##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31,
    2010,oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period from
    to          to          .   Commission File
    No. 001-12647
  ORIENTAL FINANCIAL GROUP
    INC.
 Incorporated in the Commonwealth
    of Puerto Rico
  IRS Employer Identification
    No. 66-0538893
  Principal Executive Offices:
 997 San Roberto Street
 Oriental Center 10th Floor
 Professional Office Park
 San Juan, Puerto Rico 00926
 Telephone Number:
    (787) 771-6800
    Securities Registered Pursuant to Section 12(b) of the
    Act:
 Common Stock
 ($1.00 par value per share)
 7.125% Noncumulative Monthly Income Preferred Stock,
    Series A
 ($1.00 par value per share, $25.00 liquidation
    preference per share)
 7.0% Noncumulative Monthly Income Preferred Stock,
    Series B
 ($1.00 par value per share, $25.00 liquidation
    preference per share)
 Securities Registered Pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





ORIENTAL
    FINANCIAL GROUP INC.
  FORM 10-K
  For the
    Year Ended December 31, 2010
  TABLE OF
    CONTENTS
   
 PART IItem 1.

Business

4-19Item 1A.

Risk Factors

20-29Item 1B.

Unresolved Staff Comments

29Item 2.

Properties

29Item 3.

Legal Proceedings

29PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

29-31Item 6.

Selected Financial Data

32Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations

34-85Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk

85-89Item 8.

Financial Statements and Supplementary Data

89-178Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

179Item 9A.

Controls and Procedures

179Item 9B.

Other Information

179PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

179Item 11.

Executive Compensation

179Item 12.

Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters

179Item 13.

Certain Relationships, Related Transactions, and Director
    Independence

179Item 14.

Principal Accountant Fees and Services

179PART IVItem 15.

Exhibits and Financial Statement Schedules

180EX-10.16EX-10.17EX-21.0EX-23.0EX-31.1EX-31.2EX-32.1EX-32.2   2




---



##### Table of Contents



FORWARD-LOOKING
    STATEMENTS
  Form 10-K
    
    the rate of growth in the economy and employment levels, as well
    as general business and economic conditions;
    changes in interest rates, as well as the magnitude of such
    changes;
    the fiscal and monetary policies of the federal government and
    its agencies;
    changes in federal bank regulatory and supervisory policies,
    including required levels of capital;
    the impact of the Dodd-Frank Wall Street Reform and Consumer
    Protection Act (the Dodd-Frank Act) on our
    businesses, business practices and cost of operations;
    the relative strength or weakness of the consumer and commercial
    credit sectors and of the real estate market in Puerto Rico;
    the performance of the stock and bond markets;
    competition in the financial services industry;
    additional Federal Deposit Insurance Corporation
    (FDIC) assessments; and
    possible legislative, tax or regulatory changes;    Form 10-K
 3




---



##### Table of Contents



PART I  ITEM 1.
    BUSINESS  General
                  FDIC-assisted
   4




---



##### Table of Contents



Significant
    Transactions During 2010
  Capital
    Raise.
    Eurobank
    FDIC-Assisted Acquisition.
     5




---



##### Table of Contents



5-year 3-year 5-year 3-year
  true-up True-Up true-up
  Segment
    Disclosure
     6




---



##### Table of Contents



Banking
    Activities
          Loan
    Underwriting
  loan-to-value
 7




---



##### Table of Contents



Sale of
    Loans and Securitization Activities
    Wealth
    Management Activities
    Rule 15c3-3)
    merger-and-acquisition
   8




---



##### Table of Contents



Treasury
    Activities
    Market
    Area and Competition
    Regulation
    and Supervision
  General
       9




---



##### Table of Contents



Truth-in-Lending
      Dodd-Frank
    Wall Street Reform and Consumer Protection Act
   10




---



##### Table of Contents



Holding
    Company Structure
        Dividend
    Restrictions
   11




---



##### Table of Contents



Federal
    Home Loan Bank System
      Federal
    Deposit Insurance Corporation Improvement Act
     12




---



##### Table of Contents



FDIC
    Insurance Assessments
         13




---



##### Table of Contents



Brokered
    Deposits
    Regulatory
    Capital Requirements
         14




---



##### Table of Contents



Safety
    and Soundness Standards
      Activities
    and Investments of Insured State-Chartered Banks
     15




---



##### Table of Contents



Transactions
    with Affiliates and Related Parties
      Community
    Reinvestment Act
   16




---



##### Table of Contents



USA
    Patriot Act
  Anti-Terrorism
      Privacy
    Policies
    Sarbanes-Oxley
    Act
    Form 10-K
  Puerto
    Rico Banking Act
   17




---



##### Table of Contents



Puerto
    Rico Internal Revenue Code
   18




---



##### Table of Contents



International
    Banking Center Regulatory Act of Puerto Rico
        Employees
    Internet
    Access to Reports
  Form 10-K, Form 10-Q, Form 8-K,
   19




---



##### Table of Contents



ITEM 1A.
    RISK
    FACTORS    Changes
    in interest rates may hurt the Groups
    business.
    The
    Group is at risk because most of its business is conducted in
    Puerto Rico, which is experiencing a downturn in the economy and
    in the real estate market.
           20




---



##### Table of Contents



Financial
    results are constantly exposed to market risk.
          
    Assets and liabilities may mature or reprice at different times.
    For example, if assets reprice slower than liabilities and
    interest rates are generally rising, earnings may initially
    decline.
    Assets and liabilities may reprice at the same time but by
    different amounts. For example, when the general level of
    interest rates is rising, the Group may increase rates charged
    on loans by an amount that is less than the general increase in
    market interest rates because of intense pricing competition.
    Also, basis risk occurs when assets and liabilities have similar
    repricing frequencies but are tied to different market interest
    rate indices that may not move in tandem.
    Short-term and long-term market interest rates may change by
    different amounts, i.e., the shape of the yield curve may affect
    new loan yields and funding costs differently.
    The remaining maturity of various assets and liabilities may
    shorten or lengthen as interest rates change. For example, if
    long-term mortgage interest rates decline sharply,
    mortgage-backed securities portfolio may prepay significantly
    earlier than anticipated, which could reduce portfolio income.
    If prepayment rates increase, we would be required to amortize
    net premiums into income over a shorter period of time, thereby
    reducing the corresponding asset yield and net interest income.
    Prepayment risk also has a significant impact on mortgage-backed
    securities and collateralized mortgage obligations, since
    prepayments could shorten the weighted average life of these
    portfolios.
    Interest rates may have an indirect impact on loan demand,
    credit losses, loan origination volume, the value of financial
    assets and financial liabilities, gains and losses on sales of
    securities and loans, the value of mortgage servicing rights and
    other sources of earnings.    The
    hedging transactions the Group enters into may not be effective
    in managing the exposure to market risk, including interest rate
    risk.
   21




---



##### Table of Contents



and/or
    The
    Group may incur a significant impairment charge in connection
    with a decline in the market value of its investment securities
    portfolio.
    other-than-temporary. other-than-temporary, other-than-temporary other-than-temporary
  The
    Groups risk management policies, procedures and systems
    may be inadequate to mitigate all risks inherent in the
    Groups various businesses.
   22




---



##### Table of Contents



A
    prolonged economic downturn or recession or a continuing decline
    in the real estate market would likely result in an increase in
    delinquencies, defaults and foreclosures and in a reduction in
    loan origination activity which would adversely affect the
    Groups financial results.
    loan-to-value
  A
    continuing decline in the real estate market in the U.S.
    mainland and ongoing disruptions in the capital markets may harm
    the Groups investment securities and wholesale funding
    portfolios.
    The
    Groups business could be adversely affected if the Group
    cannot maintain access to stable funding sources.
       23




---



##### Table of Contents



The
    Groups decisions regarding credit risk and the allowance
    for loan and lease losses may materially and adversely affect
    the Groups business and results of
    operations.
    
    the duration of the loan;
    credit risks of a particular borrower;
    changes in economic or industry conditions; and
    in the case of a collateralized loan, risks resulting from
    uncertainties about the future value of the collateral.      The
    Group is subject to default and other risks in connection with
    mortgage loan originations.
    Competition
    with other financial institutions could adversely affect the
    Groups profitability.
   24




---



##### Table of Contents



The
    Group operates in a highly regulated environment and may be
    adversely affected by changes in federal and local laws and
    regulations.
      
    a reduction in the Groups ability to generate or originate
    revenue-producing assets as a result of compliance with
    heightened capital standards;
    increased cost of operations due to greater regulatory
    oversight, supervision and examination of banks and bank holding
    companies, and higher deposit insurance premiums;
    the limitation on the Groups ability to raise capital
    through the use of trust preferred securities as these
    securities may no longer be included as Tier I capital
    going forward; and
    the limitation on the Groups ability to expand consumer
    product and service offerings due to anticipated stricter
    consumer protection laws and regulations.    Legislative
    and other measures that may be taken by Puerto Rico governmental
    authorities could materially increase the Groups tax
    burden or otherwise adversely affect the Groups financial
    condition, results of operations or cash flows.
   25




---



##### Table of Contents



Competition
    in attracting talented people could adversely affect the
    Groups operations.
    The
    Group may fail to realize the anticipated benefits of the
    FDIC-assisted acquisition.
         26




---



##### Table of Contents



Loans
    that the Group acquired in the FDIC-assisted acquisition may not
    be covered by the shared-loss agreements if the FDIC determines
    that the Group has not adequately performed under these
    agreements or if the shared-loss agreements have
    ended.
    Certain
    provisions of the shared-loss agreements entered into with the
    FDIC may have anti-takeover effects and could limit the
    Groups ability to engage in certain strategic transactions
    that the Groups Board of Directors believes would be in
    the best interests of shareholders.
      The
    FDIC-assisted acquisition increases the Groups commercial
    real estate and construction loan portfolio, which have a
    greater credit risk than residential mortgage
    loans.
    Loans
    that the Group acquired in the FDIC-assisted acquisition may be
    subject to impairment.
   27




---



##### Table of Contents



The
    Groups decisions regarding the fair value of assets
    acquired could be inaccurate and its estimated FDIC shared-loss
    indemnification asset may be inadequate, which could materially
    and adversely affect the Groups business, financial
    condition, results of operations, and future
    prospects.
    The
    Groups common stock may be affected by stock price
    volatility.
    
    operating results that may be worse than the expectations of
    management, securities analysts and investors;
    developments in the business or in the financial sector in
    general;
    regulatory changes affecting the industry in general or the
    business and operations;
    the operating and securities price performance of peer financial
    institutions;
    announcements of strategic developments, acquisitions and other
    material events by the Group or its competitors;
    changes in the credit, mortgage and real estate markets,
    including the markets for mortgage-related securities; and
    changes in global financial markets and global economies and
    general market conditions.  Dividends
    on the Groups common stock are payable if and when
    declared by the Board of Directors.
    Changes
    in accounting standards issued by the Financial Accounting
    Standards Board (FASB) or other standard-setting
    bodies may adversely affect the Groups financial
    statements.
  and/or Form 10-K Form 10-Q.
 28




---



##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES          ITEM 3.
    LEGAL
    PROCEEDINGS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES         29




---



##### Table of Contents



(a)

(b)

(c)Number of SecuritiesRemaining Available forNumber of Securities to

Weighted-Average

Future Issuance UnderBe Issued Upon Exercise of

Exercise Price of

Equity Compensation PlansOutstanding Options,

Outstanding Options,

(excluding those reflected inwarrants and

warrants and

columnPlan Category

rights

rights

(a))Equity compensation plans approved by shareholders:Omnibus Plan


575,651
(1)

$
12.20
(2)


365,156
(3)Other non-active stock option plans


433,863


$
17.58
(2)


1,009,514


$
15.25



365,156     (1)
    
    Includes 332,126 stock options and
    243,525 restricted stock units.(2)
    
    Exercise price related to stock
    options.(3)
    
    On April 30, 2010 an
    additional 420,807 shares of common stock were reserved for
    issuance under the Omnibus Plan.    Purchases
    of equity securities by the issuer and affiliated
    purchasers
    Stock
    Performance Graph
     30




---



##### Table of Contents



Comparison
    of 5 Year Cumulative Total Return
    Assumes Initial Investment of $100
  Total
    Return Performance
  
 Period EndingIndex

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09

12/31/10Oriental Financial Group Inc.


100.00



109.42



118.69



56.07



102.05



119.56Russell 2000


100.00



118.37



116.51



77.15



98.11



124.46SNL Bank


100.00



116.98



90.90



51.87



51.33



57.52  31




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA   ORIENTAL
    FINANCIAL GROUP INC.



SELECTED
    FINANCIAL DATA

YEARS
    ENDED DECEMBER 31, 2010, 2009, 2008, 2007 AND 2006  Year Ended December 31,2010


2009


2008


2007


2006(Dollars in thousands)EARNINGS DATA:Interest income

$
303,801


$
319,480


$
339,039


$
289,364


$
232,311Interest expense


168,601



188,468



227,728



215,634



188,185Net interest income


135,200



131,012



111,311



73,730



44,126Provision for non-covered loan and lease losses


15,914



15,650



8,860



6,550



4,388Provision for covered loan and lease losses, net


6,282















Net interest income after provision for loan and lease
    losses


113,004



115,362



102,451



67,180



39,738Non-interest income (loss)


5,130



(2,067
)


(12,242
)


42,502



17,238Non-interest expenses


112,598



83,378



72,742



66,859



63,713Income before taxes


5,536



29,917



17,467



42,823



(6,737
)Income tax expense (benefit)


(4,298
)


6,972



(9,323
)


1,558



(1,631
)Net income (loss)


9,834



22,945



26,790



41,265



(5,106
)Less: Dividends on preferred stock


(5,334
)


(4,802
)


(4,802
)


(4,802
)


(4,802
)Less: Deemed dividend on preferred stock beneficial conversion
    feature


(22,711
)














Income available (loss) to common shareholders

$
(18,211
)

$
18,143


$
21,988


$
36,463


$
(9,908
)PER SHARE DATA:Basic

$
(0.50
)

$
0.75


$
0.91


$
1.50


$
(0.40
)Diluted

$
(0.50
)

$
0.75


$
0.90


$
1.50


$
(0.40
)Average common shares outstanding and equivalents


36,810



24,306



24,327



24,367



24,663Book value per common share

$
14.33


$
10.82


$
7.96


$
12.08


$
10.98Market price at end of period

$
12.49


$
10.80


$
6.05


$
13.41


$
12.95Cash dividends declared per common share

$
0.17


$
0.16


$
0.56


$
0.56


$
0.56Cash dividends declared on common shares

$
6,820


$
3,888


$
13,608


$
13,611


$
13,753PERFORMANCE RATIOS:Return on average assets (ROA)


0.14
%


0.35
%


0.43
%


0.76
%


−0.11
%Return on average common equity (ROE)


−3.63
%


7.16
%


9.51
%


13.52
%


−3.59
%Equity-to-assets
    ratio


10.01
%


5.04
%


4.21
%


5.99
%


7.69
%Efficiency ratio


64.53
%


51.74
%


52.65
%


65.93
%


84.69
%Expense ratio


1.14
%


0.87
%


0.77
%


0.77
%


0.73
%Interest rate spread


2.17
%


2.00
%


1.62
%


1.27
%


0.70
%Interest rate margin


2.11
%


2.14
%


1.86
%


1.44
%


0.98
%  32




---



##### Table of Contents



December 31,2010


2009


2008


2007


2006(In thousands, except per share data)PERIOD END BALANCES AND CAPITAL RATIOS:Investments and loansInvestments securities

$
4,413,957


$
4,974,269


$
3,945,626


$
4,585,610


$
2,992,236Non-covered loans


1,151,838



1,140,069



1,219,112



1,179,566



1,212,370Covered loans


620,732















Securities and loans sold but not yet delivered










834,976







6,430$
6,186,527


$
6,114,338


$
5,999,714


$
5,765,176


$
4,211,036Deposits and borrowingsDeposits

$
2,588,887


$
1,745,501


$
1,785,300


$
1,246,420


$
1,232,988Securities sold under agreements to repurchase


3,456,781



3,557,308



3,761,121



3,861,411



2,535,923Other borrowings


466,140



472,888



373,718



395,441



247,140Securities purchased but not yet received






413,359



398



111,431



$
6,511,808


$
6,189,056


$
5,920,537


$
5,614,703


$
4,016,051Stockholders equityPreferred equity


68,000



68,000



68,000



68,000



68,000Common equity


664,331



262,166



193,317



291,461



268,426$
732,331


$
330,166


$
261,317


$
359,461


$
336,426Capital ratiosLeverage capital


9.56
%


6.52
%


6.38
%


6.69
%


8.42
%Tier 1 risk-based capital


30.98
%


18.79
%


17.11
%


18.59
%


21.57
%Total risk-based capital


32.26
%


19.84
%


17.73
%


19.06
%


22.04
%Other ratiosTangible common equity to total assets


9.02
%


3.97
%


3.08
%


4.82
%


6.09
%Tangible common equity to total risk weighted assets


29.23
%


11.79
%


8.40
%


13.48
%


12.49
%Total equity to total assets


10.01
%


5.04
%


4.21
%


5.99
%


7.70
%Total equity to risk weighted assets


32.47
%


14.96
%


11.47
%


16.74
%


15.78
%Financial assets managedTrust assets managed

$
2,175,270


$
1,818,498


$
1,706,286


$
1,962,226


$
1,848,596Broker-dealer assets gathered

$
1,695,635


$
1,269,284


$
1,195,739


$
1,281,168


$
1,143,668  33




---



##### Table of Contents



Consolidated Ratios of Earnings to Combined

Year Ended December 31,Fixed Charges and Preferred Stock Dividends:

2010

2009

2008

2007

2006Excluding Interest on Deposits


(A
)


1.18
x


1.07
x


1.22
x


(A
)Including Interest on Deposits


(A
)


1.13
x


1.05
x


1.17
x


(A
)     (A)
    
    In 2010 and 2006, earnings were not
    sufficient to cover preferred dividends, and the ratio was less
    than 1:1. The Group would have had to generate additional
    earnings of $15.0 million and $10.0 million to achieve
    a ratio of 1:1 in 2010 and 2006, respectively.    ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS MANAGEMENTS
    DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    FOR THE YEAR ENDED DECEMBER 31, 2010  OVERVIEW
    OF FINANCIAL PERFORMANCE
         34




---



##### Table of Contents



Comparison
    of the years ended December 31, 2010 and
    2009:
    
    Pre-tax operating income (net interest income after provision
    for non-covered loan and lease losses, core non-interest income
    from banking and wealth management revenues, less non-interest
    expenses) of approximately $46.0 million decreased 26.0%
    compared to $62.1 million in the previous year. Pre-tax
    operating income is calculated as follows:  Year Ended December 31,2010


2009


2008PRE-TAX OPERATING INCOMENet interest income

$
135,200


$
131,012


$
111,311Less provision for non-covered loan and lease losses


(15,914
)


(15,650
)


(8,860
)Core non-interest incomeWealth management revenues


17,849



14,473



16,481Banking service revenues


11,772



5,942



5,726Mortgage banking activities


9,554



9,728



3,685Investment banking revenues (losses)


118



(4
)


950Total core non-interest income


39,293



30,139



26,842Less non-interest expenses


(112,598
)


(83,378
)


(72,742
)Total Pre-tax operating income

$
45,981


$
62,123


$
56,551   
    With the FDIC-assisted acquisition on April 30, 2010, the
    Group added total loans with a fair value of
    $785.9 million. In addition to these loans, the Group
    acquired $10.1 million in Federal Home Loan Bank stock,
    foreclosed real estate and other repossessed properties of
    $17.7 million and recorded an FDIC loss-share
    indemnification asset of $545.2 million.
    Net credit impairment of $6.3 million, attributable to
    various pools of loans covered under the shared-loss agreements
    with the FDIC, was recorded during the quarter ended
    December 31, 2010.
    Net interest income increased 3.2%, to $135.2 million, due
    to an improvement in the net interest spread to 2.17% from
    2.00%, primarily reflecting the addition of covered loans from
    the FDIC-assisted acquisition. In addition, the Group paid off a
    4.39%, $100.0 million repurchase agreement that matured on
    August 16, 2010 and redeemed the $595.0 million
    remaining balance of its 0.88% note to the FDIC, which
    originated as part of the FDIC-assisted acquisition.
    Core banking and wealth management revenues increased 30.4%, to
    $39.3 million, primarily reflecting a $5.8 million
    increase in banking service revenues, to $11.8 million and
    a $3.4 million increase in wealth management revenues, to
    $17.9 million.
    Retail deposits, reflecting growth in both Group customers and
    core deposits assumed on the FDIC-assisted acquisition, grew
    44.2% or $621.6 million, to $2.0 billion, enabling the
    Group to reduce higher cost deposits.
    Non-interest expenses increased 35.0%, to $112.6 million,
    largely the result of expenses associated with the former
    Eurobank operations. As of year end 2010, the Group had achieved
    approximately 30% annualized Eurobank cost savings, as
    previously planned.
    Results for the year also include gains on sales of agency
    securities of $15.0 million, and losses in derivative
    activities of $36.9 million.
    Strategic decision in December 2010 to sell the remaining
    balance of the BALTA private label collateralized mortgage
    obligation (CMO). The proceeds from such sale amounted to
    approximately $63.5 million, which were slightly higher
    than the $63.2 million fair value at which this instrument
    was carried in books. This $300,000 difference represents a
    positive effect on stockholders equity of this transaction
    for the Group. A loss of 35




