Doral Financial Corporation Reports Earnings for the Third Quarter Ended September 30, 2009

http://www.businesswire.com/news/home/20091109005516/en

Reports Net Income of $13.2 million

Continues to Exceed Well Capitalized Levels with Tier 1 Capital Ratio of 13.5%

SAN JUAN, Puerto Rico--(Business Wire)--
Doral Financial Corporation (NYSE:DRL) ("Doral" or the "Company"), the holding
company of Doral Bank, a leading community bank based in Puerto Rico, today
announced the filing of its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009 reporting net income of $13.2 million, compared to a net loss
of $1.8 million for the comparable 2008 period.

"Our improving financial performance is a consequence of our focus on
fundamentals, our clients and community. However, we continue to operate in a
difficult market and economic environment and preserving capital and liquidity
will remain a priority," said Glen R. Wakeman, President and CEO of Doral
Financial Corporation.

Doral experienced significant improvements in key fundamentals:

* Reported net income attributable to common shareholders for the third quarter
of 2009 of $10.0 million, which resulted in diluted earnings per share of $0.17,
compared to a net loss attributable to common shareholders for the corresponding
2008 period of $10.1 million, or a diluted loss per share of $0.19. This
increase resulted in a $0.36 improvement in the quarterly earnings per share.
* Doral Financial and both its bank subsidiaries reported capital in excess of
the base levels defined by banking regulation as "well capitalized." Doral
Financial reported a Total Capital ratio of 15.3%, a Tier One Capital ratio of
13.5%, and a Leverage ratio of 8.5%.
* Reported earnings of $10 million to common shareholders is accretive to
capital for the second consecutive quarter.
* Continued to impact and improve the quality of life of the communities served
through innovative community programs. Since its inception, Doral has assisted
more than 16,500 families to stay in their homes through its loss mitigation
program; provided more than 2,500 free mammograms to women without health
insurance through Ruta Pink (Pink Route) program in conjunction with Susan G.
Komen for the Cure Puerto Rico; planted 232 trees in parks in low and moderate
income areas with d parques, sembrando comunidad (of parks, planting community),
and provided free art education and entertainment to approximately 20,000 people
with the domingos d museo (Sundays at the Museum) program in alliance with the
Museum of Art of Puerto Rico.

Doral`s transformation to a full-service community bank through its rebranding
campaign and community programs has received local and international awards.
Most recently, Doral won an American Bankers Association Marketing award for its
corporate transformation, which includes its rebranding campaign and community
programs, in the Impact Campaign category, which honors campaigns that benefit
the community or reach out to minorities and women. Meanwhile, Puerto Rico`s
Sales and Marketing Association recognized Doral`s transformation to a community
bank by honoring Glen Wakeman with the Top Management Award in the Banking and
Finance category.

