effective on the first day of the month. Contract
charges may reduce this return. The Transamerica Stable Value Option is not a separate
account investment choice — it is an investment in Transamerica’s general account. The
average yield of the stable value fund based on actual earnings and interest credited to
participants yielded 2.73% and 3.16%, respectively for the years ended December 31, 2010 and
2009. |
| Certain events limit the ability of the Plan to transact at contract value with Transamerica.
Such events include the following: (1) the Plan is changed so as to significantly affect
Transamerica obligations to the contract, (2) the contract can no longer be treated as a
pension plan contract, (3) the Plan is terminated, (4) failure to comply with the contract
requirements, (5) failure to provide information, (6) the sum of the contract account values
at any time equals $20,000 or less, or (7) the failure of the trust to qualify for exemption
from federal income taxes or any required prohibited transaction exemption under ERISA. The
plan administrator does not believe that any events, which would limit the plan’s ability to
transact at contract value with participants, are probable of occurring. |

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(4)
Information about the net assets and the significant components of the changes in net assets
relating to the nonparticipant directed investments is as follows:

| Net assets at December 31, 2009, Oriental Financial Group Inc.
common stock of 248,567 shares | $ | |
| --- | --- | --- |
| Changes in net assets during the year: | | |
| Contributions | 274,912 | |
| Transfers in | 1,102,638 | |
| Dividends | 39,394 | |
| Net appreciation | 386,681 | |
| Benefits paid to participants | (165,527 | ) |
| Transfers out | (1,038,564 | ) |
| Net increase in net assets | 599,534 | |
| Net assets at December 31, 2010, Oriental Financial Group Inc.
common stock of 262,935 shares | $ 3,284,061 | |

(5)	Related-Party Transactions
	Certain plan investments are shares of the Employer’s common stock. The Employer is the plan
sponsor and, therefore, qualifies as a party-in-interest. At December 31, 2010 and 2009, the
Plan held an investment of 262,935 and 248,567 shares of the Employer’s common stock,
respectively. The fair value of the common stock at December 31, 2010 and 2009 was $3,284,061
and $2,684,527, respectively.
	The Plan has a money market account with the Bank amounting to $4,266 at December 31, 2010
($3,369 at December 31, 2009), earning interest at 0.01% at December 31, 2010 and 2009. The Bank, who is also the Trustee, is a subsidiary of the plan sponsor
and, therefore, qualifies as a party-in-interest.
	The recordkeeper of the Plan is CPC, an affiliate of the Employer. Fees charged by CPC for
services provided were absorbed by the Employer.
(6)	Income Taxes
	The Plan is intended to be exempt from Puerto Rico and U.S. income taxes under the PRIRC, the
IRCPR and the U.S. Code. The Plan is required to operate in conformity with the PRIRC, the
IRCPR and the U.S. Code to maintain its qualification.
	The Plan was amended and restated effective January 1, 2005. The PR Treasury has determined
and informed the Employer by a letter dated November 8, 2007 that effective June 1, 2007, the
Plan and the related trust were qualified in accordance with the applicable sections of the
PRIRC. Effective January 1, 2009, the Plan was amended and restated to, among others, change
the name of the Plan from Oriental Bank & Trust CODA Profit Sharing Plan to Oriental
Financial Group, Inc. CODA Profit Sharing Plan, include automatic enrollment provisions, and
to be in compliance with the provisions of the U.S. Code. On June 18, 2010, the PR Treasury
issued a favorable determination letter as to the qualified status of the Plan under Sections
1165(a) and (e) of the PRIRC effective January 1, 2009. On March 11, 2011, the U.S. Internal
Revenue Service issued a favorable determination letter as to the qualified status of the
Plan under Sections 401(a) and (k) of the US Code. The Employer intends to amend the Plan in
compliance with the provisions of Sections 1081.01(a) and (d) of IRCPR, and intends to submit
the Plan to the PR Treasury to obtain an updated favorable determination letter as to the
Plan’s Puerto Rico tax qualified status under the IRCPR.