---



##### Table of Contents



$22.8 million was recorded in the fourth quarter of 2010
    for the difference between the amortized cost and the sales
    price.  
    In early January 2010, the Group sold $374.3 million of
    non-agency CMOs at a loss of $45.8 million. This loss was
    accounted for as
    other-than-temporary
    impairment in the fourth quarter of 2009 and no additional gain
    or loss was realized on the sale in January 2010, since these
    assets were sold at the same value reflected at
    December 31, 2009.
    After giving effect to these transactions approximately 98% of
    the Groups investment securities portfolio consist of
    fixed-rate mortgage-backed securities or notes, guaranteed or
    issued by FNMA, FHLMC or GNMA, and U.S. agency senior debt
    obligations, backed by a U.S. government sponsored entity
    or the full faith and credit of the U.S. government. This
    compares to 89% at December 31, 2009.
    Stockholders equity increased $402.2 million, or
    121.8%, to $732.3 million, at December 31, 2010,
    compared to a year ago. This increase reflects capital raises of
    $94.5 million in March 2010 and $189.4 million in
    April 2010, the net income for the year, and an improvement of
    approximately $119.7 million in the fair value of the
    investment securities portfolio.
    On March 19, 2010, the Group completed the public offering
    of 8,740,000 shares of its common stock. The offering
    resulted in net proceeds of $94.5 million after deducting
    offering costs. The Group made a capital contribution of
    $93.0 million to its banking subsidiary.
    On April 30, 2010, the Group issued 200,000 shares of
    Series C Preferred Stock, through a private placement. The
    preferred stock had a liquidation preference of $1,000 per
    share. The offering resulted in net proceeds of
    $189.4 million, after deducting offering costs. On
    May 13, 2010, the Group made a capital contribution of
    $179.0 million to its banking subsidiary. At a special
    meeting of shareholders of the Group held on June 30, 2010,
    the shareholders approved the issuance of 13,320,000 shares
    of the Groups common stock upon the conversion of the
    Series C Preferred Stock, which was converted on
    July 8, 2010 at a conversion price of $15.015 per share.
    The difference between the $15.015 per share conversion price
    and the market price of the common stock on April 30, 2010
    ($16.72) was considered a contingent beneficial conversion
    feature on June 30, 2010, when the conversion was approved
    by the shareholders. Such feature amounted to $22.7 million
    at June 30, 2010 and was recorded as a dividend of
    preferred stock.  Income
    Available (Loss) to Common Shareholders
    Return on
    Average Assets and Common Equity
    Net
    Interest Income after Provision for Loan and Lease
    Losses
   36




---



##### Table of Contents



Non-Interest
    Expenses
    Income
    Tax Expense (Benefit)
    Assets
    Managed
    Interest
    Earning Assets
      held-to-maturity.
  Interest
    Bearing Liabilities
      Stockholders
    Equity
   37




---



##### Table of Contents



Wealth
    Management and Banking Franchise
    Lending
      Deposits
    Assets
    Under Management
    Credit
    Quality on Non-Covered Loans
    loan-to-value ASC 310-30,
  The
    Investment Securities Portfolio
   38




---



##### Table of Contents



other-than-temporary
    Comparison
    of the years ended December 31, 2009 and
    2008:
    
    Pre-tax operating income (net interest income after provision
    for loan losses, core non-interest income from banking and
    wealth management revenues, less non-interest expenses) of
    approximately $62.1 million increased 9.9% compared to
    $56.6 million in the previous year.
    Net interest income increased 17.7%, to $131.0 million, due
    to an improvement in the net interest margin to 2.14% from
    1.86%, primarily reflecting lower cost of funds.
    Core banking and wealth management revenues increased 12.3%, to
    $30.1 million, primarily reflecting a $6.0 million
    increase in mortgage banking activities, to $9.7 million.
    Retail deposits, benefiting from expanded market share, grew
    29.8% or $323.0 million, to $1.4 billion, enabling the
    Group to reduce higher cost deposits.
    Higher cost brokered deposits decreased 60.8% or
    $315.2 million, and other wholesale institutional deposits
    decreased 25.8% or $47.6 million.
    Non-interest expenses increased 14.6%, to $83.4 million,
    largely the result of the industry-wide increase in Federal
    Deposit Insurance Corporation (FDIC) insurance assessments.
    Results for the year also include gains on: (i) sales of
    agency securities of $78.3 million, (ii) derivative
    activities of $28.9 million, and (iii) trading
    activities of $12.6 million.
    In December 2009, the Group made the strategic decision to sell
    $116.0 million of CDOs at a loss of $73.9 million,
    including non-credit portion of impairment value previously
    recorded as unrealized loss in other comprehensive loss.
    For the same strategic reasons, in early January 2010, the Group
    sold $374.3 million of non-agency CMOs at a loss of
    $45.8 million. This loss was accounted for as
    other-than-temporary
    impairment in the fourth quarter of 2009 and no additional gain
    or loss was realized on the sale in January 2010, since these
    assets were sold at the same value reflected at
    December 31, 2009.
    After giving effect to these transactions approximately 96% of
    the Groups investment securities portfolio consist of
    fixed-rate mortgage-backed securities or notes, guaranteed or
    issued by FNMA, FHLMC or GNMA, and U.S. agency senior debt
    obligations, backed by a U.S. government sponsored entity
    or the full faith and credit of the U.S. government. This
    compares to 85% at September 30, 2009.
    Stockholders equity increased $68.8 million or 26.3%,
    to $330.2 million, at December 31, 2009, compared to a
    year ago, due to earnings retention and improved mark to market
    valuation of the Groups investment securities portfolio. 39




---



##### Table of Contents



TABLE 1 
    YEAR-TO-DATE
    ANALYSIS OF NET INTEREST 
    INCOME AND CHANGES DUE TO VOLUME/RATE
 For the Years Ended December 31, 2010 and 2009
  Interest


Average rate


Average balanceDecember


December


December


December


December


December2010


2009


2010


2009


2010


2009(Dollars in thousands)A  TAX EQUIVALENT SPREADInterest-earning assets

$
303,801


$
319,480



4.74
%


5.22
%

$
6,412,600


$
6,117,104Tax equivalent adjustment


99,071



105,407



1.54
%


1.72
%






Interest-earning assets  tax equivalent


402,872



424,887



6.28
%


6.94
%


6,412,600



6,117,104Interest-bearing liabilities


168,601



188,468



2.57
%


3.22
%


6,561,223



5,859,249Tax equivalent net interest income / spread


234,271



236,419



3.71
%


3.72
%


(148,623
)


257,855Tax equivalent interest rate margin










3.65
%


3.86
%B  NORMAL SPREADInterest-earning assets:Investments:Investment securities


187,930



244,815



4.03
%


5.11
%


4,661,483



4,792,378Trading securities


6



940



2.11
%


3.69
%


284



25,441Money market investments


397



570



0.42
%


0.47
%


93,943



120,395188,333



246,325



3.96
%


4.99
%


4,755,710



4,938,214Loans not covered under shared-loss agreements with the
    FDIC:Mortgage


56,406



60,743



6.11
%


6.27
%


923,345



968,400Commercial


12,022



10,437



5.83
%


5.49
%


206,090



189,951Leasing


319







6.22
%


0.00
%


5,129



Consumer


2,563



1,975



9.24
%


9.62
%


27,735



20,53971,310



73,155



6.14
%


6.21
%


1,162,299



1,178,890Loans covered under shared-loss agreements with the FDIC:Loans secured by residential properties


10,029







7.66
%






130,863



Commercial and construction


23,331







8.36
%






278,925



Leasing


9,280







13.11
%






70,770



Consumer


1,518







10.82
%






14,033



44,158







8.93
%






494,591



Total loans


115,468



73,155



6.97
%


6.21
%


1,656,890



1,178,890Total interest earning assets


303,801



319,480



4.74
%


5.22
%


6,412,600



6,117,104Interest-bearing liabilities:Deposits:Non-interest bearing deposits










0.00
%


0.00
%


136,738



46,750Now accounts


14,826



17,205



2.14
%


2.92
%


692,906



588,219Savings and money market


3,055



910



1.67
%


1.43
%


182,973



63,439Certificates of deposit


30,654



36,578



2.40
%


3.49
%


1,276,550



1,047,63448,535



54,693



2.12
%


3.13
%


2,289,167



1,746,042Borrowings:Securities sold under agreements to repurchase


100,609



116,755



2.84
%


3.19
%


3,545,926



3,659,442Advances from FHLB and other borrowings


12,248



12,380



3.77
%


3.76
%


324,847



328,969FDIC-guaranteed term notes


4,084



3,175



3.87
%


3.58
%


105,597



88,713Purchase money note issued to the FDIC


1,887







0.73
%






259,603



Subordinated capital notes


1,238



1,465



3.43
%


4.06
%


36,083



36,083120,066



133,775



2.81
%


3.25
%


4,272,056



4,113,207Total interest bearing liabilities


168,601



188,468



2.57
%


3.22
%


6,561,223



5,859,249Net interest income/spread

$
135,200


$
131,012



2.17
%


2.00
%Interest rate margin










2.11
%


2.14
%Excess of average interest-earning assets over 
    average interest-bearing liabilities

















$
(148,623
)

$
257,855Average interest-earning assets to average interest-
    bearing liabilities ratio


















97.73
%


104.40
%  40




---



##### Table of Contents



C 
    CHANGES IN NET INTEREST INCOME DUE TO:
  Volume


Rate


TotalInterest Income:Investments

$
(9,104
)

$
(48,888
)

$
(57,992
)Loans


43,128



(815
)


42,31334,024



(49,703
)


(15,679
)Interest Expense:Deposits


8,844



(15,002
)


(6,158
)Repurchase agreements


(3,622
)


(12,524
)


(16,146
)Other borrowings


2,366



71



2,4377,588



(27,455
)


(19,867
)Net Interest Income

$
26,436


$
(22,248
)

$
4,188  41




---



##### Table of Contents



TABLE 1 A  ANALYSIS OF NET INTEREST INCOME AND
    CHANGES DUE TO VOLUME/RATE:
 For the Years Ended December 31, 2009 and 2008
  Interest


Average rate


Average balanceDecember 31,


December 31,


December 31,2009


2008


2009


2008


2009


2008(Dollars in thousands)A  TAX EQUIVALENT SPREADInterest-earning assets

$
319,480


$
339,039



5.22
%


5.68
%

$
6,117,104


$
5,973,225Tax equivalent adjustment


105,407



112,077



1.72
%


1.88
%






Interest-earning assets  tax equivalent


424,887



451,116



6.94
%


7.56
%


6,117,104



5,973,225Interest-bearing liabilities


188,468



227,728



3.22
%


4.06
%


5,859,249



5,602,622Tax equivalent net interest income / spread

$
236,419


$
223,388



3.72
%


3.50
%

$
257,855


$
370,603Tax equivalent interest rate margin










3.86
%


3.74
%B  NORMAL SPREADInterest-earning assets:Investments:Investment securities

$
244,815


$
257,947



5.11
%


5.49
%

$
4,792,378


$
4,702,428Trading securities


940



20



3.69
%


3.70
%


25,441



540Money market investments


570



1,907



0.47
%


3.35
%


120,395



56,856246,325



259,874



4.99
%


5.46
%


4,938,214



4,759,824Loans:Mortgage


60,743



66,087



6.27
%


6.44
%


968,400



1,026,779Commercial


10,437



10,610



5.49
%


6.57
%


189,951



161,541Consumer


1,975



2,468



9.62
%


9.84
%


20,539



25,08173,155



79,165



6.21
%


6.52
%


1,178,890



1,213,401319,480



339,039



5.22
%


5.68
%


6,117,104



5,973,225Interest-bearing liabilities:Deposits:Non-interest bearing deposits


















46,750



36,697Now accounts


17,205



4,197



2.92
%


2.44
%


588,219



171,725Savings


910



10,199



1.43
%


3.36
%


63,439



303,298Certificates of deposit


36,578



35,385



3.49
%


3.96
%


1,047,634



894,20954,693



49,781



3.13
%


3.54
%


1,746,042



1,405,929Borrowings:Repurchase agreements


115,653



161,363



3.16
%


4.25
%


3,659,442



3,800,673Interest rate risk management


1,102







0.03
%










Total repurchase agreements


116,755



161,363



3.19
%


4.25
%


3,659,442



3,800,673FHLB advances


12,074



13,457



4.18
%


4.20
%


288,830



320,594Subordinated capital notes


1,465



2,304



4.06
%


6.39
%


36,083



36,083FDIC-guaranteed term notes


3,175







3.58
%






88,713



Other borrowings


306



823



0.76
%


2.09
%


40,139



39,343133,775



177,947



3.25
%


4.24
%


4,113,207



4,196,693188,468



227,728



3.22
%


4.06
%


5,859,249



5,602,622Net interest income/spread

$
131,012


$
111,311



2.00
%


1.62
%Interest rate margin










2.14
%


1.86
%Excess of interest-earning assets over interest-bearing
    liabilities

















$
257,855


$
370,603Interest-earning assets over interest-bearing liabilities
    ratio


















104.40
%


106.61
%  42




---



##### Table of Contents



C.
    CHANGES
    IN NET INTEREST INCOME DUE TO:  Volume


Rate


TotalInterest Income:Investments

$
8,898


$
(22,447
)

$
(13,549
)Loans


(2,139
)


(3,871
)


(6,010
)6,759



(26,318
)


(19,559
)Interest Expense:Deposits


10,654



(5,742
)


4,912Repurchase agreements


(4,506
)


(40,102
)


(44,608
)Other borrowings


2,166



(1,730
)


4368,314



(47,574
)


(39,260
)Net Interest Income

$
(1,555
)

$
21,256


$
19,701  43




---



##### Table of Contents



Net
    Interest Income
  Comparison
    of the years ended December 31, 2010 and
    2009:
            Comparison
    of the years ended December 31, 2009 and
    2008:
     44




---



##### Table of Contents



45




---



##### Table of Contents



TABLE
    2  NON-INTEREST INCOME(LOSS) SUMMARY
 FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
  Year Ended December 31,2010


2009


Variance %


2008(Dollars in thousands)Wealth management revenues

$
17,849


$
14,473



23.3
%

$
16,481Banking service revenues


11,772



5,942



98.1
%


5,726Investment banking revenues (losses)


118



(4
)


−100.0
%


950Mortgage banking activities


9,554



9,728



−1.8
%


3,685Total banking and wealth management revenues


39,293



30,139



30.4
%


26,842Total
    other-than-temporarily
    impaired securities


(39,674
)


(101,472
)


−60.9
%


(58,804
)Portion of loss on securities recognized in other comprehensive
    income


22,508



41,398



−45.6
%


Other-than-temporary
    impairments on securities


(17,166
)


(60,074
)


−71.4
%


(58,804
)Accretion of FDIC loss-share indemnification asset


4,330







100.0
%


Fair value adjustment on FDIC equity appreciation instrument


909







100.0
%


Net gain (loss) on:Sale of securities


15,032



4,385



242.8
%


35,070Derivatives


(36,891
)


28,927



−227.5
%


(12,943
)Early extinguishment of repurchase agreements






(17,551
)


−100.0
%


Mortgage tax credits










0.0
%


(2,480
)Trading securities


23



12,564



−99.8
%


(13
)Foreclosed real estate


(524
)


(570
)


−8.1
%


(670
)Other


124



113



9.7
%


756(34,163
)


(32,206
)


6.1
%


(39,084
)Total non-interest income (loss)

$
5,130


$
(2,067
)


−348.2
%

$
(12,242
)   Non-Interest
    Income
  Comparison
    of the years ended December 31, 2010 and
    2009:
     46




---



##### Table of Contents



other-than-temporary
  Comparison
    of the years ended December 31, 2009 and
    2008:
    held-for-sale
   47




---



##### Table of Contents



available-for-sale available-for-sale, other-than-temporary other-than-temporary
  ASC 320-10-65-1 other-than-temporary ASC 320-10-65-1, other-than-temporary other-than-temporary
 48




---



##### Table of Contents



TABLE 3
     NON-INTEREST EXPENSES SUMMARY
    FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
  Year Ended December 31,2010


2009


Variance %


2008(Dollars in thousands)Compensation and employee benefits

$
41,723


$
32,020



30.3
%

$
30,572Occupancy and equipment


18,556



14,763



25.7
%


13,843Professional and service fees


16,491



10,379



58.9
%


9,203Insurance


7,006



7,233



−3.1
%


2,421Taxes, other than payroll and income taxes


5,106



3,004



70.0
%


2,514Advertising and business promotion


4,978



4,208



18.3
%


3,970Electronic banking charges


4,504



2,194



105.3
%


1,726Loan servicing and clearing expenses


3,051



2,390



27.7
%


2,633Foreclosure and repossession expenses


2,830



929



204.6
%


637Communication


2,561



1,567



63.4
%


1,292Director and investors relations


1,463



1,374



6.5
%


1,159Other operating expenses


4,329



3,317



30.5
%


2,772Total non-interest expenses

$
112,598


$
83,378



35.0
%

$
72,742Relevant ratios and data:Efficiency ratio


64.53
%


51.74
%






52.65
%Expense ratio


1.14
%


0.87
%






0.77
%Compensation and benefits to non- interest expense


37.05
%


38.40
%






42.03
%Compensation to total assets owned


0.57
%


0.49
%






0.50
%Average number of employees


725



541







537Average compensation per employee

$
57.5


$
59.2






$
56.9Assets owned per average employee

$
10,087


$
12,109






$
11,552   Non-Interest
    Expenses
  Comparison
    of the years ended December 31, 2010 and
    2009:
           49




---



##### Table of Contents



point-of-sale
    other-than-temporary
  Comparison
    of the years ended December 31, 2009 and
    2008:
    other-than-temporary
  Provision
    for Loan and Lease Losses
  Comparison
    of the years ended December 31, 2010 and
    2009:
       50




---



##### Table of Contents



90-days
           51




---



##### Table of Contents



Comparison
    of the years ended December 31, 2009 and
    2008:
        Income
    Taxes
    FINANCIAL
    CONDITION
  Assets
    Owned
     52




---



##### Table of Contents



TABLE
    4  ASSETS SUMMARY AND COMPOSITION
 AS OF DECEMBER 31, 2010 AND DECEMBER 31, 2009
  December 31,


December 31,


Variance


December 31,2010


2009


%


2008(Dollars in thousands)Investments:FNMA and FHLMC certificates

$
3,972,107


$
2,764,172



43.7
%

$
1,546,750Obligations of US Government sponsored agencies


3,000



1,007,091



−99.7
%


941,916Non-agency collateralized mortgage obligations






446,037



−100.0
%


529,664CMOs issued by US Government sponsored agencies


177,804



286,509



−37.9
%


351,027GNMA certificates


127,714



346,103



63.1
%


335,961Structured credit investments


41,693



38,383



8.6
%


136,181Puerto Rico Government and agency obligations


67,663



65,364



3.5
%


82,927FHLB stock


22,496



19,937



12.8
%


21,013Other investments


1,480



673



119.9
%


1874,413,957



4,974,269



−11.3
%


3,945,626Loans:Loans not covered under shared-loss agreements with the FDIC:Loans receivable


1,149,289



1,136,080



1.2
%


1,206,843Allowance for loan and lease losses


(31,430
)


(23,272
)