FINANCIAL HIGHLIGHTS

* Net income for the quarter ended September 30, 2009 totaled $13.2 million,
compared to a net loss of $1.8 million for the comparable 2008 period. Doral
Financial`s performance for the third quarter of 2009, compared to the
corresponding 2008 quarter, resulted from (i) a $15.0 million increase in
non-interest income due principally to a positive change in the fair value of
the Company`s mortgage servicing assets, gains from the sale of investment
securities, an increase in the interest-only strips ("IOs") value, partially
offset by other-than-temporary impairment ("OTTI") charges related to the
investment portfolio; (ii) an increase of $6.8 million in non-interest expenses
primarily related to a significant increment in the FDIC insurance expenses and
an increase in OREO expenses related to appraisals adjustments made during the
quarter; (iii) by the recognition of an income tax benefit of $6.9 million,
compared to an income tax expense of $1.1 million for the corresponding 2008
period and (iv) a $3.4 million decrease in net interest income driven by a
compression of net interest margin, a significant reduction of investment
securities and an increase in non-performing loans resulting from a
deteriorating economic environment.
* Net income attributable to common shareholders for the third quarter of 2009
of $10.0 million, resulted in a diluted earnings per share of $0.17, compared to
a net loss attributable to common shareholders for the corresponding 2008 period
of $10.1 million, or a diluted loss per share of $0.19, resulting in a $0.36
improvement in the quarterly earnings per share.
* Net interest income for the third quarter of 2009 was $43.6 million, compared
to $47.0 million for the corresponding period in 2008. The decrease of $3.4
million in net interest income for 2009, compared to 2008, resulted from a
reduction in interest income of $19.4 million, partially offset by a reduction
in interest expense of $16.0 million. The reduction in interest income resulted
from (i) a 0.67% reduction in yield on assets reflecting the lower market
interest rate environment and a higher level of non-performing loans; and (ii) a
$290.2 million decrease in average interest-earning assets, particularly the
investment securities average balance which decreased by $941.0 million
primarily driven by $1.4 billion of securities sold during the second and third
quarters of 2009, offset by growth in mortgage backed securities and other
interest-earning assets. The decrease in interest expense resulted from a 0.69%
decrease in the rate payable on liabilities primarily reflected in lower costs
of deposits and certain loans payable combined with slight decline in average
interest-bearing liabilities. Average interest-earning assets decreased from
$9.6 billion for the third quarter of 2008 to $9.3 billion for the corresponding
2009 period, while the average interest-bearing liabilities decreased from $8.5
billion to $8.3 billion, respectively. The reduction in leverage, combined with
a decline in interest expense, resulted in a contraction of net interest margin
from 1.96% in the third quarter of 2008 to 1.87% in the corresponding 2009
period.
* Doral Financial`s provision for loan and lease losses for the quarter ended
September 30, 2009 amounted to $4.9 million, compared to $7.2 million for the
corresponding 2008 period. The $2.3 million decrease in the provision was driven
by decreases in the provisions for the commercial and construction (including
land) portfolios of $2.0 million and $4.7 million, respectively, partially
offset by increases in the provisions for the mortgage and consumer loan
portfolios of $3.2 million and $1.0 million, respectively. Third quarter results
were impacted by the effects of continuing deterioration of Puerto Rico economy
on the residential real estate market, causing lower home absorption rates on
new construction, increased defaults on existing mortgages and weakening
economic situation of existing borrowers.
* Non-interest income for the third quarter of 2009 was $26.9 million, compared
to $11.9 million for the corresponding period in 2008. The increase in
non-interest income of $15.0 million for the third quarter of 2009, compared to
the same period in 2008, resulted from (i) an increase of $11.3 million in
servicing income from a positive change in the fair value of the Company`s
mortgage servicing assets; (ii) a net gain on the sale of investment securities
of $1.0 million; (iii) an increase in the gain on securities held for trading
primarily driven by a gain of $3.9 million on the IO value; (iv) an increase in
other income of $1.5 million related to a gain of $2.0 million from the
redemption of shares of VISA, Inc., pursuant to their global restructuring
agreement; partially offset (v) by an increase of $6.4 million in
other-than-temporary impairment losses realized on investment securities.
* Non-interest expense for the third quarter of 2009 was $59.3 million, compared
to $52.4 million for the corresponding period in 2008. Non-interest expense for
the third quarter of 2009 was impacted by decreases in operating expenses for
compensation and benefits, advertising, occupancy and depreciation and
amortization expenses, offset by increases of (i) $1.4 million in professional
expenses; (ii) $4.4 million in the FDIC insurance expense; (iii) an increase of
$3.6 million in OREO losses and other related expenses driven by appraisals
adjustments during the quarter; and (iv) an increase of $3.7 million in other
expenses primarily related to an increase of $3.5 million in the provisions for
recourse driven by continued deterioration of the portfolio.
* An income tax benefit of $6.9 million for the third quarter of 2009 related to
the effect on deferred tax assets of certain tax agreements.
* The Company reported other comprehensive income of $36.2 million for the third
quarter of 2009 compared to other comprehensive loss of $62.3 million for the
corresponding 2008 period. The Company`s other comprehensive income for the
third quarter of 2009 resulted principally from the increase in value of
securities in its available for sale investment portfolio. As of September 30,
2009, the Company`s accumulated other comprehensive loss (net of income tax
benefit) totaled $103.9 million, compared to $123.2 million as of December 31,
2008.
* Doral Financial`s loan production for the third quarter of 2009 was $248.5
million, compared to $318.3 million for the comparable 2008 period, a decrease
of approximately 22%. The decrease in Doral Financial`s loan production for the
third quarter of 2009 resulted from significant decreases in residential
mortgage and construction lending activity levels in Puerto Rico. The decrease
in Doral Financial`s originated loans is due to a number of factors including
deteriorating economic conditions, competition from other financial
institutions, changes in laws and regulations and the general economic
conditions in Puerto Rico.
* Total assets as of September 30, 2009 amounted to $10.0 billion compared to
$10.1 billion as of December 31, 2008. A decrease of $248.2 million in the
Company`s investment securities portfolio was partially offset by increases in
loans of $69.7 million and cash and due from banks of $33.2 million. Total
liabilities were $9.1 billion at September 30, 2009, compared to $9.2 billion at
December 31, 2008. Total liabilities declined due to decreases of $272.1 million
in brokered deposits and $86.6 million in other short-term borrowings, partially
offset by an increase of $192.8 million in securities sold under agreements to
repurchase.
* Non-performing assets as of September 30, 2009 were $909.9 million, an
increase of $130.7 million since December 31, 2008. Non-performing loans (which
are included in non-performing assets) as of September 30, 2009 were $816.7
million, an increase of $99.0 million since December 31, 2008. The increment in
non-performing assets resulted from increases in the construction and
residential mortgage portfolio as a direct consequence of the depressed housing
market and overall macroeconomic trends in Puerto Rico. The increase in
non-performing assets occurred principally during the first quarter of 2009.
Non-performing assets as of September 30, 2009 increased only by $20.1 million
when compared to June 30, 2009.

