Oriental Financial Group Reports Results for the First Quarter Ended March 31, 2008

Business Wire, May 6, 2008

SAN JUAN, Puerto Rico -- Oriental Financial Group Inc. (NYSE: OFG) today announced results for the first quarter ended March 31, 2008.

The Group reported income available to common shareholders of $15.6 million, an increase of 59.8% from the year ago quarter. This represented a return on average assets of 1.06% and a return on average common equity of 20.63%, compared with 1.01% and 14.54%, respectively, in the first quarter of 2007. Earnings per common share (fully diluted) of $0.64 were 60.0% greater than the $0.40 reported in the year ago quarter.

Jose Rafael Fernandez, President and Chief Executive Officer, commented, "The strategies we have in place enabled us to continue to perform well despite the turbulent credit market and the recession in Puerto Rico. Highlights of the quarter include a reduction in net credit losses, continued improvement in loan production, ongoing expansion of the net interest margin, and a significant increase in customer deposits."

Commentary and Outlook

Lending

"One of our key strategies, which has proven successful, was adopting conservative lending policies starting several years ago in light of weakening economic conditions in Puerto Rico," Mr. Fernandez explained.

As a result of these measures, in the first quarter, net credit losses declined 47.8% from the preceding quarter and 31.1% from a year ago. Non-performing loans increased by only $3.0 million, the smallest increase during the last six quarters.

"We are now seeing pockets of opportunity in lending," Mr. Fernandez noted. "Commercial loan production has been above $15 million for each of the last two quarters, following two previous quarters of low production. Mortgage originations of $44.6 million in the first quarter increased sequentially for the second consecutive quarter and exceeded $40 million for the first time in a year."

The Banking-Financial Services Franchise

A second core strategy has been growing Oriental's franchise with the objective of integrating the delivery of banking and financial services to mid and high net-worth clients, and building recurring non-interest income.

"This is a long term program that might not always result in year over year or sequential quarter increases, but that is producing positive results and value over time," Mr. Fernandez commented.

These marketing activities produced $107.0 million in retail deposits in the first quarter of 2008, for a record $1.2 billion in such deposits, representing an increase of 22.0% year over year and 10.1% quarter over quarter. "During this year's first quarter we added $9.1 million in demand deposits, $38.8 million in retail certificates of deposit, and $65.9 million in savings accounts, despite the lowering of interest rates," he explained.

Investment Securities Portfolio

A third major strategy involved repositioning Oriental's investment portfolio in late 2006 and its related funding in early 2007 to improve net interest margin. As a direct consequence, along with asset growth, net interest income for the first quarter of 2008 totaled $24.9 million, an increase of 87.8% compared with a year ago, and the net interest margin expanded to 1.68% versus 1.18% in the year ago quarter.

"This marks the fifth consecutive quarter in which the net interest margin has improved," Mr. Fernandez said. "We remain attentive to market opportunities to further improve and lengthen net interest margin."

Looking ahead, Mr. Fernandez said that Oriental is well positioned to continue to benefit from these strategies.

The following are other highlights from the first quarter financial results:

Income Statement

* Net interest income increased $11.6 million over a year ago, primarily as a result of a higher overall yield and higher average balances of interest-earning assets and a lower overall average cost of interest-bearing liabilities.

* Total banking and financial service revenues of $7.5 million grew 10.8% compared with a year ago, reflecting increased revenues from investment banking and mortgage banking activities.

* The strengthening of the mortgage banking operations during 2007 has permitted the Group to continue to securitize and sell conforming mortgage loans in the secondary market on a more consistent basis.

* Assets under management, which generate recurring fees for the Group's financial service businesses, reached $3.2 billion at March 31, 2008, an increase of 9.0% from a year ago.

* Other non-interest income consisted mainly of gains on sale of securities of $9.3 million and losses on derivative activities of $7.8 million versus the first quarter of 2007, which included an $8.2 million gain from elimination of forecasted transactions on interest rate swaps unwound in 2006.

* Non-interest expenses of $17.7 million for the 2008 first quarter increased 12.0% compared with the 2007 first quarter. Reflecting Oriental's revenue growth, the efficiency ratio improved to 54.69% versus 78.95% in the year ago quarter.

* The results for the 2008 first quarter include an income tax benefit of $2.5 million which takes into account the expiration of certain tax contingencies and the reassessment of the valuation allowance for the deferred tax asset.