35.1
%


(14,293
)Loans receivable, net


1,117,859



1,112,808



0.5
%


1,192,550Mortgage loans held for sale


33,979



27,261



24.6
%


26,562Total loans not covered under shared-loss agreements with the
    FDIC, net


1,151,838



1,140,069



1.0
%


1,219,112Loans covered under shared-loss agreements with the FDIC


670,018







100.0
%


Allowance for loan and lease losses on covered loans


(49,286
)






−100.0
%


Total loans covered under shared-loss agreements with the
    FDIC, net


620,732







100.0
%


Total loans, net


1,772,570



1,140,069



55.5
%


1,219,112Securities sold but not yet delivered










0.0
%


834,976Total securities and loans


6,186,527



6,114,338



1.2
%


5,999,714Other assets:Cash and due from banks


337,218



247,691



36.1
%


14,370Money market investments


111,728



29,432



279.6
%


52,002Accrued interest receivable


28,716



33,656



−14.7
%


43,914Deferred tax asset, net


30,350



31,685



−4.2
%


28,463Premises and equipment, net


23,941



19,775



21.1
%


21,184FDIC loss-share indemnification asset


471,872







100.0
%


Foreclosed real estate covered under shared-loss agreements with
    the FDIC


15,962







100.0
%


Foreclosed real estate not covered under share-loss agreements
    with the FDIC


11,969



9,347



28.1
%


9,162Other assets


94,494



64,909



45.6
%


33,908Total other assets


1,126,250



436,495



158.0
%


203,003Total assets

$
7,312,777


$
6,550,833



11.6
%

$
6,202,717Investments portfolio composition:FNMA and FHLMC certificates


90.1
%


55.5
%






39.2
%Obligations of US Government sponsored agencies


0.1
%


20.2
%






23.9
%Non-agency collateralized mortgage obligations


0.0
%


9.0
%






13.4
%CMOs issued by US Government sponsored agencies


4.0
%


5.8
%






8.9
%GNMA certificates


2.9
%


7.0
%






8.5
%Structured credit investments


0.9
%


0.8
%






3.5
%Puerto Rico Government and agency obligations


1.5
%


1.3
%






2.1
%FHLB stock


0.5
%


0.4
%






0.5
%Other investments


0.0
%


0.0
%






0.0
%100.0
%


100.0
%






100.0
%  53




---



##### Table of Contents



ASC 310-30,
         54




---



##### Table of Contents



MaturitiesAfter One Year toFive Years


After Five YearsBalance





Fixed


Variable


Fixed


VariableOutstanding at


One Year or


Interest


Interest


Interest


InterestDecember 31, 2010


Less


Rates


Rates


Rates


Rates(In thousands)Non-covered loansMortgage

$
872,482


$
8,399


$
41,007


$



$
823,076


$
Commercial


234,276



75,565



76,737



51,115



23,608



7,251Consumer


36,628



11,562



22,473



15



1,234



1,344Leasing


10,257



78



8,012







2,167



Total

$
1,153,643


$
95,604


$
148,229


$
51,130


$
850,085


$
8,595  55




---



##### Table of Contents



TABLE 5  LOANS RECEIVABLE COMPOSITION:
 Selected Financial Data
 As of December 31, 2010, 2009 and 2008
  December 31,


December 31,


December 31,2010


2009


2008(In thousands)Loans not-covered under shared-loss agreements with FDIC:Mortgage, mainly residential

$
868,128


$
915,439


$
996,712Commercial


234,992



197,777



187,077Consumer


35,912



22,864



23,054Leasing


10,257







Loans receivable


1,149,289



1,136,080



1,206,843Allowance for loan and lease losses


(31,430
)


(23,272
)


(14,293
)Loans receivable, net


1,117,859



1,112,808



1,192,550Mortgage loans
    held-for-sale


33,979



27,261



26,562Total loans not-covered under shared-loss agreements with
    FDIC, net


1,151,838



1,140,069



1,219,112Loans covered under shared-loss agreements with FDIC:Loans secured by 1-4 family residential properties


166,865







Construction and development secured by 1-4 family residential
    properties


17,253







Commercial and other construction


388,261







Leasing


79,093







Consumer


18,546







Total loans covered under shared-loss agreements with FDIC


670,018







Allowance for loan and lease losses on covered loans


(49,286
)


Total loans covered under shared-loss agreements with FDIC,
    net


620,732







Total loans, net

$
1,772,570


$
1,140,069


$
1,219,112Non-covered loans portfolio composition percentages:Mortgage


75.5
%


80.6
%


82.6
%Commercial, mainly real estate


20.4
%


17.4
%


15.5
%Consumer


3.1
%


2.0
%


1.9
%Leasing


0.9
%


0.0
%


0.0
%Total non-covered loans


100.0
%


100.0
%


100.0
%Covered loans portfolio composition percentages:Loans secured by 1-4 family residential properties


24.9
%






Construction and development secured by 1-4 family residential
    properties


2.6
%






Commercial and other construction


57.9
%






Leasing


11.8
%






Consumer


2.8
%






Total covered loans


100.0
%


0.0
%


0.0
%  56




---



##### Table of Contents



Liabilities
    and Funding Sources
      360-day 30-day
       57




---



##### Table of Contents



(In thousands)Three (3) months or less

$
132,246Over 3 months through 6 months


154,530Over 6 months through 12 months


143,019Over 12 months


160,212Total

$
590,007  58




---



##### Table of Contents



TABLE 6  LIABILITIES SUMMARY AND COMPOSITION 
    AS OF DECEMBER 31, 2010, 2009 AND 2008
 December 31,


December 31,


Variance


December 31,2010


2009


%


2008(Dollars in thousands)Deposits:Non-interest bearing deposits

$
170,705


$
73,548



132.1
%

$
53,165Now accounts


783,744



619,947



26.4
%


400,623Savings and money market accounts


235,690



86,791



171.6
%


50,152Certificates of deposit


1,393,743



961,344



45.0
%


1,274,8622,583,882



1,741,630



48.4
%


1,778,802Accrued interest payable


5,005



3,871



29.3
%


6,4982,588,887



1,745,501



48.3
%


1,785,300Borrowings:Short term borrowings


42,470



49,218



−13.7
%


29,193Securities sold under agreements to repurchase


3,456,781



3,557,308



−2.8
%


3,761,121Advances from FHLB


281,753



281,753



0.0
%


308,442FDIC-guaranteed term notes


105,834



105,834



0.0
%


Subordinated capital notes


36,083



36,083



0.0
%


36,0833,922,921



4,030,196



2.7
%


4,134,839Total deposits and borrowings


6,511,808



5,775,697



12.7
%


5,920,139FDIC net settlement payable


24,839







100.0
%


Securities and loans purchased but not yet received






413,359



−100.0
%


398Other liabilities


43,799



31,611



38.4
%


23,682Total liabilities

$
6,580,446


$
6,220,667



5.8
%

$
5,944,219Deposits portfolio composition percentages:Non-interest bearing deposits


6.6
%


4.2
%






3.0
%Now accounts


30.3
%


35.6
%






22.5
%Savings accounts


9.1
%


5.0
%






2.8
%Certificates of deposit


54.0
%


55.2
%






71.7
%100.0
%


100.0
%






100.0
%Borrowings portfolio composition percentages:Federal funds purchases and other short term borrowings


1.1
%


1.2
%






0.7
%Securities sold under agreements to repurchase


88.1
%


88.3
%






91.0
%Advances from FHLB


7.2
%


7.0
%






7.5
%FDIC-guaranteed term notes


2.7
%


2.6
%






0.0
%Subordinated capital notes


0.9
%


0.9
%






0.8
%100.0
%


100.0
%






100.0
%Securities sold under agreements to repurchaseAmount outstanding at year-end

$
3,456,781


$
3,557,308






$
3,761,121Daily average outstanding balance

$
3,545,926


$
3,659,442






$
3,800,673Maximum outstanding balance at any month-end

$
3,566,588


$
3,762,353






$
3,858,680   Stockholders
    Equity
   59




---



##### Table of Contents



60




---



##### Table of Contents



TABLE
    7  CAPITAL, DIVIDENDS AND STOCK DATA
  December 31,


December 31,


Variance


December 31,2010


2009


%


2008(In thousands, except for per share data)Capital data:Stockholders equity

$
732,331


$
330,166



121.8
%

$
261,317Regulatory Capital Ratios data:Leverage Capital Ratio


9.56
%


6.52
%


46.6
%


6.38
%Minimum Leverage Capital Ratio Required


4.00
%


4.00
%






4.00
%Actual Tier 1 Capital

$
698,836


$
414,702



68.5
%

$
389,235Minimum Tier 1 Capital Required

$
292,449


$
254,323



15.0
%

$
244,101Excess over regulatory requirement

$
406,387


$
160,379



153.4
%

$
145,134Tier 1 Risk-Based Capital Ratio


30.98
%


18.79
%


64.9
%


17.11
%Minimum Tier 1 Risk-Based Capital Ratio Required


4.00
%


4.00
%






4.00
%Actual Tier 1 Risk-Based Capital

$
698,836


$
414,702



68.5
%

$
389,235Minimum Tier 1 Risk-Based Capital Required

$
90,228


$
88,295



2.2
%

$
91,022Excess over regulatory requirement

$
608,608


$
326,407



86.5
%

$
298,213Risk-Weighted Assets

$
2,255,691


$
2,207,383



2.2
%

$
2,275,550Total Risk-Based Capital Ratio


32.26
%


19.84
%


62.6
%


17.73
%Minimum Total Risk-Based Capital Ratio Required


8.00
%


8.00
%






8.00
%Actual Total Risk-Based Capital

$
727,689


$
437,975



66.1
%

$
403,523Minimum Total Risk-Based Capital Required

$
180,455


$
176,591



2.2
%

$
182,044Excess over regulatory requirement

$
547,234


$
261,384



109.4
%

$
221,479Risk-Weighted Assets

$
2,255,691


$
2,207,383



2.2
%

$
2,275,550Other ratios:Tangible common equity (common equity less goodwill and core
    deposit intangible) to total assets


9.02
%


3.97
%


127.7
%


3.08
%Tangible common equity to risk-weighted assets


29.23
%


11.79
%


148.5
%


8.40
%Total equity to total assets


10.01
%


5.04
%


98.6
%


4.21
%Total equity to risk-weighted assets


32.47
%


14.96
%


117.0
%


11.48
%Stock data:Outstanding common shares


46,349



24,235



91.2
%


24,297Book value per common share

$
14.33


$
10.82



32.4
%

$
7.96Market price at end of year

$
12.49


$
10.80



15.6
%

$
6.05Market capitalization at end of year

$
578,899


$
261,738



121.2
%

$
146,997Common dividend data:Cash dividends declared

$
6,820


$
3,888



75.4
%

$
13,608Cash dividends declared per share

$
0.17


$
0.16



6.0
%

$
0.56Payout ratio


−33.79
%


21.33
%


258.4
%


61.89
%Dividend yield


1.36
%


1.48
%


8.0
%


9.26
%     (1)
    
    Tangible common equity consists of
    common equity less goodwill, less core deposit intangible. 61




---



##### Table of Contents



2010


2009(In thousands, except share or per share information)Total Stockholders equity

$
732,331


$
330,166Less: Preferred stock


(68,000
)


(68,000
)Less: Goodwill


(3,662
)


(2,006
)Less: Other intangibles


(1,328
)


Total tangible common equity

$
659,341


$
260,160Total assets

$
7,312,777


$
6,550,833Less: Goodwill


(3,662
)


(2,006
)Less: Other intangibles


(1,328
)


Total tangible assets

$
7,307,787


$
6,548,827Tangible common equity to tangible assets


9.02
%


3.97
%Common shares outstanding at end of year


46,348,667



24,235,088Tangible book value per common share

$
14.23


$
10.73        62




---



##### Table of Contents



2010


2009(In thousands)Common stockholders equity

$
664,331


$
262,166Less: Unrealized gains on
    available-for-sale
    securities, net of income tax


(36,987
)


82,739Less: Disallowed deferred tax assets


(25,548
)


(30,485
)Less: Disallowed servicing assets


(969
)


(712
)Less: Intangible assets:Goodwill


(3,662
)


(2,005
)Other disallowed intangibles


(1,328
)


Add: Subordinated capital notes


35,000



35,000Total Tier 1 common equity

$
630,837


$
346,703     2010


2009


2008(In thousands)Risk-based capital:Tier 1 capital

$
698,836


$
414,702


$
389,235Supplementary (Tier II) capital


28,853



23,273



14,288Total Capital

$
727,689


$
437,975


$
403,523Risk-weighted assets:Balance sheet items

$
2,216,617


$
2,199,669


$
2,269,585Off-balance sheet items


39,074



7,714



8,214Total risk-weighted assets

$
2,255,691


$
2,207,383


$
2,277,799RatiosTier 1 capital (minimum required  4%)


30.98
%


18.79
%


17.11
%Total capital ( minimum required  8%)


32.26
%


19.84
%


17.73
%Leverage ratio


9.56
%


6.52
%


6.38
%Equity to assets


10.01
%


5.04
%


4.21
%Tangible equity to assets


9.02
%


3.97
%


3.08
%      63




---



##### Table of Contents



3-year
    CashPrice


DividendHigh


Low


Per share2010December 31, 2010

$
13.72


$
11.50


$
0.05September 30, 2010

$
14.45


$
12.13


$
0.04June 30, 2010

$
16.72


$
12.49


$
0.04March 31, 2010

$
14.09


$
10.00


$
0.042009December 31, 2009

$
13.69


$
9.43


$
0.04September 30, 2009

$
15.41


$
7.48


$
0.04June 30, 2009

$
11.27


$
4.88


$
0.04March 31, 2009

$
7.38


$
0.91


$
0.042008December 31, 2008

$
18.56


$
5.37


$
0.14September 30, 2008

$
20.99


$
14.21


$
0.14June 30, 2008

$
20.57


$
14.26


$
0.14March 31, 2008

$
23.28


$
12.79


$
0.14  64




---



##### Table of Contents



December 31,


December 31,


Variance


December 31,2010


2009


%


2008(Dollars in thousands)Oriental Bank and Trust Regulatory Capital Ratios:Total Tier 1 Capital to Total Assets


9.28
%


5.78
%


60.6
%


5.42
%Actual Tier 1 Capital

$
665,952


$
359,339



85.3
%

$
311,300Minimum Capital Requirement (4%)

$
287,060


$
248,671



15.4
%

$
229,903Minimum to be well capitalized (5%)

$
358,825


$
310,839



15.4
%

$
287,378Tier 1 Capital to Risk-Weighted Assets


29.89
%


16.52
%


80.9
%


14.21
%Actual Tier 1 Risk-Based Capital

$
665,952


$
359,339



85.3
%

$
311,300Minimum Capital Requirement (4%)

$
89,113


$
87,021



2.4
%

$
87,640Minimum to be well capitalized (6%)

$
133,669


$
130,532



2.4
%

$
131,461Total Capital to Risk-Weighted Assets


31.17
%


17.59
%


77.2
%


14.86
%Actual Total Risk-Based Capital

$
694,461


$
382,611



81.5
%

$
325,593Minimum Capital Requirement (8%)

$
178,226


$
174,042



2.4
%

$
175,281Minimum to be well capitalized (10%)

$
222,782


$
217,553



2.4
%

$
219,101     Groups
    Financial Assets Managed
      Allowance
    for Loan and Lease Losses and Non-Performing
    Assets
   65




---



##### Table of Contents



90-days
     66




---



##### Table of Contents



ASC 310-20. ASC 310-30.
  loan-to-value
        
    Mortgage loans are placed on a non-accrual basis
    when they become 365 days or more past due and are
    written-down, if necessary, based on the specific evaluation of
    the collateral underlying the loan. At December 31, 2010,
    the Groups non-performing mortgage loans totaled
    $98.4 million (80.1% of the Groups non-performing
    loans), an 11.5% increase from the $88.2 million (84.5% of
    the Groups non-performing loans) reported at
    December 31, 2009. Non-performing loans in this category
    are primarily residential mortgage loans.
    Commercial loans are placed on non-accrual status
    when they become 90 days or more past due and are
    written-down, if necessary, based on the specific evaluation of
    the underlying collateral, if any. At December 31, 2010,
    the Groups non-performing commercial loans amounted to
    $23.6 million (19.2% of the Groups non-performing
    loans), a 50.6% increase when compared to non-performing
    commercial loans of $15.7 million reported at
    December 31, 2009 (15.0% of the Groups non-performing
    loans). Most of this portfolio is collateralized by commercial
    real estate properties.
    Consumer loans are placed on non-accrual status
    when they become 90 days past due and written-off when
    payments are delinquent 120 days in personal loans and
    180 days in credit cards and personal lines of credit. At
    December 31, 2010, the Groups non-performing consumer
    loans amounted to $762 thousand (0.6% of the Groups total
    non-performing loans), a 71.2% increase from the $445 thousand
    reported at December 31, 2009 (0.5% of total non-performing
    loans).
    Leases are placed on non-accrual status when they
    become 90 days past due and written-off when payments are
    delinquent 120 days. At December 31, 2010, the
    Groups non-performing leases amounted to $35 thousand
    (0.03% of the Groups total non-performing loans). At
    December 31, 2009 there were no leases. 67




---



##### Table of Contents




    Foreclosed real estate is initially recorded at
    the lower of the related loan balance or fair value at the date
    of foreclosure. Any excess of the loan balance over the fair
    value of the property is charged against the allowance for loan
    and lease losses. Subsequently, any excess of the carrying value
    over the estimated fair value less disposition cost is charged
    to operations. Proceeds from sales of foreclosed real estate
    properties during the year ended December 31, 2010, totaled
    approximately $7.9 million.     68




---



##### Table of Contents



TABLE
    8  ALLOWANCE FOR LOAN AND LEASE LOSSES SUMMARY
    YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
  Year Ended December 31,2010


2009


2008Non-covered loansBalance at beginning of year

$
23,272


$
14,293


$
10,161Provision for non-covered loan and lease losses


15,914



15,650



8,860Charge-offs


(8,235
)


(7,028
)


(5,104
)Recoveries


479



357



376Balance at end of year

$
31,430


$
23,272


$
14,293Covered loansBalance at beginning of year

$



$



$
Provision for covered loan and lease losses


6,282







FDIC shared-loss portion on provision for covered loan and lease
    losses


43,004







Balance at end of year

$
49,286


$



$
  69




---



##### Table of Contents



TABLE
    9  ALLOWANCE FOR NON-COVERED LOAN AND LEASE LOSSES
    BREAKDOWN
    AS OF DECEMBER 31, 2010, 2009 AND 2008
  Year Ended December 31,2010


2009


2008(Dollars in thousands)Mortgage

$
16,179


$
15,044


$
8,514Commercial


11,153



7,112



4,004Consumer


2,286



864



1,714Leasing


860







Unallocated allowance


952



252



61$
31,430


$
23,272


$
14,293Allowance composition:Mortgage


51.48
%


64.60
%


59.60
%Commercial


35.49
%


30.60
%


28.00
%Consumer


7.27
%


3.70
%


12.00
%Leasing


2.74
%


0.00
%


0.00
%Unallocated allowance


3.02
%


1.10
%


0.40
%100.00
%


100.00
%


100.00
%Allowance coverage ratio at end of period applicable to:Mortgage


1.85
%


1.60
%


0.83
%Commercial


4.76
%


3.60
%


2.14
%Consumer


6.24
%


3.76
%


7.43
%Leasing


8.38
%


0.00
%


0.00
%Unallocated allowance


0.08
%


0.02
%


0.00
%Total allowance to total loans


2.72
%


2.00
%


1.16
%Other selected data and ratios:Allowance coverage ratio to:Non-performing loans


25.59
%


22.30
%


18.50
%Non-real estate non-performing loans


128.73
%


144.30
%


239.90
%  70




---



##### Table of Contents



TABLE
    10  NET CREDIT LOSSES STATISTICS:
    YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
    (Dollars in thousands)
  Year Ended December 31,2010


2009


2008MortgageCharge-offs

$
(3,867
)

$
(3,493
)

$
(1,977
)Recoveries


93



70



(3,774
)


(3,423
)


(1,977
)CommercialCharge-offs


(2,833
)


(2,223
)


(459
)Recoveries


160



56



52(2,673
)


(2,167
)


(407
)ConsumerCharge-offs


(1,535
)


(1,312
)


(2,668
)Recoveries


226



231



324(1,309
)


(1,081
)


(2,344
)Net credit lossesTotal charge-offs


(8,235
)