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| | U.S. generally accepted accounting principles require plan management to evaluate tax
positions taken by the plan and recognize a tax liability (or asset) if the plan has taken an
uncertain position that more likely than not would not be sustained upon examination by the
Internal Revenue Service and the Puerto Rico Treasury Department. The Plan administrator has
analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2010,
there are no uncertain positions taken or expected to be taken that would require recognition
of a liability (or asset) or disclosure in the financial statements. The plan is subject to
routine audits by taxing jurisdictions; however, there are currently no audits for any tax
periods in progress. The plan administrator believes it is no longer subject to income tax
examinations for years prior to 2007. |
| --- | --- |
| (7) | Fair Value |
| | As discussed in Note 2, the Plan uses the fair value measurement framework under U.S.
generally accepted accounting principles. |
| | Fair Value Measurement |
| | Fair value is the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. The
fair value hierarchy requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The three levels of inputs that may
be used to measure fair value: |

Level 1 — assets include equity securities that are traded in an active exchange market, as well as certain money market instruments. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2 — observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets. Level 2 assets include (i) pooled separate accounts, and (ii) the Stable Value Fund.

Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, for which the determination of fair value requires significant management judgment or estimation. As of December 31, 2010 and 2009 the Plan did not have such assets.

| The following is a description of the valuation methodologies used for instruments measured
at fair value: |
| --- |
| Investment securities |
| Pooled Separate Accounts: the fair value of the investments in this category has been
estimated using the NAV per share, as a practical expedient. The NAV of these accounts is
based on the market value of its underlying investments. The NAV is not a public-quoted price
in an active market (“Level 2”). There are currently no redemption restrictions on these
investments, except in the “Janus Overseas Ret Opt” mutual fund which assesses a 2.00% fee
for selling shares that had not been held for a period longer than 90 days. |
| Stable Value Fund: valued at contract value, and is based on its beginning balance plus any
deposit and credited interest, less any withdrawals, charges, or expenses, a measurement
which approximates fair value (“Level 2”). |
| Shares of the Employer’s common stock: valued at quoted closing market prices (“Level 1”). |

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| Money market instruments: stated at fair value, which approximates cost plus accumulated
interest earnings less distributions to date (“Level 1”). |
| --- |
| The preceding methods described may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore, although
the Plan believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value
of certain financial instruments could result in a different fair value measurement at the
reporting date. |
| Investment securities measured at fair value on a recurring basis for which the Plan has
elected the fair value option, are summarized below: |

	December 31, 2010
	Fair Value Measurements
	Level 1	Level 2	Level 3
Money market instruments	$ 87,542	$ —	$ —
Common stock	3,284,061	—	—
Pooled separate accounts
Hybrid (a)	—	814,273	—
Bond (b)	—	596,623	—
International Equity (c)	—	466,454	—
Equity — Large Cap (d)	—	1,006,825	—
Equity — Mid Cap (e)	—	174,773	—
Equity — Small Cap (f)	—	153,635	—
Stable value fund	—	1,558,616	—
	$ 3,371,603	$ 4,771,199	$ —

	December 31, 2009
	Fair Value Measurements
	Level 1	Level 2	Level 3
Money market instruments	$ 88,660	$ —	$ —
Common stock	2,684,527	—	—
Pooled separate accounts	—		—
Hybrid (a)		584,092
Bond (b)		503,892
International Equity (c)		352,240
Equity — Large Cap (d)		916,806
Equity — Mid Cap (e)		166,661
Equity — Small Cap (f)		110,509
Stable value fund	—	1,454,264	—
	$ 2,773,187	$ 4,088,464	$ —

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| (a) | The pooled separate accounts in this category primarily invest in U.S. and non-U.S.
stocks, and fixed-income securities which may include bonds, cash equivalents or other
money market instruments. |
| --- | --- |
| (b) | The pooled separate accounts in this category primarily invest in bonds (at least 80%
of total assets), preferred stocks, cash equivalents or other money market instruments. |
| (c) | The pooled separate accounts in this category primarily invest at least 80% of assets
in equity and debt securities of issuers from countries outside of the United States. |
| (d) | The pooled separate accounts in this category primarily invest in equity securities of
medium and large capitalization companies, and may invest in securities of non-U.S.
issuers. |
| (e) | The pooled separate accounts in this category primarily invest in domestic equity
securities with growth potential, including foreign equity securities and debt securities. |
| (f) | The pooled separate accounts in this category primarily invest in common stocks
contained in both the Small Cap 1750 Index and the Russell 2000 Value Index. |

There were no transfers into and out of Level 1 and Level 2 fair value measurements during the years ended December 31, 2010 and 2009.

