As the dust settles from Doral Bank's failure, questions linger about what the Puerto Rican bank's implosion means for the territory's banking industry and for future bank failures.

Banco Popular was immediately hailed as a clear winner from Doral's demise, adding heft on the island and in New York. Popular's big haul, paired with a handful of side deals the company made immediately afterward, could cement the destiny of other island players while providing some insight into how bank seizures have evolved in the past five years.

"I think it's good for the industry on the island," Taylor Brodarick, an analyst at Guggenheim Securities, said. Doral's failure "had been looming as a likelihood for at least the past year. Each part of the bank that was sold off went to an appropriate home."

Here is a long-term view of how the failure could influence other institutions that do business on the island.

OFG Bancorp

The $7.4 billion-asset company unsuccessfully bid on certain Doral loans and deposits, a spokesman said. Still, the company has a strong position on the island, with nearly 10% of the local deposits, based on data from the Federal Deposit Insurance Corp.

OFG likely made a half-hearted attempt to land Doral at a good price, realizing that an inability to do so wouldn't be viewed as a setback, industry observers said.

"Fundamentally they are in a fine position without it," said Emlen Harmon, an analyst at Jefferies. "I think from their perspective there wasn't a lot they were particularly interested in."

Buying parts of Doral "didn't fit their strategic vision," Brodarick said. OFG is almost finished digesting its purchase of Eurobank, which failed in 2010, and doesn't see integrating another failed bank as a productive use of resources, he said.

Additionally, the company's earnings potential is about to improve as the "accounting drag from the FDIC loss-share for Eurobank" is about to end, Harmon said. Once that happens OFG will start accruing capital quickly, opening up strategic options.

The company, unlike Popular and First BanCorp, only has branches in Puerto Rico, making a jump to the U.S. mainland logical.

OFG, for its part, is ready to take advantage of a sensible opportunity on the mainland.

A mainland acquisition is likely something that could take place "further down the road," Harmon said, adding that investors are eager to see OFG retool its balance sheet before it pursues robust growth.

First BanCorp

The $12.4 billion-asset First BanCorp saw the Doral failure as a chance to improve its market share in key areas such as mortgages, deposits and branch count. The San Juan company bought 10 branches from Popular, along with $625 million in deposits and a $325 million mortgage portfolio.

Adding the deposits follows the company's efforts to "decrease its reliance on brokered deposits," Brodarick said.

"It pretty clearly improves their positioning, and obviously enhances their footprint," said William Mayer, a lawyer at Goodwin Procter. "From a defensive standpoint, it is a positive."

First BanCorp wants to achieve a 20% deposit market share in Puerto Rico, said Aurelio Aleman, the company's president and chief executive. While short of that goal – First BanCorp's market share was 12.4% on June 30 – the deal helps "close that gap between where we are and where we want to be," he said.

The company will likely focus on optimizing its operations in Puerto Rico and Florida. It has a 10 locations in Miami-Dade and Broward counties, which is becoming "a more important segment every day," Aleman said, though Puerto Rico will remain its main market.

"It's all about execution and who executes best," he said. "Service is the asset we sell to our clients."

More consolidation is needed, industry observers said, even on an island with just seven banks. The head-scratcher involves determining which banks could – and should – merge.

A merger of OFG and First BanCorp would be a game changer that would create a formidable competitor to the $32.5 billion-asset Popular. It would create an bank with $20 billion in assets, along with more than 110 branches and 22% deposit market share on the island.

The odds of such a deal are low, industry observers said, though continued woes in the territory could give traction to such talk.

Popular, for its part, is unlikely to pursue more deals in Puerto Rico since regulators would likely balk at approving a merger that would give the company added heft where it already holds more than a third of the deposits.

The company's management also seems more intent to build in southern Florida and New York City, Brodarick said.

Such sentiment was strongly echoed by Richard Carrion, Popular's president and chief executive, who touted Doral's commercial lending operations around New York as "the most attractive" part of last week's acquisition.

Santander and Scotiabank

OFG and First BanCorp view themselves as acquirers and, for some market watchers, the Puerto Rican operations of the Spanish giant Banco Santander would be a perfect fit.

Santander Holdings USA, which recently hired a new CEO, is planning to absorb the operations of its $5.5 billion-asset Banco Santander Puerto Rico, which had 50 branches and 9.2% deposit market share on the island at June 30, according to FDIC data.

Those changes could create the ideal environment for Santander to part ways with the Puerto Rican bank, Brodarick said.

OFG has regularly expressed interest in buying the Puerto Rican operations of either Banco Santander or Canada's Scotiabank, though any deal would hinge on pricing and other circumstances.

First BanCorp doesn't discuss merger speculation, though management isn't expecting new consolidation opportunities in the near term. Rather, it believes Florida will provide chances for deals, Aleman said.

Scotiabank does not comment on M&A speculation, a spokesman said. Banco Santander did not return a call seeking comment.

A merger of OFG and First BanCorp would be a game changer that would create a formidable competitor to the $32.5 billion-asset Popular. It would create an bank with $20 billion in assets, along with more than 110 branches and 22% deposit market share on the island.

The odds of such a deal are low, industry observers said, though continued woes in the territory could give traction to such talk.

Popular, for its part, is unlikely to pursue additional deals in Puerto Rico since regulators would likely balk at approving a merger that would give the company added heft where it already holds more than a third of the deposits.

The company's management also seems more intent to build in southern Florida and New York City, Brodarick said.

Such sentiment was strongly echoed by Richard Carrion, Popular's president and chief executive, who touted Doral's commercial lending operations around New York as "the most attractive" part of last week's acquisition.

What About the FDIC?

The FDIC fared much better with Doral's closure than it did when it had to resolve the failure of three Puerto Rican banks in April 2010. There was no loss-sharing agreement tied to Doral's seizure, which cost the Deposit Insurance fund nearly $750 million.

The closures of Westernbank, R-G Premier Bank and Eurobank had significant loss sharing while costing a total of more than $5 billion to resolve.

The contrasting terms show how much the banking industry has recovered in the last five years, industry experts said.

"Loss-share is definitely over with," said Stanley Orszula, a lawyer at Quarles & Brady. "The FDIC just doesn't want to be in the loss-share business anymore, and a ton of them are expiring this year."

It is unclear what will happen to Doral's unresolved legal claim to a nearly $230 million tax refund from Puerto Rico. A few days before Doral's failure, a court ruled that the company was not entitled to the funds, though the company vowed to fight on.

The FDIC could end up jousting with stakeholders of Doral's holding company if a court determines that a refund is merited, Orszula said. The FDIC could assert a claim by arguing that the funds actually belong to the failed bank.

"It's a big number to fight over," Orszula said of the refund. "Who is owed the right to the tax refund? I would not be surprised to see the FDIC argue for it."

The FDIC has asked for a 90-day stay for all litigation, an agency spokesman said, declining to comment further.

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