(7,028
)


(5,104
)Total recoveries


479



357



376$
(7,756
)

$
(6,671
)

$
(4,728
)Net credit losses (recoveries) to average non-covered loans
    outstanding:Mortgage


0.41
%


0.35
%


0.19
%Commercial


1.30
%


1.14
%


0.25
%Consumer


4.72
%


5.26
%


9.35
%Total


0.67
%


0.57
%


0.39
%Recoveries to charge-offs


5.82
%


5.10
%


7.40
%Average loans:Mortgage

$
923,345


$
968,400


$
1,026,779Commercial


206,090



189,951



161,541Consumer


27,735



20,539



25,081Leasing


5,129







Total

$
1,162,299


$
1,178,890


$
1,213,401  71




---



##### Table of Contents



TABLE
    11  NON-PERFORMING ASSETS
  December 31,2010


2009


2008(Dollars in thousands)Non-performing assets:Non-accruing loans:Troubled Debt Restructuring loans

$
1,672


$
214


$
57Other loans


61,660



56,854



38,722Accruing loans:Troubled Debt Restructuring loans


9,773



443



882Other loans


49,700



46,860



37,828Total non-performing loans

$
122,805


$
104,371


$
77,489Foreclosed real estate not covered under shared-loss agreements
    with the FDIC


11,969



9,347



9,162$
134,774


$
113,718


$
86,651Non-performing assets to total assets, excluding covered
    assets


2.03
%


1.74
%


1.40
%Non-performing assets to total capital


18.40
%


34.44
%


33.16
%   Year Ended December 31,2010


2009


2008Interest that would have been recorded in the year if the loans
    had not been classified as non-accruing

$
3,802


$
3,571


$
2,545   TABLE
    12  NON-PERFORMING LOANS: 
    AS OF DECEMBER 31, 2010, 2009 AND 2008
  December 31,2010


2009


2008(Dollars in thousands)Non-performing loans:Mortgage

$
98,389


$
88,238


$
71,531Commercial


23,619



15,688



5,186Consumer


762



445



772Leasing


35







Total

$
122,805


$
104,371


$
77,489Non-performing loans composition percentages:Mortgage


80.12
%


84.50
%


92.30
%Commercial


19.23
%


15.00
%


6.70
%Consumer


0.62
%


0.50
%


1.00
%Leasing


0.03
%


0.00
%


0.00
%Total


100.00
%


100.00
%


100.00
%Non-performing loans to:Total loans, excluding covered loans


10.38
%


8.97
%


6.28
%Total assets, excluding covered assets


1.85
%


1.59
%


1.25
%Total capital


18.40
%


31.61
%


29.65
%  72




---



##### Table of Contents



TABLE
    13  HIGHER RISK RESIDENTIAL MORTGAGE LOANS 
    AS OF DECEMBER 31, 2010
  Higher-Risk Residential Mortgage Loans*High Loan-to-Value Ratio MortgagesJunior Lien Mortages


Interest Only Loans


LTV 90% to 100%Carrying








Carrying








CarryingValue


Allowance


Coverage


Value


Allowance


Coverage


Value


Allowance


Coverage(In thousands)Delinquency:Up to 90 days

$
21,661


$
247



1.14
%

$
33,826


$
927



2.74
%

$
105,371


$
1,644



1.56
%91 - 120 days


172



3



1.74
%


433



19



4.39
%


1,916



65



3.39
%121 - 180 days


167



4



2.40
%


378



36



9.52
%


3,028



202



6.67
%181 - 365 days


1,170



30



2.56
%


1,478



142



9.61
%


4,839



198



4.09
%Over 365 days


1,855



137



7.39
%


3,467



1,045



30.14
%


9,795



1,244



12.70
%Total

$
25,025


$
421



1.68
%

$
39,582


$
2,169



5.48
%

$
124,949


$
3,353



2.68
%Percentage of total loans not covered by FDIC shared-loss
    agreements


2.11
%










3.33
%










10.52
%Refinanced or Modified Loans:Amount

$
1,824


$
103



5.65
%

$



$







$
11,183


$
699



6.25
%Percentage of Higher-Risk Loan Category


7.29
%










0.00
%










8.95
%Current
    Loan-to-Value:Under 70%

$
19,058


$
293



1.54
%

$
6,188


$
397



6.42
%

$



$




70% - 79%


2,806



48



1.71
%


7,850



520



6.62
%










80% - 89%


2,307



31



1.34
%


9,658



455



4.71
%










90% - 100%


854



49



5.74
%


15,886



797



5.02
%


124,949



3,353



2.68
%$
25,025


$
421



1.68
%

$
39,582


$
2,169



5.48
%

$
124,949


$
3,353



2.68
%     *
    
    Loans may be included in more than
    one higher-risk loan category  Contractual
    Obligations and Commercial Commitments
    Payments Due by PeriodTotal


Less than 1 year


1 - 3 years


3 - 5 years


After 5 years(In thousands)CONTRACTUAL OBLIGATIONS:Short term borrowings

$
42,470


$
42,470


$



$



$
Securities sold under agreements to repurchase


3,450,000



900,000



700,000



100,000



1,750,000Advances from FHLB


280,000







225,000



55,000



FDIC-guaranteed term notes


105,000







105,000



Subordinated capital notes


36,083















36,083Annual rental commitments under noncancelable operating leases


40,850



4,402



8,564



8,176



19,708Total

$
3,954,403


$
946,872


$
1,038,564


$
163,176


$
1,805,791    73




---



##### Table of Contents



case-by-case
  Impact
    of Inflation and Changing Prices
       QUARTERLY
    FINANCIAL DATA (Unaudited)    TABLE
    13A  SELECTED QUARTERLY FINANCIAL DATA:
  Quarter EndedMarch 31,


June 30,


September 30,


December 31,Year Ended December 31, 2010

2010


2010


2010


2010(In thousands, except per share data)Interest income

$
70,336


$
79,842


$
81,221


$
72,402Interest expense


40,859



42,881



43,061



41,800Net interest income


29,477



36,961



38,160



30,602Provision for non-covered loan and lease losses


4,014



4,100



4,100



3,700Provision for covered loan and lease losses, net














6,282Net interest income after provision for loan and lease
    losses


25,463



32,861



34,060



20,620Non-interest income (loss)


8,038



(4,331
)


(10,464
)


11,887Non-interest expenses


20,395



27,849



32,705



31,649Income before taxes


13,106



681



(9,109
)


858Income tax expense (benefit)


1,171



34



(1,287
)


(4,216
)Net income (loss)


11,935



647



(7,822
)


5,074Less: Dividends on preferred stock


(1,201
)


(1,733
)


(1,200
)


(1,200
)Less: Deemed dividend on preferred stock beneficial conversion
    feature










(22,711
)


Less: Allocation of undistributed earnings for participating
    preferred shares






(3,104
)






Income available (loss) to common shareholders

$
10,734


$
(4,190
)

$
(31,733
)

$
3,874PER SHARE DATA:Basic

$
0.42


$
(0.13
)

$
(0.70
)

$
0.08Diluted

$
0.41


$
(0.13
)

$
(0.70
)

$
0.08  74




---



##### Table of Contents



As








AsAs


Previously





As


PreviouslyRe-measured


Reported





Re-measured


ReportedQuarter ended


Quarter ended





Quarter ended


Quarter endedJune 30, 2010


June 30, 2010


Difference


September 30, 2010


September 30, 2010


Difference(In thousands)Net interest income

$
36,961


$
38,652


$
(1,691
)

$
38,160


$
38,160


$
Provision for loan losses


4,100



4,100







4,100



4,100



Net interest income after provision for loan and lease losses


32,861



34,552



(1,691
)


34,060



34,060



Non-interest income (loss)


(4,331
)


12,303



(16,634
)


(10,464
)


(10,308
)


(156
)Operating expenses


27,849



27,872



(23
)


32,705



32,705



Income before income tax expense (benefit)


681



18,983



(18,302
)


(9,109
)


(8,953
)


(156
)Income tax expense (benefit)


34



1,634



(1,600
)


(1,287
)


(2,358
)


1,071Net income (loss)

$
647


$
17,349


$
(16,702
)

$
(7,822
)

$
(6,595
)

$
(1,227
)  75




---



##### Table of Contents



TABLE
    13B  SELECTED QUARTERLY FINANCIAL DATA:
  Quarter EndedMarch 31,


June 30,


September 30,


December 31,Year Ended December 31, 2009

2009


2009


2009


2009(In thousands, except for per share data)Interest income

$
83,931


$
82,051


$
78,553


$
74,866Interest expense


53,266



46,563



45,659



42,980Net interest income


30,665



35,488



32,894



31,886Provision for loan losses


(3,200
)


(3,650
)


(4,400
)


(4,400
)Net interest income after provision for loan losses


27,465



31,838



28,494



27,486Total non-interest income (loss)


17,246



46,051



16,320



(81,605
)Total non-interest expenses


19,273



22,214



20,486



21,405Income before taxes


25,438



55,675



24,328



(75,524
)Income tax expense (benefit)


690



4,761



3,001



(1,480
)Net income (loss)


24,748



50,914



21,327



(74,044
)Less: Dividends on preferred stock


(1,201
)


(1,200
)


(1,201
)


(1,200
)Income available to common shareholders

$
23,547


$
49,714


$
20,126


$
(75,244
)Per share data:Basic

$
0.97


$
2.05


$
0.83


$
(3.10
)Diluted

$
0.97


$
2.04


$
0.83


$
(3.10
)  76




---



##### Table of Contents



Critical
    Accounting Policies  Financial
    Instruments
  available-for-sale,
    Level 1 
    Level 1 asset and liabilities include equity securities
    that are traded in an active exchange market, as well as certain
    U.S. Treasury and other U.S. government agency
    securities that are traded by dealers or brokers in active
    markets. Valuations are obtained from readily available pricing
    sources for market transactions involving identical assets or
    liabilities.Level 2 
    Observable inputs other than Level 1 prices, such as quoted
    prices for similar assets or liabilities; 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 or liabilities.
    Level 2 assets and liabilities include
    (i) mortgage-backed securities for which the fair value is
    estimated based on valuations obtained from third-party pricing
    services for identical or comparable assets, (ii) debt
    securities with quoted prices that are traded less frequently
    than exchange-traded instruments and (iii) derivative
    contracts and financial liabilities (e.g. callable brokered CDs
    and medium-term notes elected for fair value option under the
    fair value measurement framework), whose value is determined
    using a pricing model with inputs that are observable in the
    market or can be derived principally from or corroborated by
    observable market data.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 and liabilities
    include financial instruments whose value is determined using
    pricing models, for which the determination of fair value
    requires significant management judgment or estimation.  Impairment
    of Investment Securities
  other-than-temporary ASC 320-10-65-1, other-than-temporary other-than-temporary
 77




---



##### Table of Contents




    intent to sell the debt security;
    if it is more likely than not that the entity will be required
    to sell the debt securities before the anticipated recovery;
    identification and evaluation of investments that have
    indications of possible
    other-than-temporary
    impairment;
    analysis of individual investments that have fair values less
    than amortized cost, including consideration of the length of
    time the investment has been in an unrealized loss position and
    the expected recovery period;
    discussion of evidential matter, including an evaluation of
    factors or triggers that could cause individual investments to
    qualify as having
    other-than-temporary
    impairment and those that would not support
    other-than-temporary
    impairment.  Derivative
    Financial Instruments
            Loans
    and Allowance for Loan and Lease Losses
   78




---



##### Table of Contents



Non-covered
    loans
    ASC 310-20, ASC 310-20
  and/or
      90-days
   79




---



##### Table of Contents



Covered
    loans
  ASC 310-30,
    ASC 310-30
    ASC 310-30
  ASC 310-30
 80




---



##### Table of Contents



FDIC
    Shared-Loss Indemnification Asset
      Income
    Taxes
       81




---



##### Table of Contents



Accounting
    for Transfers and Servicing of Financial Assets and
    Extinguishment of Liabilities
             82




---



##### Table of Contents



Recent
    Accounting Developments:
  Transfers of Financial Assets 2009-16, 860-10),
  Variable Interest Entities 2009-17, 860-10).
 83




---



##### Table of Contents



Fair Value Measurements and Disclosures 2010-06, 820-10. 820-10
  Consolidation 2010-10,
  Derivatives and Hedging
  Loan Modification ASC 310-30.
 84




---



##### Table of Contents



Credit Quality and Allowance for Credit Losses
    Disclosures No. 2010-20, No. 2011-01, No. 2010-20 , No. 2010-20
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK RISK
    MANAGEMENT  Background
      Market
    Risk
      Interest
    Rate Risk
       85




---



##### Table of Contents



Net Interest Income Risk (one year projection)Static Balance Sheet


Growing simulationAmount


Percent


Amount


PercentChange in interest rate

Change


Change


Change


Change(Dollars in thousands)+ 200 Basis points

$
27,137



21.66
%

$
22,031



17.04
%+ 100 Basis points

$
20,295



16.20
%

$
29,560



22.86
%− 100 Basis points

$
(38,124
)


−30.43
%

$
(39,910
)


−30.86
%− 200 Basis points

$
(60,775
)


−48.52
%

$
(64,997
)


−50.26
%       Interest rate swaps and options on interest rate
    swaps
 86




---



##### Table of Contents



Structured borrowings
    over-the-counter
    Credit
    Risk
      available-for-sale
    Liquidity
    Risk
   87




---



##### Table of Contents



Operational
    Risk
     88




---



##### Table of Contents



Concentration
    Risk
     89




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  ORIENTAL
    FINANCIAL GROUP INC.
  FORM-10K
  FINANCIAL
    DATA INDEX
  FINANCIAL STATEMENTSReports of Independent Registered Public
    Accounting Firm


91Managements Annual Report on Internal
    Control Over Financial Reporting


92Attestation Report of Independent Registered
    Public Accounting Firm on Internal Control over Financial
    Reporting


93Consolidated Statements of Financial Condition as
    of December 31, 2010 and 2009


94Consolidated Statements of Operations for the
    years ended December 31, 2010, 2009, and 2008


95Consolidated Statements of Changes in
    Stockholders Equity for the years ended December 31,
    2010, 2009, and 2008


96Consolidated Statements of Comprehensive Income
    (Loss) for the years ended December 31, 2010, 2009, and
    2008


97Consolidated Statements of Cash Flows for the
    years ended December 31, 2010, 2009, and 2008


98Notes to the Consolidated Financial Statements


101 to 178SUPPLEMENTARY INFORMATION (See Tables 13A and 13B under
    Item 7 of this report)  90




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control 
    Integrated Framework
  KPMG
    LLP
        91




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  MANAGEMENTS
    ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
    REPORTING
    Rules 13a-15(f) 15d-15(f)
            Internal Control-Integrated Framework
      By: /s/  José
    Rafael Fernández

By: /s/  Norberto
    GonzálezJosé Rafael Fernández

Norberto GonzálezPresident and Chief Executive Officer

Executive Vice President and Chief Financial OfficerDate: March 9, 2011

Date: March 9, 2011  92




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Internal
    Control-Integrated Framework
        Internal Control-Integrated Framework
    KPMG
    LLP
       93




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  CONSOLIDATED STATEMENTS OF FINANCIAL
    CONDITION
 DECEMBER 31, 2010 AND DECEMBER 31,
    2009
   December 31,


December 31,2010


2009(In thousands, exceptshare data)ASSETSCash and cash equivalentsCash and due from banks

$
337,218


$
247,691Money market investments


111,728



29,432Total cash and cash equivalents


448,946



277,123Investments:Trading securities, at fair value, with amortized cost of $1,307
    (December 31, 2009  $522)


1,330



523Investment securities
    available-for-sale,
    at fair value, with amortized cost of $3,661,146
    (December 31, 2009  $5,044,017)


3,700,064



4,953,659Investment securities
    held-to-maturity,
    at amortized cost, with fair value of $675,721 at
    December 31, 2010


689,917



Federal Home Loan Bank (FHLB) stock, at cost


22,496



19,937Other investments


150



150Total investments


4,413,957



4,974,269Loans:Mortgage loans
    held-for-sale,
    at lower of cost or fair value


33,979



27,261Loans not covered under shared-loss agreements with the FDIC,
    net of allowance for loan and lease losses of $31,430
    (December 31, 2009  $23,272)


1,117,859



1,112,808Loans covered under shared-loss agreements with the FDIC, net of
    allowance for loan and lease losses of $49,286 at
    December 31, 2010


620,732



Total loans, net


1,772,570



1,140,069FDIC shared-loss indemnification asset


471,872



Foreclosed real estate covered under shared-loss agreements with
    the FDIC


15,962



Foreclosed real estate not covered under shared-loss agreements
    with the FDIC


11,969



9,347Accrued interest receivable


28,716



33,656Deferred tax asset, net


30,350



31,685Premises and equipment, net


23,941



19,775Forward settlement swaps


11,023



8,511Investment in equity indexed options


9,870



6,464Investment in swap options


7,422



Other assets


66,179



49,934Total assets

$
7,312,777


$
6,550,833LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Demand deposits

$
954,553


$
693,506Savings accounts


235,690



86,792Certificates of deposit


1,398,644



965,203Total deposits


2,588,887



1,745,501Borrowings:Short-term borrowings


42,470



49,218Securities sold under agreements to repurchase


3,456,781



3,557,308Advances from FHLB


281,753



281,753FDIC-guaranteed term notes


105,834



105,834Subordinated capital notes


36,083



36,083Total borrowings


3,922,921



4,030,196Securities purchased but not yet received






413,359FDIC net settlement payable


24,839



Accrued expenses and other liabilities


43,799



31,611Total liabilities


6,580,446



6,220,667Stockholders equity:Preferred stock, $1 par value; 10,000,000 shares
    authorized; 1,340,000 shares of Series A and
    1,380,000 shares of Series B issued and outstanding,
    $25 liquidation value


68,000



68,000Common stock, $1 par value; 100,000,000 shares
    authorized; 47,807,734 shares issued;
    46,348,667 shares outstanding (December 31,
    2009  25,739,397; 24,235,088)


47,808



25,739Additional paid-in capital


498,435



213,445Legal surplus


46,331



45,279Retained earnings


51,502



77,584Treasury stock, at cost, 1,459,067 shares
    (December 31, 2009  1,504,309 shares)


(16,732
)


(17,142
)Accumulated other comprehensive income (loss), net of tax of
    ($2,108) (December 31, 2009  $7,445)


36,987



(82,739
)Total stockholders equity


732,331



330,166Total liabilities and stockholders equity

$
7,312,777


$
6,550,833    94




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDED DECEMBER 31, 2010, 2009
    and 2008
  Year Ended December 31,2010


2009


2008Interest income:LoansLoans not covered under shared-loss agreements with the FDIC

$
71,310


$
73,155


$
79,165Loans covered under shared-loss agreements with the FDIC


44,158







Mortgage-backed securities


161,518



198,015



184,019Investment securities and other


26,815



48,310



75,855Total interest income


303,801



319,480



339,039Interest expense:Deposits


48,535



54,693



49,781Securities sold under agreements to repurchase


100,609



116,755



161,363Advances from FHLB and other borrowings


12,248



12,380



14,280FDIC-guaranteed term notes


4,084



3,175



Note payable to the FDIC


1,887







Subordinated capital notes


1,238



1,465



2,304Total interest expense


168,601



188,468



227,728Net interest income


135,200



131,012



111,311Provision for non-covered loan and lease losses


15,914



15,650



8,860Provision for covered loan and lease losses, net


6,282







Net interest income after provision for loan and lease
    losses


113,004



115,362



102,451Non-interest income:Wealth management revenues


17,849



14,473



16,481Banking service revenues


11,772



5,942



5,726Mortgage banking activities


9,554



9,728



3,685Investment banking revenues (losses)


118



(4
)


950Total banking and wealth management revenues


39,293



30,139



26,842Total loss on
    other-than-temporarily
    impaired securities


(39,674
)


(101,472
)


(58,804
)Portion of loss on securities recognized in other comprehensive
    income


22,508



41,398



Other-than-temporary
    impairments on securities


(17,166
)


(60,074
)


(58,804
)Accretion of FDIC loss-share indemnification asset


4,330







Fair value adjustment on FDIC equity appreciation instrument


909







Net gain (loss) on:Sale of securities


15,032



4,385



35,070Derivatives


(36,891
)


28,927



(12,943
)Mortgage tax credits










(2,480
)Early extinguishment of repurchase agreements






(17,551
)