(8)
The following is a reconciliation of net assets available for benefits per the financial
statements at December 31, 2010 to Form 5500:

Net assets available for benefits per financial statements	$
Amounts allocated to withdrawing participants	(3,985	)
Net assets available for benefits per form 5500	$ 8,186,117

The following is a reconciliation of deductions from net assets attributed to benefits and withdrawals per the financial statements for the year ended December 31, 2010 to Form 5500:

| Deductions from net assets attributed to benefits
and withdrawals per financial statements | $ | |
| --- | --- | --- |
| Amounts allocated to withdrawing participants | 3,985 | |
| Amounts allocated to withdrawing participants in previous year | (1,529 | ) |
| Deductions from net assets attributed to benefits
and withdrawals per form 5500 | $ 425,695 | |

Amounts allocated to withdrawing participants are recorded on Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, 2010, but not yet paid as of that date. Total payments of $3,985 were paid on January 15, 2011 pertaining to 2010 distributions.

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| (9) |
| --- |
| In accordance with the U.S. Department of Labor’s Regulation 2510.3102, an employer is
required to segregate participants’ contributions from its general assets as soon as
practical when amounts are contributed by participants or withheld from their wages for a
pension benefit plan such as the Plan. There were unintentional
delays in the remittance of participants’ contributions withheld
in two occasions during the year ended December 31, 2010. The
Employer will absorb any costs incurred by the Plan as a result of the untimely
remittances of the participants’ contributions. |

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SCHEDULE I

ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

Schedule H, Line 4a — Schedule of Delinquent Participant Contributions

Year ended December 31, 2010

Total that Constitute Nonexempt Prohibited Transactions	Participant			Contributions	Total Fully
	Contributions		Contributions	Pending	Corrected Under
	Transferred Late	Contributions	Corrected	Correction in	VFCP and PTE
Year Ended	to Plan*	Not Corrected	Outside VFCP	VFCP	2002-51
December 31, 2009	$ 3,323	—	3,323	—	—
December 31, 2010	$ 8,397	—	8,397	—	—

• It was noted that there were unintentional delays by the employer in submitting 2010 and 2009 employee’s contributions in the amount of $8,397 and $3,323, respectively, to the trustee. The employer has not reimbursed the Plan for the lost interest.

See accompanying report of independent registered public accounting firm.

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SCHEDULE II

ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN

Schedule H, Line 4i — Schedule of Assets (Held at End of Year)

December 31, 2010

	(b)	(c) — Description of investment,
	Identity of issue,	including maturity date, rate
	borrower, lessor,	of interest, collateral, par,	(d)	(e)
(a)	or similar party	or maturity value	Cost	Current value
	Nonparticipant directed:
*	Oriental Financial Group Inc.	Oriental Financial Group Inc.:
		Common Stock; 262,935 shares	N/A	$ 3,284,061
	Participant directed:
	Transamerica	Pooled Separate Accounts:
		Columbia Marsico 2lst Century; 46,389 units	**	665,961
		Janus Overseas Ret Opt; 6,730 units	**	466,454
		Loomis Sayles Inv Grade Bond; 12,821 units	**	382,251
		Transamerica AA — Growth; 27,679 units	**	380,551
		Pioneer Cullen Value; 10,034 units	**	203,576
		Transamerica AA — Mod Growth; 12,721 units	**	186,465
		Thornburg Core Growth; 13,177 units	**	174,773
		Transamerica AA — Moderate; 10,234 units	**	156,155
		Transamerica Core Equity; 7,265 units	**	137,288
		SSgA Russell 2000 Value Index; 2,711 units	**	136,449
		Transamerica Partners Hg Yd Bd; 4,064 units	**	113,725
		Loomis Sayles Bond; 1,973 units	**	100,647
		Transamerica AA — Conservative; 5,842 units	**	91,102
		Vanguard Small-Cap Index; 153 units	**	17,186
				3,212,583
		Money Market Instruments:
	Money Market	AIM Short Term Liquid Asset	**	83,276
*	Oriental Bank and Trust	Money Market (0.01% yield)	**	4,266
				87,542
		Stable Value Fund:
*	Transamerica	Transamerica Stable Value; 87,700 units	**	1,558,616
		Total		$ 8,142,802

*	Party in interest as defined by ERISA.
**	Not applicable as these are participant directed.
N/A	Not available

See accompanying report of independent registered public accounting firm.

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SIGNATURES

The Plan . Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	ORIENTAL FINANCIAL GROUP, INC. CODA PROFIT SHARING PLAN
	(Name of Plan)
Date: June 29, 2011	/s/ Norberto González
	Norberto González
	Executive Vice President and
	Chief Financial Officer
	/s/ José Gabriel Díaz
	José Gabriel Díaz
	First Senior Vice President and
	Executive Trust Officer

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INDEX OF EXHIBITS

Exhibit No.	Description of Document
23.1	Consent of KPMG LLP

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