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Business Services Industry

Doral Financial Corporation Reports Results for 2007 Third Quarter

Business Wire, Nov 12, 2007

Net Loss of $70.5 Million and a Pre-Tax Net Loss of $148.4 Million, Reflects, Among Other Things, a $126.2 Million Charge Due to Doral's Successful Balance Sheet Restructuring

Company Views Itself as Well Capitalized and Achieving Substantial Progress on Its Transformation Following the July 19, 2007 Recapitalization

SAN JUAN, Puerto Rico -- Doral Financial Corporation (NYSE: DRL), a diversified financial services company, today announced that, with its previously disclosed successful recapitalization this past July and resolution of many of the past financial, legal and management issues that had beset the Corporation, it has the capital strength and competitive foundation necessary to move forward to build its long-term growth potential as a community bank. Among other initiatives, Doral reported that during the third quarter ended September 30, 2007 it had:

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* Raised $610 million in a recapitalization that gave the company an extremely strong capital base, with a leverage ratio of 11.6%, up from 4.5% as reported at June 30, 2006;

* Strengthened its balance sheet and reduced interest rate risk by reducing its portfolio of available-for-sale investment securities and related liabilities by $1.9 billion at a loss of $126.2 million;

* Expanded Net Interest Margin from 1.34% in the third quarter of 2006 to 1.81% in the third quarter of 2007;

* Reduced its provision for loan and lease losses to $5.1 million compared to $10.1 million for the same period in 2006;

* Grew loan production by 8% versus third quarter 2006, including a 19% increase in mortgage loan production; and,

* Recognized $86.3 million of deferred tax assets.

Reflecting the costs and charges of eliminating many of its legacy issues, Doral incurred a net loss attributable to common shareholders for the third quarter of 2007 of $70.5 million, or a diluted loss per share of $1.59. For the third quarter of 2006, Doral incurred a net loss of $37.0 million, or a diluted loss per share of $6.85.

Glen R. Wakeman, CEO and President of Doral Financial stated, "The September 30, 2007 quarter marked a watershed period for Doral Financial. We successfully delivered on our goals to resolve our major legacy issues, add new capital for growth, sell non-core assets, and invest in an expanding platform of products and services consistent with our community bank focus. Doral is now well capitalized, we have capacity to grow and we are confident in our ability to deploy our capital, return to profitability, execute on fundamentals and build long-term value for all of our constituencies."

Other key 2007 third quarter figures are as follows:

* Net interest income for the third quarter of 2007 was $39.4 million, compared to $44.1 million for the same period in 2006. The decrease in net interest income for 2007, compared to 2006, was related to a decrease in interest income due to the sale of $1.9 billion in available-for-sale securities. This was partially offset by the reduction in interest expense related to the termination of the funding associated with the investment securities sold and to the repayment of $625 million in senior notes due on July 20, 2007 which was funded primarily from the $610 million equity investment by Doral Holdings on July 19, 2007, reducing the leverage of Doral Financial. This reduction in leverage also resulted in the increase in the net interest margin from 1.34% in the third quarter of 2006 to 1.81% in the third quarter of 2007. Average interest-earning assets decreased from $13.1 billion during the third quarter of 2006 to $8.7 billion for the third quarter of 2007, while the interest bearing-liabilities decreased from $12.5 billion to $8.1 billion, respectively.

* For the third quarter of 2007, the provision for loan and lease losses was $5.1 million, compared to $10.1 million for the same period in 2006. The decrease in the provision for loan losses is principally related to the stabilization of delinquencies in the various loan receivable portfolios, following a period of substantial increases in the allowance for loan and lease losses over the last 18 months. Management remains cautious about the current economic environment and its potential impact on delinquencies and credit losses.

* Non-interest loss for the third quarter of 2007 was $109.6 million, compared to a non-interest loss of $1.5 million for the same period in 2006. The non-interest loss during the third quarter of 2007 compared to the same period in 2006 was primarily driven by a significant loss related to the sale of $1.9 billion in available-for-sale investment securities. The sale and the cancellation of related borrowings used to finance these securities were completed during the third quarter of 2007, at a total pre-tax loss of approximately $126.2 million, consisting of a loss of $16.4 million on economic hedging transactions, a loss of $95.0 million on sale of investment securities, and a net loss on extinguishment of liabilities of $14.8 million. This loss was partly offset by gains from the sale of Doral Bank NY's branch network and related assets which net $5.4 million during the third quarter of 2007. Non-interest income from the operations for the quarter, without taking into consideration the sale of the securities and related transactions was $11.3 million.

Business Services Industry

Doral Financial Corporation Reports Results for 2007 Third Quarter

Business Wire, Nov 12, 2007

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