Trading securities


23



12,564



(13
)Foreclosed real estate


(524
)


(570
)


(670
)Other


124



113



756Total non-interest income, net


5,130



(2,067
)


(12,242
)Non-interest expenses:Compensation and employee benefits


41,723



32,020



30,572Occupancy and equipment


18,556



14,763



13,843Professional and service fees


16,491



10,379



9,203Insurance


7,006



7,233



2,421Taxes, other than payroll and income taxes


5,106



3,004



2,514Advertising and business promotion


4,978



4,208



3,970Electronic banking charges


4,504



2,194



1,726Loan servicing and clearing expenses


3,051



2,390



2,633Foreclosure and repossession expenses


2,830



929



637Communication


2,561



1,567



1,292Director and investors relations


1,463



1,374



1,159Printing, postage, stationery and supplies


1,188



902



988Other


3,141



2,415



1,784Total non-interest expenses


112,598



83,378



72,742Income before income taxes


5,536



29,917



17,467Income tax expense (benefit)


(4,298
)


6,972



(9,323
)Net income


9,834



22,945



26,790Less: Dividends on preferred stock


(5,335
)


(4,802
)


(4,802
)Less: Deemed dividend on preferred stock beneficial conversion
    feature


(22,711
)






Income available (loss) to common shareholders

$
(18,212
)

$
18,143


$
21,988Income (loss) per common share:Basic

$
(0.50
)

$
0.75


$
0.91Diluted

$
(0.50
)

$
0.75


$
0.90Average common shares outstanding and equivalents


36,810



24,306



24,327Cash dividends per share of common stock

$
0.17


$
0.16


$
0.56    95




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS EQUITY
 FOR
    THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
  Year Ended December 31,2010


2009


2008(In thousands)Preferred stock:Balance at beginning of year

$
68,000


$
68,000


$
68,000Issuance of preferred stock


177,289







Conversion of preferred stock to common stock


(177,289
)






Balance at end of year


68,000



68,000



68,000Additional paid-in capital from beneficial conversion
    feature:Balance at beginning of year










Issuance of preferred stock  beneficial conversion
    feature


22,711







Conversion of preferred stock to common stock 
    beneficial conversion feature


(22,711
)






Balance at end of year










Common stock:Balance at beginning of year


25,739



25,739



25,557Issuance of common stock


8,740







Conversion of preferred stock to common stock


13,320







Exercised stock options


9







182Balance at end of year


47,808



25,739



25,739Additional paid-in capital:Balance at beginning of year


213,445



212,625



210,073Issuance of common stock


90,896







Conversion of preferred stock to common stock


186,680







Deemed dividend on preferred stock beneficial conversion feature


22,711







Stock-based compensation expense


1,194



742



559Exercised stock options


63







1,993Exercised restricted stock units with treasury shares


(380
)






Capital contribution






78



Common stock issuance costs


(5,250
)






Preferred stock issuance costs


(10,924
)






Balance at end of year


498,435



213,445



212,625Legal surplus:Balance at beginning of year


45,279



43,016



40,573Transfer from retained earnings


1,052



2,263



2,443Balance at end of year


46,331



45,279



43,016Retained earnings:Balance at beginning of year


77,584



51,233



45,296Cumulative effect on initial adoption of accounting principle






14,359



Net income


9,834



22,945



26,790Cash dividends declared on common stock


(6,818
)


(3,888
)


(13,608
)Cash dividends declared on preferred stock


(5,335
)


(4,802
)


(4,802
)Deemed dividend on preferred stock beneficial conversion feature


(22,711
)






Transfer to legal surplus


(1,052
)


(2,263
)


(2,443
)Balance at end of year


51,502



77,584



51,233Treasury stock:Balance at beginning of year


(17,142
)


(17,109
)


(17,023
)Stock purchased






(182
)


(235
)Exercised restricted stock units with treasury shares


380







Stock used to match defined contribution plan


30



149



149Balance at end of year


(16,732
)


(17,142
)


(17,109
)Accumulated other comprehensive income (loss), net of tax:Balance at beginning of year


(82,739
)


(122,187
)


(13,015
)Cumulative effect on initial adoption of accounting principle






(14,359
)


Other comprehensive income (loss), net of tax


119,726



53,807



(109,172
)Balance at end of year


36,987



(82,739
)


(122,187
)Total stockholders equity

$
732,331


$
330,166


$
261,317    96




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (LOSS)
 FOR THE
    YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
  Year Ended December 31,2010


2009


2008(In thousands)Net income

$
9,834


$
22,945


$
26,790Other comprehensive income:Unrealized gain (loss) on securities
    available-for-sale
    arising during the year


127,144



(3,323
)


(141,076
)Realized gain on investment securities included in net income


(15,032
)


(4,385
)


(35,070
)Total loss on other- than-temporarily impaired securities


39,674



101,472



58,804Portion of loss on securities recognized in other comprehensive
    income


(22,508
)


(41,398
)


Income tax effect


(9,552
)


1,441



8,170Other comprehensive income (loss) for the year


119,726



53,807



(109,172
)Comprehensive income (loss)

$
129,560


$
76,752


$
(82,382
)    97




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 FOR
    THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
  Year Ended December 31,2010


2009


2008(In thousands)Cash flows from operating activities:Net income

$
9,834


$
22,945


$
26,790Adjustments to reconcile net income to net cash used in
    operating activities:Amortization of deferred loan origination fees, net of costs


211



218



(428
)Amortization of premiums, net of accretion of discounts


40,667



13,075



(786
)Amortization of core deposit intangible


95







Accretion of FDIC loss-share indemnification asset


(4,330
)






Other-than-temporary
    impairments on securities


17,166



60,074



58,804Depreciation and amortization of premises and equipment


5,764



5,987



5,443Deferred income tax benefit


(10,092
)


(1,782
)


(9,931
)Provision for loan and lease losses, net


22,196



15,650



8,860Stock-based compensation


1,194



742



559Fair value adjustment of servicing asset


(1,805
)


(4,301
)


(293
)(Gain) loss on:Sale of securities


(15,032
)


(4,385
)


(35,070
)Sale of mortgage loans held for sale


(5,383
)


(3,827
)


(2,408
)Derivatives


36,891



(28,927
)


12,943Mortgage tax credits










2,480Early extinguishment of repurchase agreements






17,551



Sale of foreclosed real estate


524



570



670Sale of premises and equipment


49



(71
)


1Originations and purchases of loans
    held-for-sale


(227,401
)


(230,240
)


(140,080
)Proceeds from sale of loans
    held-for-sale


77,705



106,071



58,355Net (increase) decrease in:Trading securities


(807
)


(267
)


866Accrued interest receivable


4,940



10,258



8,401Other assets


(332
)


(26,008
)


(10,082
)Net increase (decrease) in:Accrued interest on deposits and borrowings


582



(5,622
)


2,717Accrued expenses and other liabilities


23,461



8,295



(2,163
)Net cash used in operating activities


(23,903
)


(43,994
)


(14,352
) 98




---



##### Table of Contents



Year Ended December 31,2010


2009


2008(In thousands)Cash flows from investing activities:Purchases of:Investment securities
    available-for-sale


(5,630,637
)


(12,577,326
)


(4,159,014
)Investment securities
    held-to-maturity


(703,390
)






(14,000
)FHLB stock


(2,560
)


(26,981
)


(22,164
)Equity options


(5,899
)


(4,067
)


(5,596
)Maturities and redemptions of:Investment securities
    available-for-sale


3,011,108



3,825,193



970,543Investment securities
    held-to-maturity


12,754







304,133Other investments










1,511FHLB stock


10,077



28,057



21,809Proceeds from sales of:Investment securities
    available-for-sale


3,689,869



9,101,639



1,687,779Investment securities
    held-to-maturity










834,975Foreclosed real estate


7,886



9,312



3,264Other repossessed assets


711







Premises and equipment


631



128



14Origination and purchase of loans, excluding loans
    held-for-sale


(144,210
)


(93,093
)


(157,063
)Principal repayments of loans, including covered loans


231,976



131,079



111,869Shared-loss agreements reimbursements from the FDIC


120,675







Additions to premises and equipment


(9,974
)


(4,636
)


(4,863
)Cash and cash equivalents received in FDIC-assisted acquisition


89,777







Net cash provided by (used in) investing activities


678,794



389,305



(426,803
)Cash flows from financing activities:Net increase (decrease) in:Deposits


115,377



(26,764
)


564,516Securities sold under agreements to repurchase


(100,000
)


(217,551
)


(100,023
)Short term borrowings


(6,709
)


19,986



1,733Proceeds from:Issuance of FDIC-guaranteed term notes






105,000



Advances from FHLB






1,397,880



2,098,070Exercise of stock options


72







2,175Issuance of common stock, net


94,386







Issuance of preferred stock, net


189,076







Capital contribution






78



Repayments of advances from FHLB






(1,424,580
)


(2,121,370
)Repayments of note payable to the FDIC


(715,970
)






Purchase of treasury stock






(182
)


(235
)Termination of derivative instruments


(47,147
)


20,263



(7,912
)Dividends paid on preferred stock


(5,335
)


(4,802
)


(4,802
)Dividends paid on common stock


(6,818
)


(3,888
)


(13,608
)Net cash provided by (used in) financing activities


(483,068
)


(134,560
)


418,544 99




---



##### Table of Contents



Year Ended December 31,2010


2009


2008(In thousands)Net change in cash and cash equivalents


171,823



210,751



(22,611
)Cash and cash equivalents at beginning of year


277,123



66,372



88,983Cash and cash equivalents at end of year

$
448,946


$
277,123


$
66,372Supplemental Cash Flow Disclosure and Schedule of Non-cash
    Activities:Interest paid

$
167,992


$
191,992


$
225,011Income taxes paid

$
6,281


$
54


$
54Mortgage loans securitized into mortgage-backed securities

$
142,907


$
147,419


$
72,753Investment securities
    held-to-maturity
    transferred to
    available-for-sale

$



$



$
375,780Securities sold but not yet delivered

$



$



$
834,976Securities purchased but not yet received

$



$
413,359


$
398Transfer from loans to foreclosed real estate

$
12,408


$
10,067


$
8,889Conversion of preferred stock to common stock

$
200,000


$



$
      100




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2010, 2009, AND 2008
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Nature
    of Operations
             101




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates in the Preparation of Financial
    Statements
  other-than-temporary
  Principles
    of Consolidation
    Cash
    Equivalents
    Earnings
    per Common Share
    Securities
    Purchased/Sold Under Agreements to
    Resell/Repurchase
    Investment
    Securities
  held-to-maturity, available-for-sale held-to-maturity
 102




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale.
  held-to-maturity
  held-to-maturity available-for-sale. held-to-maturity section 25-18 ASC 320-10-25.
      available-for-sale held-to-maturity
  Financial
    Instruments
  available-for-sale,
     103




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        820-1-35-51.
  Impairment
    of Investment Securities
  other-than-temporary ASC 320-10-65-1, other-than-temporary other-than-temporary
    
    intent to sell the debt security;
    if it is more likely than not that the entity will be required
    to sell the debt securities before the anticipated recovery;
    identification and evaluation of investments that have
    indications of possible
    other-than-temporary
    impairment;
    analysis of individual investments that have fair values less
    than amortized cost, including consideration of the length of
    time the investment has been in an unrealized loss position and
    the expected recovery period; 104




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    discussion of evidential matter, including an evaluation of
    factors or triggers that could cause individual investments to
    qualify as having
    other-than-temporary
    impairment and those that would not support
    other-than-temporary
    impairment.  Derivative
    Financial Instruments
            Off-Balance
    Sheet Instruments
    Mortgage
    Banking Activities and Loans
    Held-For-Sale
  held-for-sale lower-of-cost-or-fair held-for-sale
 105




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting
    for Transfers and Servicing of Financial Assets and
    Extinguishment of Liabilities
         106




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Servicing
    Assets
  and/or
        Loans
    and Allowance for Loan and Lease Losses
    Non-Covered
    Loans
    ASC 310-20, ASC 310-20
 107




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or
      90-days
    Mortgage Loans: sub-segments:
 108




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  sub-segments,
  Commercial loans:
  Consumer loans:
  Leasing:
    Covered
    Loans
  ASC 310-30,
    ASC 310-30
   109




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ASC 310-30
  ASC 310-30
  Lease
    Financing
      Reserve
    for Unfunded Commitments
    FDIC
    Shared-Loss Indemnification Asset
   110




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Core
    Deposit Intangible
    Foreclosed
    Real Estate and Other Repossessed Property
  Non-covered
    Foreclosed Real Estate
    Covered
    Foreclosed Real Estate and Other Repossessed
    Property
    Premises
    and Equipment
    Income
    Taxes
   111




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               112




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Equity-Based
    Compensation Plan
              Comprehensive
    Income
  available-for-sale
 113




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Commitments
    and Contingencies
    Subsequent
    Events
  Form 10-K
  Reclassifications
    Recent
    Accounting Developments:
  Transfers of Financial Assets 2009-16, 860-10). 2009-16 paragraph 860-10-40-6A. 2009-16
     114




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2009-16,
  Variable Interest Entities 2009-17, 860-10).
  Fair Value Measurements and Disclosures 2010-06, 820-10. 820-10
  Consolidation 2010-10,
 115




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivatives and Hedging
  Loan Modification ASC 310-30.
  Credit Quality and Allowance for Credit Losses
    Disclosures No. 2010-20, No. 2011-01, No. 2010-20, No. 2010-20
    2.
    FDIC-ASSISTED
    ACQUISITION     116




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      true-up True-Up true-up
   117




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    PreliminaryApril 30, 2010


MeasurementBook value


Fair Value


(As initially


Period


April 30, 2010April 30, 2010


Adjustments


reported)


Adjustments


(As remeasured)(In thousands)AssetsCash and cash equivalents

$
89,777


$



$
89,777


$



$
89,777Federal Home Loan Bank (FHLB) stock


10,077







10,077







10,077Loans covered under shared-loss agreements with the FDIC


1,536,416



(699,942
)


836,474



(53,547
)


782,927Loans not covered under shared-loss agreements with the FDIC


4,275



(1,266
)


3,009



(23
)


2,986Foreclosed real estate covered under shared-loss agreements with
    the FDIC


26,082



(8,555
)


17,527



(2,941
)


14,586Other repossessed assets covered under shared-loss agreements
    with the FDIC


3,401



(339
)


3,062







3,062FDIC shared-loss indemnification asset






516,250



516,250



28,963



545,213Core deposit intangible






1,423



1,423







1,423Deferred tax asset, net














1,058



1,058Goodwill














1,656



1,656Other assets


20,168



(14,867
)


5,301



1,176



6,477Total assets acquired

$
1,690,196


$
(207,296
)

$
1,482,900


$
(23,658
)

$
1,459,242LiabilitiesDeposits

$
722,442


$
7,104


$
729,546


$



$
729,546Deferred tax liability, net










6,419



(6,419
)


Other liabilities


9,426







9,426







9,426Total liabilities assumed

$
731,868


$
7,104


$
745,391


$
(6,419
)

$
738,972Net assets acquired

$
958,328


$
(214,400
)

$
737,509


$
(17,239
)

$
720,270ConsiderationNote payable to the FDIC

$
715,536


$
434


$
715,970


$



$
715,970FDIC settlement payable


15,244



(4,654
)


10,590



(7,199
)


3,391FDIC equity appreciation instrument






909



909







909$
730,780


$
(3,311
)

$
727,469


$
(7,199
)

$
720,270Bargain purchase gain from the FDIC-assisted acquisition









$
10,040


$
(10,040
)

$
  118




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31, 2010(In thousands)Balance at April 30, 2010

$
545,213Shared-loss agreements reimbursements from the FDIC


(120,675
)Credit impairment losses to be covered under shared-loss
    agreements


43,004Accretion of FDIC shared-loss indemnification asset


4,330Balance at December 31, 2010

$
471,872   Fair
    Value of Assets Acquired and Liabilities Assumed
    Cash and cash equivalents
  Federal Home Loan Bank stock
  Loans
  and/or
  Foreclosed real estate and other repossessed
    properties
  FDIC shared-loss indemnification
    asset
 119




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Goodwill
  Core deposit intangible (CDI) 
  Deposit liabilities
  Deferred taxes
  Other assets and other liabilities
  3.
    INVESTMENTS  Money
    Market Investments
   120




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Investment
    Securities
    December 31, 2010Gross


Gross





WeightedAmortized


Unrealized


Unrealized


Fair


AverageCost


Gains


Losses


Value


Yield(In thousands)Available-for-saleObligations of US Government sponsored agencies

$
3,000


$



$



$
3,000



0.01
%Puerto Rico Government and agency obligations


71,128



160



3,625



67,663



5.37
%Structured credit investments


61,724







20,031



41,693



3.68
%Total investment securities


135,852



160



23,656



112,356FNMA and FHLMC certificates


3,238,802



45,446



2,058



3,282,190



3.70
%GNMA certificates


118,191



9,523







127,714



5.19
%CMOs issued by US Government sponsored agencies


168,301



9,524



21



177,804



5.01
%Total mortgage-backed-securities and CMOs


3,525,294



64,493



2,079



3,587,708Total securities
    available-for-sale


3,661,146



64,653



25,735



3,700,064



3.84
%Held-to-maturityMortgage-backed-securitiesFNMA and FHLMC certificates


689,917







14,196



675,721



3.74
%Total

$
4,351,063


$
64,653


$
39,931


$
4,375,785



3.82
%   December 31, 2009Gross


Gross





WeightedAmortized


Unrealized


Unrealized


Fair


AverageCost


Gains


Losses


Value


Yield(In thousands)Available-for-saleObligations of US Government sponsored agencies

$
1,037,722


$
359


$
30,990


$
1,007,091



3.18
%Puerto Rico Government and agency obligations


71,537



9



6,181



65,365



5.37
%Structured credit investments


61,722







23,340



38,382



3.69
%Total investment securities


1,170,981



368



60,511



1,110,838FNMA and FHLMC certificates


2,766,317



22,154



24,298



2,764,173



4.62
%GNMA certificates


339,830



7,317



1,044



346,103



4.81
%CMOs issued by US Government sponsored agencies


279,454



7,057



3



286,508



5.20
%Non-agency collateralized mortgage obligations


487,435







41,398



446,037



5.78
%Total mortgage-backed-securities and CMOs


3,873,036



36,528



66,743



3,842,821Total securities
    available-for-sale

$
5,044,017


$
36,896


$
127,254


$
4,953,659



4.48
%    121




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2010Available-for-sale





Held-to-maturityAmortized Cost


Fair Value


Amortized Cost


Fair Value(In thousands)


(In thousands)Investment securitiesDue less than 1 yearObligations of US Government sponsored agencies

$
3,000


$
3,000


$



$
Due from 1 to 5 yearsPuerto Rico Government and agency obligations


382



388







Due after 5 to 10 yearsPuerto Rico Government and agency obligations


13,682



12,658







Structured credit investments


11,976



8,379







Total due after 5 to 10 years


25,658



21,037







Due after 10 yearsPuerto Rico Government and agency obligations


57,064



54,617







Structured credit investments


49,748



33,314







Total due after 10 years


106,812



87,931







Total investment securities


135,852



112,356







Mortgage-backed securitiesDue after 5 to 10 yearsFNMA and FHLMC certificates


14,069



14,868







Due after 10 yearsFNMA and FHLMC certificates


3,224,733



3,267,322



689,917



675,721GNMA certificates


118,191



127,714







CMOs issued by US Government sponsored agencies


168,301



177,804







Total due after 10 years


3,511,225



3,572,840



689,917



675,721Total mortgage-backed securities


3,525,294



3,587,708



689,917



675,721Total securities
    available-for-sale

$
3,661,146


$
3,700,064


$
689,917


$
675,721   available-for-sale
 122




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    other-than-temporary
        Year Ended December 31, 2010GrossDescription

Face Value


Cost


Sale Price


Sale Book Value


Gross Gains


Losses(In thousands)Sale of Securities
    Available-for-SaleInvestment securitiesObligations of U.S. Government sponsored agencies