CAPITAL RATIOS

As of September 30, 2009, Doral Bank PR and Doral Bank NY were in compliance
with the regulatory capital requirements that were applicable to them as a state
non-member bank and federal savings bank, respectively (ie., total capital and
Tier 1 capital to risk weighted assets of at least 8% and 4%, respectively, and
Tier 1 capital to average assets of at least 4%).

REGULATORY CAPITAL RATIOS AS OF SEPTEMBER 30, 2009
DORAL DORAL DORAL

FINANCIAL(2)
BANK PR
BANK NY

Total Capital Ratio (Total capital to risk- weighted assets) 15.3 % 13.6 % 16.7 %
Tier 1 Capital Ratio (Tier 1 capital to risk- weighted assets) 13.5 % 12.3 % 16.2 %
Leverage Ratio(1) 8.5 % 6.5 % 12.7 %

(1) Tier 1 capital to average assets in the case of Doral Financial and Doral Bank PR and Tier 1 capital to adjusted total assets in the case of Doral Bank NY.
(2) Doral Financial was not subject to regulatory capital requirements as of September 30, 2009. Ratios were prepared as if the company were subject to the requirement for comparability purposes.

FORWARD-LOOKING STATEMENTS

This Press Release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In addition, Doral Financial
Corporation (the "Company") may make forward-looking statements in its other
press releases, its other filings with the Securities and Exchange Commission
("SEC") or in other public or shareholder communications and its senior
management may make forward-looking statements orally to analysts, investors,
the media and others.

These forward-looking statements may relate to the Company`s financial
condition, results of operations, plans, objectives, future performance and
business, including, but not limited to, statements with respect to the adequacy
of the allowance for loan and lease losses, market risk and the impact of
interest rate changes, capital markets conditions, capital adequacy and
liquidity, and the effect of legal proceedings and new accounting standards on
the Company`s financial condition and results of operations. Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts, and are generally identified by the use of words or
phrases such as "would be," "will allow," "intends to," "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project,"
"believe," "expect," "may" or similar expressions.