$
1,168,925


$
1,191,915


$
1,196,123


$
1,191,408


$
4,716


$
1Puerto Rico Government and agency obligations


2,295



2,396



2,394



2,395







1Total investment securities


1,171,220



1,194,311



1,198,517



1,193,803



4,716



2Mortgage-backed securities and CMOsFNMA and FHLMC certificates


2,070,159



1,940,384



1,783,631



1,755,808



27,823GNMA certificates


307,356



315,911



293,997



288,726



5,271



Non-agency collateralized mortgage obligations


842,619



840,775



430,926



453,702







22,776Total mortgage-backed securities and CMOs


3,220,134



3,097,070



2,508,554



2,498,236



33,094



22,776Total

$
4,391,354


$
4,291,381


$
3,707,071


$
3,692,039


$
37,810


$
22,778   123




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31, 2009Description

Face Value


Cost


Sale Price


Sale Book Value


Gross Gains


Gross Losses(In thousands)Sale of Securities
    Available-for-SaleInvestment securitiesObligations of U.S. Government sponsored agencies

$
3,189,385


$
3,190,113


$
3,189,827


$
3,188,991


$
856


$
20Structured credit investments


134,000



114,128



42,210



116,094







73,884Puerto Rico Government and agency obligations


90,000



90,612



90,000



90,000







Total investment securities


3,413,385



3,394,853



3,322,037



3,395,085



856



73,904Mortgage-backed securities and CMOsFNMA and FHLMC certificates


5,520,419



5,490,838



5,088,807



5,018,408



71,549



1,150GNMA certificates


347,667



355,949



353,801



353,176



625



CMOs issued by U.S. Government sponsored agencies


330,000



330,938



336,994



330,585



6,409



Total mortgage-backed securities and CMOs


6,198,086



6,177,725



5,779,602



5,702,169



78,583



1,150Total

$
9,611,471


$
9,572,578


$
9,101,639


$
9,097,254


$
79,439


$
75,054   Year Ended December 31, 2008Description

Face Value


Cost


Sale Price


Sale Book Value


Gross Gains


Gross Losses(In thousands)Sale of Securities
    Available-for-SaleInvestment securitiesObligations of U.S. Government sponsored agencies

$
793,300


$
792,957


$
791,278


$
782,063


$
9,215


$
Puerto Rico Government and agency obligations


1,830



1,843



1,862



1,804



58



Total investment securities


795,130



794,800



793,140



783,867



9,273



Mortgage-backed securities and CMOsFNMA and FHLMC certificates


821,488



817,883



703,921



693,370



10,551



GNMA certificates


196,578



199,030



190,718



189,872



907



61Total mortgage-backed securities and CMOs


1,018,066



1,016,913



894,639



883,242



11,458



611,813,196



1,811,713



1,687,779



1,667,109



20,731



61Sale of Securities
    Held-to-MaturityInvestment securitiesObligations of U.S. Government sponsored agencies


125,000



124,981



127,870



125,000



2,870



Mortgage-backed securities and CMOsFNMA and FHLMC certificates


1,028,748



906,544



488,628



481,518



7,110



GNMA certificates


319,223



272,090



115,358



113,441



1,917



CMOs issued by U.S. Government sponsored agencies


140,473



140,979



103,119



100,616



2,503



Total mortgage-backed securities and CMOs


1,488,444



1,319,613



707,105



695,575



11,530



1,613,444



1,444,594



834,975



820,575



14,400



Total

$
3,426,640


$
3,256,307


$
2,522,754


$
2,487,684


$
35,131


$
61  124




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale held-to-maturity,
  December 31,
    2010Available-for-sale
  Less than 12 monthsAmortized


Unrealized


FairCost


Loss


Value(In thousands)FNMA and FHLMC certificates

$
245,533


$
2,058


$
243,475CMOs issued by US Government sponsored agencies


2,591



21



2,570Obligations of US Government sponsored agencies


1,000







1,000249,124



2,079



247,045   12 months or moreAmortized


Unrealized


FairCost


Loss


ValueStructured credit investments


61,724



20,031



41,693Puerto Rico Government and agency obligations


50,773



3,625



47,148112,497



23,656



88,841   TotalAmortized


Unrealized


FairCost


Loss


ValueFNMA and FHLMC certificates


245,533



2,058



243,475Structured credit investments


61,724



20,031



41,693Puerto Rico Government and agency obligations


50,773



3,625



47,148CMOs issued by US Government sponsored agencies


2,591



21



2,570Obligations of US Government sponsored agencies


1,000







1,000$
361,621


$
25,735


$
335,886   December 31,
    2010Held-to-maturity
  Less than 12 monthsAmortized


Unrealized


FairCost


Loss


Value(In thousands)FNMA and FHLMC certificates

$
689,917


$
14,196


$
675,721  125




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31,
    2009Available-for-sale
  Less than 12 monthsAmortized


Unrealized


FairCost


Loss


Value(In thousands)FNMA and FHLMC certificates

$
1,772,575


$
24,287


$
1,748,288Obligations of US Government sponsored agencies


602,926



30,990



571,936GNMA certificates


154,916



1,030



153,886CMOs issued by US Government sponsored agencies


2,701



3



2,6982,533,118



56,310



2,476,808   12 months or moreAmortized


Unrealized


FairCost


Loss


ValueFNMA and FHLMC certificates


605



11



594GNMA certificates


350



14



336Non-agency collateralized mortgage obligations


113,122



41,398



71,724Puerto Rico Government and agency obligations


71,155



6,181



64,974Structured credit investments


61,722



23,340



38,382246,954



70,944



176,010   TotalAmortized


Unrealized


FairCost


Loss


ValueFNMA and FHLMC certificates


1,773,180



24,298



1,748,882Obligations of US Government sponsored agencies


602,926



30,990



571,936GNMA certificates


155,266



1,044



154,222Non-agency collateralized mortgage obligations


113,122



41,398



71,724Puerto Rico Government and agency obligations


71,155



6,181



64,974Structured credit investments


61,722



23,340



38,382CMOs issued by US Government sponsored agencies


2,701



3



2,698$
2,780,072


$
127,254


$
2,652,818   other-than-temporary 320-10-65-1,
  320-10-5-1
  
    analysis of individual investments that have fair values less
    than amortized cost, including consideration of the length of
    time the investment has been in an unrealized loss position and
    the expected recovery period;
    the financial condition of the issuer or issuers;
    the creditworthiness of the obligor of the security; 126




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    actual collateral attributes;
    any rating changes by a rating agency;
    the payment structure of the debt security and the likelihood of
    the issuer being able to make payments;
    current market conditions
    adverse conditions specifically related to the security,
    industry, or a geographic area;
    the Groups intent to sell the debt security;
    whether it is more-likely-than-not that the Group will be
    required to sell the debt security before its anticipated
    recovery;
    and other qualitative factors that could support or not an
    other-than-temporary
    impairment.    Other-than-temporary other-than-temporary
  other-than-temporary other-than-temporary
  available-for-sale
     127




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Identification of the estimated fair value of the contractual
    coupon of the loans underlying the CLO. This information is
    obtained directly from the trustees reports for each CLO
    security.
    Calculation of the
    yield-to-maturity
    for each loan in the CLO, and determination of the interest rate
    spread (yield less the risk-free rate).
    Estimated default probabilities for each loan in the CLO. These
    are based on the credit ratings for each company in the
    structure, and this information also is obtained directly from
    the trustees reports for each CLO security. The default
    probabilities are adjusted based on the credit rating assuming
    the highest default probabilities for the loans of those
    entities with the lowest credit ratings. In addition to
    determining the current default probabilities, estimates are
    developed to calculate the cumulative default probabilities in
    successive years. To establish the reasonability of the default
    estimates, market-implied default rates are compared to
    historical credit ratings-based default rates.
    Once the default probabilities are estimated, the average
    numbers of defaults is calculated for the loans underlying each
    CLO security. In those cases where defaults are deemed to occur,
    a recovery rate is applied to the cash flow determination at the
    time in which the default is expected to occur. The recovery
    rate is based on average historical information for similar
    securities, as well as the actual recovery rates for defaults
    that have occurred within the pool of loans underlying the
    securities owned by the Group.
    One hundred simulations are carried out and run through a cash
    flow engine for the underlying pool of loans in each CLO
    security. Each one of the simulations uses different default
    estimates and forward yield curve assumptions.    other-than-temporary
     128




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            other-than-temporary
  Year EndedDecember 31, 2010Total loss
    other-than-temporarily
    impaired securities

$
(39,674
)Portion of loss on securities recognized in other comprehensive
    income


22,508Net impairment losses recognized in earnings

$
(17,166
)   4.
    PLEDGED
    ASSETS   129




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    available-for-sale
 130




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    LOANS
    RECEIVABLE AND ALLOWANCE FOR LOAN AND LEASE LOSSES  Loans
    Receivable Composition
    December 31,


December 31,2010


2009(In thousands)Loans not-covered under shared-loss agreements with FDIC:Loans secured by real estate:Residential  1 to 4 family

$
847,402


$
898,790Home equity loans, secured personal loans and others


25,080



20,145Commercial


174,056



157,631Deferred loan fees, net


(3,931
)


(3,318
)1,042,607



1,073,248Other loans:Commercial


60,936



40,146Personal consumer loans and credit lines


35,912



22,864Leasing


10,257



Deferred loan fees, net


(423
)


(178
)106,682



62,832Loans receivable


1,149,289



1,136,080Allowance for loan and lease losses


(31,430
)


(23,272
)Loans receivable, net


1,117,859



1,112,808Mortgage loans
    held-for-sale


33,979



27,261Total loans not-covered under shared-loss agreements with
    FDIC, net


1,151,838



1,140,069Loans covered under shared-loss agreements with FDIC:Loans secured by 1-4 family residential properties


166,865



Construction and development secured by 1-4 family residential
    properties


17,253



Commercial and other construction


388,261



Leasing


79,093



Consumer


18,546



Total loans covered under shared-loss agreements with FDIC


670,018



Allowance for loan and lease losses on covered loans


(49,286
)


Total loans covered under shared-loss agreements with FDIC,
    net


620,732



Total loans, net

$
1,772,570


$
1,140,069  131




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Loans PastDue Over30-59 Days


60-89 Days


Greater than


Total Past








90 Days andPast Due


Past Due


90 Days


Due


Current


Total Loans


Still AccruingDecember 31, 2010:Loans not covered under shared-loss agreements with the
    FDIC:Secured by real estate (except commercial)ResidentialTraditional

$
22,093


$
9,414


$
76,604


$
108,111


$
638,158


$
746,269


$
37,850Non-traditional


837



845



12,016



13,698



66,056



79,754



4,953Loss mitigation program


2,528



1,043



9,336



12,907



33,497



46,404



6,06025,458



11,302



97,956



134,716



737,711



872,427



48,863Home equity loans, secured personal loans


149







340



489



961



1,450



Other










55



55







55



25,607



11,302



98,351



135,260



738,672



873,932



48,863Commercial


1,123



9,367



13,390



23,880



210,396



234,276



ConsumerPersonal consumer loans and credit lines  secured


23











23



4,853



4,876



Personal consumer loans and credit lines  unsecured


419



207



136



762



17,576



18,338



Credit cards


262



173



285



720



3,620



4,340



Overdrafts










940



940



6,684



7,624



704



380



1,361



2,445



32,733



35,178



Leasing






79



35



114



10,143



10,257



Total loans not covered under shared-loss agreements with the
    FDIC

$
27,434


$
21,128


$
113,137


$
161,699


$
991,944


$
1,153,643


$
48,863   132




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Loans PastDue Over30-59 Days


60-89 Days


Greater than











90 Days andPast Due


Past Due


90 Days


Total Past Due


Current


Total Loans


Still AccruingDecember 31, 2009:Loans not covered under shared-loss agreements with the
    FDIC:MortgageResidentialTraditional

$
21,344


$
12,507


$
70,255


$
104,106


$
704,624


$
808,730


$
29,304Non-traditional


1,967



416



14,974



17,357



74,982



92,339



8,011Loss mitigation program


732



522



2,884



4,138



13,536



17,674



2,37424,043



13,445



88,113



125,601



793,142



918,743



39,689Home equity loans, secured personal loans






153



271



424



1,086



1,510



Other










55



55







55



24,043



13,598



88,439



126,080



794,228



920,308



39,689Commercial


2,025



6,761



15,687



24,473



173,256



197,729



ConsumerPersonal consumer loans and credit lines  secured


97



15



1



113



3,551



3,664



Personal consumer loans and credit lines  unsecured


494



137



160



791



14,282



15,073



Credit cards


22



9



12



43



1,072



1,115



Overdrafts


16



211



3



230



1,457



1,687



629



372



176



1,177



20,362



21,539



Total loans not covered under shared-loss agreements with the
    FDIC

$
26,697


$
20,731


$
104,302


$
151,730


$
987,846


$
1,139,576


$
39,689   Non-covered
    Loans
    ASC 310-20. 310-30
 133




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-accrualDecember 31,2010


2009(In thousands)MortgageResidentialTraditional

$
38,754


$
33,407Non-traditional


7,063



6,962Loss mitigation program


3,276



51049,093



40,879Home equity loans, secured personal loans


340



271Other


55



5549,488



41,205Commercial


13,390



15,687ConsumerPersonal consumer loans and credit lines  secured






1Personal consumer loans and credit lines  unsecured


136



160Credit cards


285



12Overdrafts






3421



176Leasing


35



Total

$
63,334


$
57,068     Credit
    Quality Indicators
       134




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  90-days
    Special Mention:
  Substandard:
  Doubtful:
  ASC
    310-10-35:
    BalanceOutstanding at


DelinquencyDecember 31, 2010


Pass


Special Mention


Substandard


Doubtful


ASC 310-10-35(In thousands)Commercial

$
234,276


$
188,281


$
5,908


$
14,046


$
143


$
25,898     BalanceOutstanding at


DelinquencyDecember 31, 2010


0-90 days


91-120 days


121-365 days


Over 365 days


ASC 310-10-35(In thousands)MortgageTraditional

$
746,269


$
669,665


$



$
37,851


$
38,753


$
Non-traditional


79,754



67,738







4,953



7,063



Loss mitigation program


46,404



7,767







2,035



2,553



34,049872,427



745,170







44,839



48,369



34,049Home equity loans, secured personal loans


1,450



1,110











340



Other


55















55



873,932



746,280







44,839



48,764



34,049Consumer


35,178



34,466







697



15



Leasing


10,257



10,222







35







Total

$
919,367


$
790,968


$



$
45,571


$
48,779


$
34,049  135




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Allowance
    for Loan and Lease Losses
  Non-Covered
    Loans
      Year Ended December 31,2010


2009


2008(In thousands)Balance at beginning of year

$
23,272


$
14,293


$
10,161Provision for loan and lease losses


15,914



15,650



8,860Charge-offs


(8,235
)


(7,028
)


(5,104
)Recoveries


479



357



376Balance at end of year

$
31,430


$
23,272


$
14,293  136




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Mortgage


Commercial


Consumer


Leasing


Unallocated


Total(In thousands)Allowance for loan and lease losses:Ending allowance balance attributable to loans:Individually evaluated for impairment

$
2,250


$
823


$



$



$
138


$
3,211Collectively evaluated for impairment


13,929



10,330



2,286



860



814



28,219Total ending allowance balance

$
16,179


$
11,153


$
2,286


$
860


$
952


$
31,430Loans:Individually evaluated for impairment


34,049



25,898














$
59,947Collectively evaluated for impairment


838,433



208,378



36,628



10,257







1,093,696Total ending loans balance

$
872,482


$
234,276


$
36,628


$
10,257


$



$
1,153,643    137




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31, 2010Average


InterestUnpaid


Recorded


Specific





Recorded


IncomePrincipal


Investment


Allowance


Coverage


Investment


Recognized(In thousands)Impaired loans with specific allowanceCommercial

$
11,948


$
10,070


$
823



8
%

$
10,622


$
158Residential  Loss mitigation program


34,049



34,049



2,250



7
%


16,977



743Impaired loans with no specific allowanceCommercial


15,828



15,828







0
%


11,472



651Total investment in impaired loans

$
61,825


$
59,947


$
3,073



5
%

$
39,071


$
1,552   For the Year Ended December 31, 2009Average


InterestUnpaid


Recorded


Specific





Recorded


IncomePrincipal


Investment


Allowance


Coverage


Investment


Recognized(In thousands)Impaired loans with specific allowanceCommercial

$
9,355


$
9,355


$
709



8
%

$
3,138


$
86Residential  Loss mitigation program


10,139



10,139



684



7
%


6,870



226Impaired loans with no specific allowanceCommercial


6,227



6,227







0
%


5,818



241Total investment in impaired loans

$
25,721


$
25,721


$
1,393



5
%

$
15,826


$
553     Covered
    Loans under
    ASC 310-30
  ASC 310-30 ASC 310-30 ASC 310-30 ASC 310-30. ASC 310-30, ASC 310-30. ASC 310-20.
 138




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    310-30
  At Acquisition dateNon-Impaired


Impaired


Total LoansLoans


Loans


Acquired(In thousands)Contractually required principal

$
1,035,888


$
504,803


$
1,540,691Fair value

$
470,761


$
315,152


$
785,913     At April 30, 2010Unpaid


FairPrincipal


Value


Fair


TotalBalance


Adjustment


Value


Mark(In thousands)Covered loans:Loans secured by residential properties

$
299,775


$
(111,615
)

$
188,160



−37.23
%Construction secured by residential properties


87,709



(68,544
)


19,165



−78.15
%Commercial and other construction


953,128



(526,427
)


426,701



−55.23
%Leasing


160,492



(34,841
)


125,651



−21.71
%Consumer


35,312



(12,062
)


23,250



−34.16
%1,536,416



(753,489
)


782,927



−49.04
%Non-covered loans:Credit cards


4,275



(1,289
)


2,986



−30.15
%Total loans acquired in the FDIC-assisted acquisition

$
1,540,691


$
(754,778
)

$
785,913



−48.99
%  139




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands)Contractually required principal and interest

$
1,766,352Less: Expected Cash Flows


983,452Non-Accretable Discount


782,900Expected Cash Flows


983,452Less: Fair Value of Loans Acquired under ASC
    310-30


782,927Accretable Yield

$
200,525     Total Loans Acquired(In thousands)Contractual balance

$
1,370,942Carrying amount

$
620,732     Accretable YieldActivity(In thousands)Balance at January 1, 2010

$
Additions


(200,525
)Accretion


44,158Transfer to non-accretable discount


9,194Cost recovery


(1,385
)Balance at December 31, 2010

$
(148,558
)   Non-AccretableDiscount Activity(In thousands)Balance at January 1, 2010

$
Additions


(782,900
)Principal losses


187,400Transfer from accretable discount


(9,194
)Cost recovery


1,385Balance at December 31, 2010

$
(603,309
)  140




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31, 2010Average


InterestUnpaid


Recorded


Specific





Recorded


IncomePrincipal


Investment


Allowance


Coverage


Investment


Recognized(In thousands)Covered LoansImpaired covered loans with specific allowanceLoans secured by 1-4 family residential properties

$
64,366


$
38,885


$
3,582



9
%

$
38,667


$
1,941Construction and development secured by 1-4 family residential
    properties


55,524



11,828



1,939



16
%


12,541



727Commercial and other construction


637,044



318,404



43,748



14
%


324,946



16,629Total investment in impaired covered loans

$
756,934


$
369,117


$
49,269



13
%

$
376,154


$
19,297     Year EndedDecember 31,2010(In thousands)Balance at beginning of year

$
Provision for covered loan and lease losses


6,282FDIC loss-share portion of provision for covered loan and lease
    losses


43,004Balance at end of year

$
49,286   6.
    SERVICING
    ASSETS  and/or
     141




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year Ended December 31,2010


2009(In thousands)Fair value at beginning of period

$
7,120


$
2,819Acquisition of leasing servicing assets from FDIC-assisted
    acquisition


1,190



Servicing from mortgage securitizations or assets transfers


2,933



3,058Changes due to payments on loans


(869
)


(309
)Changes in fair value due to changes in valuation model inputs
    or assumptions


(679
)


1,552Fair value at end of period

$
9,695


$
7,120     Year Ended December 31,2010


2009Constant prepayment rate


9.50% - 37.57%



7.52% - 32.22%Discount rate


11.00% - 14.00%



10.00% - 13.50%     Year Ended December 31,2010Constant prepayment rate


2.99% - 6.29%Discount rate


13.13% - 17.89%  142




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2010(In thousands)Mortgage related servicing assetCarrying value of mortgage servicing asset

$
8,925Constant prepayment rateDecrease in fair value due to 10% adverse change

$
(365
)Decrease in fair value due to 20% adverse change

$
(707
)Discount rateDecrease in fair value due to 10% adverse change

$
(391
)Decrease in fair value due to 20% adverse change

$
(751
)Leasing servicing assetCarrying value of leasing servicing asset

$
770Discount rateDecrease in fair value due to 10% adverse change

$
(9
)Decrease in fair value due to 20% adverse change

$
(19
)          143




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    PREMISES
    AND EQUIPMENT    Useful Life

December 31,


December 31,(Years)

2010


2009(In thousands)Land



$
2,328


$
978Buildings and improvements

40


6,301



2,982Leasehold improvements

5  10


20,564



19,198Furniture and fixtures

3  7


10,099



8,527Information technology and other assets

3  7


19,003



16,944Vehicles




71



58,366



48,629Less: accumulated depreciation and amortization




(34,425
)


(28,854
)$
23,941


$
19,775       8.
    DERIVATIVE
    ACTIVITIES    over-the-counter
  ninety-day
   144




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Notional Amount


Fixed Rate


Trade Date


Settlement Date


Maturity Date(In thousands)Forward settlement into two year contract

$
300,000



1.5040
%


08/18/10



12/28/11



12/28/13Forward settlement into three year contract


300,000



1.8450
%


08/18/10



12/28/11



12/28/14Forward settlement into four year contract


300,000



2.1550
%


08/18/10



12/28/11



12/28/15Forward settlement into two year contract


350,000



1.8275
%


08/13/10



05/09/12



05/09/14$
1,250,000     Option





SwapFixed


Trade


Maturity


Swap Start


MaturityNotional Amount


Rate


Date


Date


Date


Date(In thousands)Option to enter into two-year swap contract

$
100,000



2.1225
%


11/15/10



08/10/12



08/14/12



05/14/15Option to enter into three-year swap contract


150,000



2.6400
%


11/15/10



12/04/12



12/06/12



06/06/16$
250,000          145




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                Year Ending

Equity Indexed


Equity IndexedDecember 31,

Options Purchased


Options Written(In thousands)2011

$
21,415


$
19,9022012


64,285



63,4362013


38,590



35,7152014


17,340



16,8982015


7,330



7,446$
148,960


$
143,397     9.
    ACCRUED
    INTEREST RECEIVABLE AND OTHER ASSETS    December 31,


December 31,2010


2009(In thousands)Loans

$
11,068


$
10,888Investments


17,648



22,768$
28,716


$
33,656  146




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2010


2009(In thousands)Prepaid FDIC insurance

$
16,796


$
22,568Servicing asset


9,695



7,120Other prepaid expenses


7,897



4,269Goodwill


3,662



2,006Mortgage tax credits


3,432



3,819Other repossessed assets covered by FDIC shared-loss agreements


2,341



Debt issuance costs


2,299



3,531FDIC loss share receivable


1,757



Core deposit intangible


1,328



Investment in Statutory Trusts


1,086



1,086Accounts receivable and other assets


15,886



5,535$
66,179


$
49,934          147




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    DEPOSITS
    AND RELATED INTEREST    December 31,


December 31,2010


2009(In thousands)Non-interest bearing demand deposits

$
170,649


$
73,548Interest-bearing savings and demand deposits


1,019,594



706,750Individual retirement accounts


359,730



312,843Retail certificates of deposit


477,180



312,410Total retail deposits


2,027,153



1,405,551Institutional deposits


283,686



136,683Brokered deposits


278,048



203,267$
2,588,887


$
1,745,501     Year Ended December 31,2010


2009


2008(In thousands)Demand and savings deposits

$
17,881


$
18,115


$
14,396Certificates of deposit


30,654



36,578



35,385$
48,535


$
54,693


$
49,781       (In thousands)Within one year:Three (3) months or less

$
297,622Over 3 months through 1 year


642,930940,552Over 1 through 2 years


260,303Over 2 through 3 years


112,289Over 3 through 4 years


46,694Over 4 through 5 years


29,458$
1,389,296  148




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    BORROWINGS  Short
    Term Borrowings
    Securities
    Sold under Agreements to Repurchase
      December 31,2010


2009Fair Value of





Fair Value ofBorrowing


Underlying


Borrowing


UnderlyingBalance


Collateral


Balance


Collateral(In thousands)


(In thousands)Citigroup Global Markets Inc.

$
1,600,000


$
1,752,619


$
1,700,000


$
1,880,838Credit Suisse Securities (USA) LLC


1,250,000



1,325,392



1,250,000



1,327,820UBS Financial Services Inc.


500,000



605,706



500,000



569,726JP Morgan Chase Bank NA


100,000



119,997



100,000



121,649Total

$
3,450,000


$
3,803,714


$
3,550,000


$
3,900,033  149




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Borrowing


Weighted-AverageYear of Maturity

Balance


Coupon


Settlement Date


Maturity Date


Next Put Date(In thousands)2011$
100,000



4.17
%


12/28/2006



12/28/2011



3/28/2011350,000



4.13
%


12/28/2006



12/28/2011



3/28/2011100,000



4.29
%


12/28/2006



12/28/2011



3/28/2011350,000



4.25
%


12/28/2006



12/28/2011



3/28/2011900,0002012350,000



4.26
%


5/9/2007



5/9/2012



2/9/2011100,000



4.50
%


8/14/2007



8/14/2012



2/16/2011100,000



4.47
%


9/13/2007



9/13/2012



3/13/2011150,000



4.31
%


3/6/2007



12/6/2012



3/6/2011700,0002014100,000



4.72
%


7/27/2007



7/27/2014



1/27/2011100,0002017500,000



4.67
%


3/2/2007



3/2/2017



3/2/2011250,000



0.25
%


3/2/2007



3/2/2017



3/2/2011100,000



0.00
%


6/6/2007



3/6/2017



3/6/2011900,000



0.00
%


3/6/2007



6/6/2017



3/6/20111,750,000$
3,450,000



2.81
%    150




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2010


2009Fair Value of





Fair Value ofUnderlying





UnderlyingBorrowing Balance


Collateral


Borrowing Balance


Collateral(In thousands)GNMA certificatesWithin 30 days

$



$
38,877


$



$
90,229Less than 1 year


5,275



5,221



5,216



5,3491  3 years


16,090



16,537



157,236



110,211over 5 years


45,783



21,303



128,060



105,74167,148



81,938



290,512



311,530FNMA certificatesWithin 30 days






509,914







144,260Less than 1 year


572,590



547,108



583



6031  3 years


769,645



787,326



816,020



838,7973 to 5 years


100,000



78,689



100,000



81,727over 5 years


1,421,948



1,230,407



616,187



585,6262,864,183



3,153,444



1,532,790



1,651,013FHLMC certificatesWithin 30 days






87,823







75,325Less than 1 year


38,160



39,269



94,201



94,1681  3 years


26,060



21,327



147,309



151,9193 to 5 years














over 5 years


282,269



240,570



313,786



252,599346,489



388,989



555,296



574,011CMOsWithin 30 days






2,739







22,048Less than 1 year


169,305



171,021







1  3 years


2,875



2,983







3 to 5 years










337,727



335,840over 5 years














172,180



176,743



337,727



357,888US Agency securitiesWithin 30 days














310,4221  3 years






2,600







3 to 5 years










141,708



124,776over 5 years










691,967



570,393



2,600



833,675



1,005,591Total

$
3,450,000


$
3,803,714


$
3,550,000


$
3,900,033  151




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,2010


2009(In thousands)Average daily aggregate balance outstanding

$
3,545,926


$
3,659,442Maximum outstanding balance at any month-end

$
3,566,588


$
3,762,353Weighted average interest rate during the year


2.84
%


3.19
%Weighted average interest rate at year end


2.81
%


2.85
%   Advances
    from the Federal Home Loan Bank
      Weighted-AverageYear of Maturity

Borrowing Balance


Coupon


Settlement Date


Maturity Date


Next Put Date(In thousands)2012$
25,000



4.37
%


5/4/2007



5/4/2012



2/4/201125,000



4.57
%


7/24/2007



7/24/2012



1/24/201125,000



4.26
%


7/30/2007



7/30/2012



1/31/201150,000



4.33
%


8/10/2007



8/10/2012



2/11/2011100,000



4.09
%


8/16/2007



8/16/2012



2/16/2011225,000201425,000



4.20
%


5/8/2007



5/8/2014



2/8/201130,000



4.22
%


5/11/2007



5/11/2014



2/10/201155,000$
280,000



4.24
%    152




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Subordinated
    Capital Notes
      3-month
    FDIC-
    Guaranteed Term Notes  Temporary Liquidity Guarantee
    Program
    12.
    EMPLOYEE
    BENEFIT PLAN   153




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      13.
    RELATED
    PARTY TRANSACTIONS    December 31,2010


2009(In thousands)Balance at the beginning of year

$
3,889


$
2,151New loans


187



1,809Repayments


(617
)


(71
)Credits of persons no longer considered related parties


(7
)


Balance at the end of year

$
3,452


$
3,889   14.
    INCOME
    TAX      Year Ended December 31,2010


2009


2008(In thousands)Current income tax expense

$
5,794


$
8,754


$
608Deferred income tax benefit


(10,092
)


(1,782
)


(9,931
)Income tax expense (benefit)

$
(4,298
)

$
6,972


$
(9,323
)    154




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Year Ended December 31,2010


2009


2008Amount


Rate


Amount


Rate


Amount


Rate(Dollars in thousands)Tax at statutory rates

$
2,267



40.95
%

$
12,251



40.95
%

$
6,813



39.00
%Tax effect of exempt income, net


(5,569
)


−100.59
%


(22,081
)


−73.80
%


(11,285
)


−64.60
%Effect of tax rate on capital loss carryforwards


(6,012
)


−108.59
%


16,481



55.10
%






Change in valuation allowance


2,929



52.91
%


81



0.30
%


(3,340
)


−19.10
%Income tax contingencies provision/(credit)


53



0.95
%


671



2.20
%


(1,956
)


−11.20
%Other items, net


2,034



36.72
%


(431
)


−1.40
%


445



2.60
%Income tax expense (benefit)

$
(4,298
)


−77.64
%

$
6,972



23.35
%

$
(9,323
)


−53.30
%  155




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2010


2009(In thousands)Deferred tax assets:Allowance for loan losses and other reserves

$
31,479


$
9,166FDIC-assisted acquisition


10,399



Unamortized discount related to mortgage servicing rights sold


421



700Deferred gain on sale of assets


163



192Deferred loan origination fees


548



377Unrealized net loss included in accumulated other comprehensive
    income






7,445S&P option contracts


6,731



5,848Net capital and operating loss carryforwards


13,547



14,387Other deferred tax assets


2,141



1,462Total gross deferred tax asset


65,429



39,577Deferred tax liabilities:FDIC shared-loss indemnification asset


(20,696
)


Derivative unrealized net gain


(5,267
)


(3,319
)Deferred loan origination costs


(1,889
)


(1,706
)Other deferred tax liabilities


(2,964
)


(1,533
)Total deferred tax liabilities


(30,816
)


(6,558
)Less: Valuation allowance


(4,263
)


(1,334
)Net deferred tax asset

$
30,350


$
31,685      156




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            15.
    STOCKHOLDERS
    EQUITY  Preferred
    Stock
     157




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Common
    Stock
        Regulatory
    Capital Requirements
       158




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Minimum CapitalActual


RequirementGroup Ratios

Amount


Ratio


Amount


Ratio(Dollars in thousands)As of December 31, 2010Total Capital to Risk-Weighted Assets

$
727,689



32.26
%

$
180,455



8.00
%Tier 1 Capital to Risk-Weighted Assets

$
698,836



30.98
%

$
90,228



4.00
%Tier 1 Capital to Total Assets

$
698,836



9.56
%

$
292,449



4.00
%As of December 31, 2009Total Capital to Risk-Weighted Assets

$
437,975



19.84
%

$
176,591



8.00
%Tier 1 Capital to Risk-Weighted Assets

$
414,702



18.79
%

$
88,295



4.00
%Tier 1 Capital to Total Assets

$
414,702



6.52
%

$
254,323



4.00
%   Minimum to be WellCapitalized UnderMinimum Capital


Prompt CorrectiveActual


Requirement


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


Ratio(Dollars in thousands)Bank RatiosAs of December 31, 2010Total Capital to Risk-Weighted Assets

$
694,461



31.17
%

$
178,226



8.00
%

$
222,782



10.00
%Tier 1 Capital to Risk-Weighted Assets

$
665,952



29.89
%

$
89,113



4.00
%

$
133,669



6.00
%Tier 1 Capital to Total Assets

$
665,952



9.28
%

$
287,060



4.00
%

$
358,825



5.00
%As of December 31, 2009Total Capital to Risk-Weighted Assets

$
382,611



17.59
%

$
174,042



8.00
%

$
217,553



10.00
%Tier 1 Capital to Risk-Weighted Assets

$
359,339



16.52
%

$
87,021



4.00
%

$
130,532



6.00
%Tier 1 Capital to Total Assets

$
359,339



5.78
%

$
248,678



4.00
%

$
310,847



5.00
%     Equity-Based
    Compensation Plan
   159




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2010


2009


2008Weighted





Weighted





WeightedNumber of


Average


Number of


Average


Number of


AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceBeginning of year


514,376


$
16.86



500,200


$
17.14



717,700


$
16.15Options granted


262,700



11.97



15,676



8.28



23,000



17.93Options exercised


(8,337
)


8.60











(182,200
)


11.93Options forfeited


(2,750
)


23.29



(1,500
)


21.86



(58,300
)


21.49End of year


765,989


$
15.25



514,376


$
16.86



500,200


$
17.14     Outstanding


ExercisableWeighted AverageWeighted


Contract Life





WeightedNumber of


Average


Remaining


Number of


AverageRange of Exercise Prices

Options


Exercise Price


(Years)


Options


Exercise Price$ 5.63 to $ 8.45


15,677


$
8.28



8.3



1


$
7.748.45 to  11.27


2,250



10.29



5.9



750



10.2911.27 to  14.09


508,527



12.18



7.3



154,652



12.4014.09 to  16.90


62,035



15.60



3.6



54,035



15.6819.72 to  22.54


29,600



20.70



4.2



22,100



20.3022.54 to  25.35


88,850



23.98



3.3



88,850



23.9825.35 to  28.17


59,050



27.46



3.8



59,050



27.46765,989


$
15.25



6.2



379,438



18.38Aggregate Intrinsic Value

$
324,723










$
45,826       2010

2009

2008Weighted Average Assumptions:Dividend yield


1.47
%


4.55
%


4.78
%Expected volatility


60
%


36
%


35
%Risk-free interest rate


3.07
%


4.40
%


3.23
%Expected life (in years)


8.0



8.5



8.5  160




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 20102010


2009


2008Weighted





Weighted





WeightedAverage





Average





AverageRestricted


Grant Date


Restricted


Grant Date


Restricted


Grant DateUnits


Fair Value


Units


Fair Value


Units


Fair ValueBeginning of period


147,625


$
14.64



99,916


$
18.54



38,006


$
12.49Restricted units granted


131,000



11.88



53,609



8.18



71,316



21.14Restricted units vested


(30,000
)


12.49















Restricted units forfeited


(5,100
)


14.12



(5,900
)


21.86



(9,406
)


13.88End of period


243,525


$
13.43



147,625


$
14.64



99,916


$
18.54   Legal
    Surplus
    Earnings
    per Common Share
    Year Ended December 31,2010


2009


2008Net income

$
9,834


$
22,945


$
26,790Less: Dividends on preferred stock


(5,334
)


(4,802
)


(4,802
)Less: Deemed dividend on preferred stock beneficial conversion
    feature


(22,711
)






Income available (loss) to common shareholders

$
(18,211
)

$
18,143


$
21,988Average common shares outstanding and equivalents


36,810



24,306



24,327Earnings per common share  basic

$
(0.50
)

$
0.75


$
0.91Earnings per common share  diluted

$
(0.50
)

$
0.75


$
0.90     Treasury
    Stock
   161




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2010


2009


2008Dollar





Dollar





DollarShares


Amount


Shares


Amount


Shares


Amount(In thousands)Beginning of year


1,504


$
17,142



1,442


$
17,109



1,436


$
17,023Common shares used for exercise of stock options


(30
)


(380
)














Common shares repurchased /(used) to match defined contribution
    plan, net


(15
)


(30
)


62



33



6



86End of year


1,459


$
16,732



1,504


$
17,142



1,442


$
17,109   Accumulated
    Other Comprehensive Income
    December 31,2010


2009(In thousands)Unrealized gain (loss) on securities
    available-for-sale
    which are not
    other-than-temporarily
    impaired

$
39,094


$
(48,786
)Unrealized loss on securities
    available-for-sale
    for which a portion of
    other-than-temporary
    impairment has been recorded in earnings






(41,398
)Income tax effect


(2,107
)


7,445$
36,987


$
(82,739
)   16.
    COMMITMENTS  Loan
    Commitments
  case-by-case
   162




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Lease
    Commitments
    Year Ending December 31,

Minimum Rent(In thousands)2011

$
4,4022012


4,3512013


4,2132014


4,2122015


3,964Thereafter


19,708$
40,850   17.
    CONTINGENCIES      Accounting
    and Disclosure Framework
    Accruals. and
 163




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Disclosure. and or
  Opinion of Management as to Eventual
    Outcome.
  18.
    FAIR
    VALUE    Fair
    Value Measurement
    Money
    market investments
    Investment
    securities
   164




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivative
    instruments
    Servicing
    assets
    Loans
    receivable considered impaired that are collateral
    dependent
  ASC 310-10-35.
  Foreclosed
    real estate
      December 31, 2010Fair Value MeasurementsLevel 1


Level 2


Level 3


Total(In thousands)Investment securities
    available-for-sale

$



$
3,658,371


$
41,693


$
3,700,064Money market investments


111,728











111,728Derivative assets






18,445



9,870



28,315Derivative liabilities






(64
)


(12,830
)


(12,894
)Servicing assets










9,695



9,695$
111,728


$
3,676,752


$
48,428


$
3,836,908  165




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2009Fair Value MeasurementsLevel 1


Level 2


Level 3


Total(In thousands)Investment securities
    available-for-sale

$



$
4,843,553


$
110,106


$
4,953,659Money market investments


29,432











29,432Derivative assets






8,511



6,464



14,975Derivative liabilities










(9,543
)


(9,543
)Servicing assets










7,120



7,120$
29,432


$
4,852,064


$
114,147


$
4,995,643     Total Fair Value Measurements(Year Ended December 31, 2010)InvestmentSecuritiesLevel 3 Instruments Only

Available-for-Sale


Derivative Asset


Derivative Liability


Servicing Assets(In thousands)Balance at beginning of year

$
110,106


$
6,464


$
(9,543
)

$
7,120Gains (losses) included in earnings


(39,942
)


2,587



1,869



Changes in fair value of investment securities available for
    sale included in other comprehensive income


44,707











New instruments acquired






1,147



(5,959
)


4,123Principal repayments, sales, and amortization


(73,178
)


(328
)


803



(869
)Changes in fair value of servicing assets














(679
)Balance at end of year

$
41,693


$
9,870


$
(12,830
)

$
9,695   166




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Total Fair Value Measurements(Year Ended December 31, 2009)InvestmentSecuritiesLevel 3 Instruments Only

Available-for-Sale


Derivative Asset


Derivative Liability


Servicing Assets(In thousands)Balance at beginning of year

$
665,848


$
12,801


$
(16,588
)

$
2,819Gains (losses) included in earnings


(133,943
)


(7,174
)


7,328



Changes in fair value of investment securities available for
    sale included in other comprehensive income


75,713











New instruments acquired






3,460



(3,362
)


Principal repayments, sales, and amortization


(137,558
)


(2,623
)


3,079



(1,600
)Adoption of FASB
    ASC 320-10-65-1


14,359











Transfer of non-agency CMOs sold in January 2010 (Level 2
    at December 31, 2009)


(374,313
)










Servicing from securitization or assets transferred














3,058Changes in fair value of servicing assets














2,843Balance at end of year

$
110,106


$
6,464


$
(9,543
)

$
7,120       available-for-sale
  December 31, 2010Amortized


Unrealized





Weighted Average


PrincipalType

Cost


Losses


Fair Value


Yield


Protection(In thousands)Structured credit investmentsCDO

$
25,548


$
9,404


$
16,144



5.80
%


8.50
%CLO


15,000



4,683



10,317



2.44
%


7.60
%CLO


11,976



3,597



8,379



1.89
%


26.18
%CLO


9,200



2,347



6,853



2.15
%


20.64
%$
61,724


$
20,031


$
41,693



3.68
%   ASC 310-10-35
   167




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Carrying Value atDecember 31, 2010