Doral Financial cautions readers not to place undue reliance on any of these
forward-looking statements since they speak only as of the date made and
represent Doral Financial`s expectations of future conditions or results and are
not guarantees of future performance. The Company does not undertake and
specifically disclaims any obligations to update any forward-looking statements
to reflect occurrences or unanticipated events or circumstances after the date
of those statements.

Forward-looking statements are, by their nature, subject to risks and
uncertainties. While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain important factors
that could cause actual results to differ materially from those contained in any
forward-looking statement:

* the continued recessionary conditions of the Puerto Rico and the United States
economies and the continued weakness in the performance of the United States
capital markets leading to, among other things, (i) a deterioration in the
credit quality of our loans and other assets, (ii) decreased demand for our
products and services and lower revenue and earnings, (iii) reduction in our
interest margins, and (iv) decreased availability and increased pricing of our
funding sources, including brokered certificates of deposits;
* the strength or weakness of the real estate markets and of the consumer and
commercial credit sectors and its impact in the credit quality of our loans and
other assets which may lead to, among other things, an increase in our
non-performing loans, charge-offs and loan loss provisions;
* a decline in the market value and estimated cash flows of our mortgage-backed
securities and other assets may result in the recognition of
other-than-temporary impairment of such assets under generally accepted
accounting principles in the United States of America ("GAAP");
* our ability to derive sufficient income to realize the benefit of the deferred
tax assets;
* uncertainty about the legislative and other measures adopted by the Puerto
Rico government in response to its fiscal situation and the impact of such
measures on several sectors of the Puerto Rico economy;
* uncertainty about the effectiveness of the various actions undertaken to
stimulate the United States economy and stabilize the United States financial
markets, and the impact of such actions on our business, financial condition and
results of operations;
* changes in interest rates, which may result from changes in the fiscal and
monetary policy of the federal government, and the potential impact of such
changes in interest rates on our net interest income and the value of our loans
and investments;
* the commercial soundness of our various counterparties of financing and other
securities transactions, which could lead to possible losses when the collateral
held by us to secure the obligations of the counterparty is not sufficient or to
possible delays or losses in recovering any excess collateral belonging to us
held by the counterparty;
* our ability to collect payment of a receivable from Lehman Brothers, Inc.
("LBI"), which results from the excess of the value of securities owned by Doral
Financial that were held by LBI above the amounts owed by Doral Financial under
certain terminated repurchase agreements and forward agreement;
* higher credit losses because of federal or state legislation or regulatory
action that either (i) reduces the amount that our borrowers are required to pay
us, or (ii) limits our ability to foreclose on properties or collateral or makes
foreclosures less economically feasible;
* developments in the regulatory and legal environment for financial services
companies in Puerto Rico and the United States as a result of, among other
things, recent legislative and regulatory proposals made by the federal
government;
* changes in our accounting policies or in accounting standards, and changes in
how accounting standards are interpreted or applied;
* general competitive factors and industry consolidation;
* potential adverse outcome in the legal or regulatory actions or proceedings
described in Part I, Item 3 "Legal Proceedings" in the Company`s 2008 Annual
Report on Form 10-K, as updated from time to time in the Company`s future
reports with the SEC; and
* the other risks and uncertainties detailed in Part II, Item 1A "Risk Factors"
in the Company`s Quarterly Report on Form 10-Q for the quarter ended September
30, 2009, as updated from time to time in the Company`s future reports filed
with the SEC.

Doral Financial Corporation
Investor Relations:
Roberto Reyna, 787-474-5498
SVP Investor Relations
Roberto.Reyna@doralfinancial.com
or
Media:
Lucienne Gigante, 787-474-6298
VP Public Relations
Lucienne.Gigante@doralbank.com

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