December 31, 2009Level 3


Level 3(In thousands)


(In thousands)Impaired commercial loans

$
25,898


$
26,299Foreclosed real estate


27,931



9,347$
53,829


$
35,646   ASC 310-10-35.
      Fair
    Value of Financial Instruments
     168




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2010


2009Fair


Carrying


Fair


CarryingValue


Value


Value


Value(In thousands)Financial Assets:Cash and cash equivalents

$
448,946


$
448,946


$
277,123


$
277,123Trading securities


1,330



1,330



523



523Investment securities
    available-for-sale


3,700,064



3,700,064



4,953,659



4,953,659Investment securities
    held-to-maturity


675,721



689,917







Federal Home Loan Bank (FHLB) stock


22,496



22,496



19,937



19,937Total loans (including loans
    held-for-sale)Non-covered loans


1,150,945



1,151,838



1,150,340



1,140,069Covered loans


600,421



620,732







Investment in equity indexed options


9,870



9,870



6,464



6,464Investment in swap options


7,422



7,422







FDIC shared-loss indemnification asset


430,383



471,872







Accrued interest receivable


28,716



28,716



33,656



33,656Derivative assets


11,023



11,023



8,511



8,511Servicing assets


9,695



9,695



7,120



7,120Financial Liabilities:Deposits


2,585,922



2,588,887



1,741,417



1,745,501Securities sold under agreements to repurchase


3,701,669



3,456,781



3,777,157



3,557,308Advances from FHLB


303,868



281,753



301,004



281,753FDIC-guaranteed term notes


106,428



105,834



111,472



105,834Subordinated capital notes


36,083



36,083



36,083



36,083Short term borrowings


42,470



42,470



49,218



49,218Securities purchased but not yet received










413,359



413,359Derivative liabilities


12,894



12,894



9,543



9,543Accrued expenses and other liabilities


43,730



43,730



31,611



31,611     
    Cash and cash equivalents, money market investments, time
    deposits with other banks, securities sold but not yet
    delivered, accrued interest receivable and payable, securities
    and loans purchased but not yet received, federal funds
    purchased, accrued expenses and other liabilities have been
    valued at the carrying amounts reflected in the consolidated
    statements of financial condition as these are reasonable
    estimates of fair value given the short-term nature of the
    instruments.
    Investments in FHLB stock are valued at their redemption value.
    The fair value of investment securities is based on quoted
    market prices, when available, or market prices provided by
    recognized broker dealers. If listed prices or quotes are not
    available, fair value is based upon externally developed models
    that use both observable and unobservable inputs depending on
    the market activity of the instrument. The estimated fair value
    of the structured credit investments and the non-agency
    collateralized 169




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  mortgage obligations are determined by using a third-party cash
    flow valuation model to calculate the present value of projected
    future cash flows. The assumptions used, which are highly
    uncertain and require a high degree of judgment, include
    primarily market discount rates, current spreads, duration,
    leverage, default, home price depreciation, and loss rates. The
    assumptions used are drawn from a wide array of data sources,
    including the performance of the collateral underlying each
    deal. The external-based valuation, which is obtained at least
    on a quarterly basis, is analyzed and its assumptions are
    evaluated and incorporated in either an internal-based valuation
    model when deemed necessary or compared to counterparties prices
    and agreed by management.  
    The FDIC loss-share indemnification asset is measured separately
    from each of the covered asset categories as it is not
    contractually embedded in any of the covered asset categories.
    The $430.4 million fair value of the FDIC loss-share
    indemnification asset represents the present value of the
    estimated cash payments (net of amount owed to the FDIC)
    expected to be received from the FDIC for future losses on
    covered assets based on the credit assumptions on estimated cash
    flows for each covered asset pool and the loss sharing
    percentages. The ultimate collectability of the FDIC loss-share
    indemnification asset is dependent upon the performance of the
    underlying covered loans, the passage of time and claims paid by
    the FDIC which are impacted by the Banks adherence to
    certain guidelines established by the FDIC.
    The fair values of the derivative instruments are provided by
    valuation experts and counterparties. Certain derivatives with
    limited market activity are valued using externally developed
    models that consider unobservable market parameters. The Group
    offers its customers certificates of deposit with an option tied
    to the performance of the Standard & Poors 500
    stock market index (S&P Index), and uses equity indexed
    option agreements with major broker-dealer companies to manage
    its exposure to changes in this index. Their fair value is
    obtained through the use of an external based valuation that was
    thoroughly evaluated and adopted by management as its
    measurement tool for these options. The payoff of these options
    is linked to the average value of the S&P Index on a
    specific set of dates during the life of the option. The
    methodology uses an average rate option or a cash-settled option
    whose payoff is based on the difference between the expected
    average value of the S&P Index during the remaining life of
    the option and the strike price at inception. The assumptions,
    which are uncertain and require a degree of judgment, include
    primarily S&P Index volatility, forward interest rate
    projections, estimated index dividend payout, and leverage.
    Fair value of interest rate swaps and options on interest rate
    swaps is based on the net discounted value of the contractual
    projected cash flows of both the pay-fixed receive-variable legs
    of the contracts. The projected cash flows are based on the
    forward yield curve, and discounted using current estimated
    market rates.
    The fair value of the covered and non-covered loan portfolio
    (including loans
    held-for-sale)
    is estimated by segregating by type, such as secured by real
    estate (except commercial), commercial, consumer, and leasing.
    Each loan segment is further segmented into fixed and adjustable
    interest rates and by performing and non-performing categories.
    The fair value of performing loans is calculated by discounting
    contractual cash flows, adjusted for prepayment estimates
    (voluntary and involuntary), if any, using estimated current
    market discount rates that reflect the credit and interest rate
    risk inherent in the loan. This fair value is not currently an
    indication of an exit price as that type of assumption could
    result in a different fair value estimate.
    The fair value of demand deposits and savings accounts is the
    amount payable on demand at the reporting date. The fair value
    of fixed-maturity certificates of deposit is based on the
    discounted value of the contractual cash flows, using estimated
    current market discount rates for deposits of similar remaining
    maturities.
    For short-term borrowings, the carrying amount is considered a
    reasonable estimate of fair value. The subordinated capital note
    has a par value of $36.1 million, bears interest based on
    3-month
    LIBOR plus 295 basis points (3.25% at December 31,
    2010; 3.20% at December 31, 2009), payable quarterly. The
    fair value of long-term borrowings is based on the discounted
    value of the contractual cash flows, using current estimated
    market discount rates for borrowings with similar terms and
    remaining maturities and put dates. 170




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    The fair value of commitments to extend credit and unused lines
    of credit is based on fees currently charged to enter into
    similar agreements, taking into account the remaining terms of
    the agreements and the counterparties credit standings.
    The fair value of servicing assets is estimated by using a cash
    flow valuation model which calculates the present value of
    estimated future net servicing cash flows, taking into
    consideration actual and expected loan prepayment rates,
    discount rates, servicing costs, and other economic factors,
    which are determined based on current market conditions.  19.
    SEGMENT
    REPORTING          Form 10-K.
 171




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Wealth





Total Major





ConsolidatedYear Ended December 31, 2010

Banking


Management


Treasury


Segments


Eliminations


Total(In thousands)Interest income

$
115,468


$
15


$
188,318


$
303,801


$



$
303,801Interest expense


(39,169
)






(129,432
)


(168,601
)






(168,601
)Net interest income


76,299



15



58,886



135,200







135,200Provision for non-covered loan and lease losses


(15,914
)










(15,914
)






(15,914
)Provision for covered loan and lease losses


(6,282
)










(6,282
)






(6,282
)Non-interest income (loss)


26,150



17,883



(38,903
)


5,130







5,130Non-interest expenses


(85,603
)


(15,569
)


(11,426
)


(112,598
)






(112,598
)Intersegment revenues


1,622



763







2,385



(2,385
)


Intersegment expenses






(2,156
)


(229
)


(2,385
)


2,385



Income (loss) before income taxes

$
(3,728
)

$
936


$
8,328


$
5,536


$



$
5,536Total assets as of December 31, 2010

$
3,369,399


$
15,484


$
4,670,547


$
8,055,430


$
(742,653
)

$
7,312,777   Wealth





Total Major





ConsolidatedYear Ended December 31, 2009

Banking


Management


Treasury


Segments


Eliminations


Total(In thousands)Interest income

$
73,155


$
47


$
246,278


$
319,480


$



$
319,480Interest expense


(35,099
)






(153,369
)


(188,468
)






(188,468
)Net interest income


38,056



47



92,909



131,012







131,012Provision for non-covered loan losses


(15,650
)










(15,650
)






(15,650
)Non-interest income (loss)


15,190



14,496



(31,753
)


(2,067
)






(2,067
)Non-interest expenses


(57,204
)


(14,783
)


(11,391
)


(83,378
)






(83,378
)Intersegment revenues


1,297











1,297



(1,297
)


Intersegment expenses






(1,172
)


(125
)


(1,297
)


1,297



Income (loss) before income taxes

$
(18,311
)

$
(1,412
)

$
49,640


$
29,917


$



$
29,917Total assets as of December 31, 2009

$
1,655,515


$
9,879


$
5,223,969


$
6,889,363


$
(338,530
)

$
6,550,833   172




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Wealth





Total Major





ConsolidatedYear Ended December 31, 2008

Banking


Management


Treasury


Segments


Eliminations


Total(In thousands)Interest income

$
80,725


$
97


$
258,217


$
339,039


$



$
339,039Interest expense


(33,128
)






(194,600
)


(227,728
)






(227,728
)Net interest income


47,597



97



63,617



111,311







111,311Provision for non-covered loan losses


(8,860
)










(8,860
)






(8,860
)Non-interest income (loss)


7,104



17,236



(36,582
)


(12,242
)






(12,242
)Non-interest expenses


(57,210
)


(11,413
)


(4,119
)


(72,742
)






(72,742
)Intersegment revenues


3,702











3,702



(3,702
)


Intersegment expenses






(2,954
)


(748
)


(3,702
)


3,702



Income (loss) before income taxes

$
(7,667
)

$
2,966


$
22,168


$
17,467


$



$
17,467Total assets as of December 31, 2008

$
1,524,979


$
10,763


$
4,912,694


$
6,448,436


$
(242,900
)

$
6,205,536  173




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  20.
    ORIENTAL
    FINANCIAL GROUP INC. (HOLDING COMPANY ONLY) FINANCIAL
    INFORMATION      ORIENTAL
    FINANCIAL GROUP INC.
  CONDENSED
    STATEMENTS OF FINANCIAL POSITION INFORMATION
    (Holding Company Only)
  December 31,2010


2009(In thousands)ASSETSCash and cash equivalents

$
16,402


$
36,056Investment securities
    held-to-maturity,
    at amortized cost


8,175



Investment securities
    available-for-sale,
    at fair value


106,611



112,565Other investment securities


150



150Investment in bank subsidiary, equity method


727,878



307,997Investment in nonbank subsidiaries, equity method


10,489



8,817Due from bank subsidiary, net


319



94Deferred tax asset, net


1,830



595Other assets


1,940



1,779Total assets

$
873,793


$
468,053LIABILITIES AND STOCKHOLDERS EQUITYSecurities sold under agreements to repurchase

$
100,236


$
100,236Subordinated capital notes


36,083



36,083Dividend payable


2,320



972Accrued expenses and other liabilities


2,823



596Total liabilities


141,462



137,887Stockholders equity


732,331



330,166Total liabilities and stockholders equity

$
873,793


$
468,053  174




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    STATEMENTS OF OPERATIONS INFORMATION
    (Holding Company Only)
  Year Ended December 31,2010


2009


2008(In thousands)Income (loss):Dividends from bank subsidiary

$



$



$
33,000Interest income


3,563



10,501



18,148Loss on early extinguishment of repurchase agreement






(17,551
)


Investment and trading activities, net and other


4,083



24,643



4,350Total income

$
7,646


$
17,593


$
55,498Expenses:Interest expense

$
5,770


$
10,810


$
15,939Operating expenses


5,884



4,817



4,084Total expenses


11,654



15,627



20,023Income (loss) before income taxes


(4,008
)


1,966



35,475Income tax (expense) benefit


1,652



(1,400
)


41Income (loss) before changes in undistributed earnings
    (losses) of subsidiaries


(2,356
)


566



35,516Equity in undistributed earnings (losses) from:Bank subsidiary


10,518



22,626



(8,566
)Nonbank subsidiaries


1,672



(247
)


(160
)Net income

$
9,834


$
22,945


$
26,790  175




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    STATEMENTS OF COMPREHENSIVE INCOME INFORMATION
    (Holding Company Only)
  Year Ended December 31,2010


2009


2008(In thousands)Net income

$
9,834


$
22,945


$
26,790Other comprehensive income (loss):Unrealized gain (loss) on securities
    available-for-sale
    arising during the year


2,779



4,521



(3,748
)Realized loss on securities
    available-for-sale
    arising during the year






(6,620
)


(1,558
)Other comprehensive income (loss) from bank subsidiary


117,364



55,929



(104,873
)Income tax effect


(417
)


(23
)


1,007Total other comprehensive income (loss) for the year


119,726



53,807



(109,172
)Total comprehensive income (loss)

$
129,560


$
76,752


$
(82,382
)  176




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    STATEMENTS OF CASH FLOWS INFORMATION
    (Holding Company Only)
  Year Ended December 31,2010


2009


2008(In thousands)Cash flows from operating activities:Net income

$
9,834


$
22,945


$
26,790Adjustments to reconcile net income to net cash provided by
    operating activities:Equity in undistributed (earnings) losses from banking subsidiary


(10,518
)


(22,626
)


8,566Equity in undistributed (earnings) losses from nonbanking
    subsidiaries


(1,672
)


247



160Amortization of premiums, net of accretion discounts on
    investment securities


1,526



79



(649
)Loss on early extinguishment of repurchase agreements






17,551



Realized loss on sale of investments






(6,620
)


(1,575
)Stock based compensation


1,194



742



559Deferred income tax benefit


(1,652
)


(190
)


(229
)(Increase) decrease in other assets


(160
)


2,294



2,225Increase (decrease) in accrued expenses, other liabilities, and
    dividend payable


3,607



(2,746
)


316Net cash provided by operating activities


2,158



11,676



36,163Cash flow from investing activities:Purchase of securities
    available-for-sale


(264,696
)


(1,562,012
)


(1,016,855
)Purchase of securities
    held-to-maturity


(8,188
)






Redemptions and sales of securities
    available-for-sale


152,408



337,600



671,809Redemptions of securities
    held-to-maturity


12







Proceeds from sale of investment securities
    available-for-sale


119,497



1,463,149



316,575Redemptions and sales of other securities










1,525Net (increase) decrease in due from bank subsidiary, net


(225
)


(49
)


1,388Capital contributions to banking subsidiary


(292,000
)


(15,000
)


(5,000
)Net cash provided by (used in) investing activities


(293,192
)


223,688



(30,558
)Cash flow from financing activities:Net decrease in securities sold under agreements to repurchase






(217,551
)


Proceeds from exercise of stock options, net


72







2,175Proceeds from issuance of common stock, net


94,386







Proceeds from issuance of preferred stock, net


189,075







Net decrease in due to bank subsidiaries, net










(656
)Purchase of treasury stock






(182
)


(86
)Capital contribution






78



Dividends paid


(12,153
)


(8,690
)


(18,410
)Net cash provided by (used in) financing activities


271,380



(226,345
)


(16,977
)Net change in cash and cash equivalents


(19,654
)


9,019



(11,372
)Cash and cash equivalents at beginning of year


36,056



27,037



38,409Cash and cash equivalents at end of year

$
16,402


$
36,056


$
27,037  177




---



##### Table of Contents



ORIENTAL
    FINANCIAL GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  21.
    SUBSEQUENT
    EVENTS     178




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  a.
    Disclosure
    Controls and Procedures  Rules 13a-15(e) 15d-15(e) Form 10-K,
  b.
    Managements
    Annual Report on Internal Control over Financial
    Reporting    c.
    Attestation
    Report of the Registered Public Accounting Firm    d.
    Changes
    in Internal Control over Financial Reporting  Rules 13a-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   PART III



Items 10 through 14 will be provided by incorporating the
    information required under such items by reference to the
    Groups definitive proxy statement to be filed with the SEC
    no later than 120 days after the end of the fiscal year
    covered by this report.


179




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Part II-
  Financial Statements:Reports of Independent Registered Public Accounting FirmManagements Report on Internal Control Over Financial
    ReportingAttestation Report of Independent Registered Public Accounting
    Firm on Internal Control over Financial ReportingConsolidated Statements of Financial Condition as of
    December 31, 2010 and 2009Consolidated Statements of Operations for the years ended
    December 31, 2010, 2009, and 2008Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2010, 2009, and 2008Consolidated Statements of Comprehensive Income (Loss) for the
    years ended December 31, 2010, 2009, and 2008Consolidated Statements of Cash Flows for the years ended
    December 31, 2010, 2009, and 2008Notes to the Consolidated Financial Statements   (a)(2) 
    Financial Statement Schedules
    (a)(3) 
    Exhibits
  Exhibit No.:

Description Of Document:2
.1

Purchase and Assumption Agreement  Whole Bank, All
    Deposits, dated as of April 30, 2010, among the Federal
    Deposit Insurance Corporation, Receiver of Eurobank,
    San Juan, Puerto Rico, the Federal Deposit Insurance
    Corporation, and Oriental Bank and Trust.(1)3
.1

Certificate of Incorporation, as amended.(2)3
.2

By-Laws.(3)4
.1

Certificate of Designation of the 7.125% Noncumulative Monthly
    Income Preferred Stock, Series A.(4)4
.2

Certificate of Designation of the 7.0% Noncumulative Monthly
    Income Preferred Stock, Series B.(5)4
.3

Certificate of Designation of the Mandatory Convertible
    Noncumulative Non-Voting Perpetual Preferred Stock,
    Series C.(6)4
.4

Registration Rights Agreement, dated April 23, 2010,
    between the Group and each of the purchasers of the
    Series C Preferred Stock.(7)10
.1

Securities Purchase Agreement, dated April 23, 2010,
    between the Group and each of the purchasers of the
    Series C Preferred Stock.(8)10
.2

Omnibus Asset Servicing Agreement, dated as of June 9,
    2010, between Oriental Bank and Trust and Bayview Loan
    Servicing, LLC.(9)10
.3

Lease Agreement between Oriental Financial Group Inc. and
    Professional Office Park V, Inc.(10)10
.4

First Amendment to Lease Agreement Dated May 18, 2004,
    between Oriental Financial Group Inc. and Professional Office
    Park V, Inc.(11)10
.5

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and José R. Fernández(12)10
.6

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and Norberto González(13) 180




---



##### Table of Contents



Exhibit No.:

Description Of Document:10
.7

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and Ganesh Kumar(14)10
.8

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and Mari Evelyn Rodríguez(15)10
.9

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and Julio R. Micheo(16)10
.10

Technology Outsourcing Agreement between Oriental Financial
    Group Inc. and Metavante Corporation(17)10
.11

Amended and Restated 2007 Omnibus Performance Incentive Plan(18)10
.12

Form of qualified stock option award and agreement(19)10
.13

Form of restricted stock award and agreement(20)10
.14

Form of restricted unit award and agreement(21)10
.15

Agreement between Oriental Financial Group Inc. and José J.
    Gil de Lamadrid(22)10
.16

Employment Agreement between Oriental Financial Group Inc. and
    José R. Fernández10
.17

Change in Control Compensation Agreement between Oriental
    Financial Group Inc. and José Ramón González12
.0

Computation of Ratios of Earnings to Combined Fixed Charges and
    Preferred Stock Dividends (included in Item 6 hereof).21
.0

List of subsidiaries23
.0

Consent of KPMG LLP31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated herein by reference to
    Exhibit 2.1 of the Groups current report on
    Form 8-K
    filed with the SEC on May 6, 2010.(2)
    
    Incorporated herein by reference to
    Exhibit 3.1 of the Groups quarterly report on
    form 10-Q
    filed with the SEC on August 10, 2010.(3)
    
    Incorporated herein by reference to
    Exhibit 3(ii) of the Groups current report on
    Form 8-K
    filed with the SEC on June 23, 2008.(4)
    
    Incorporated herein by reference to
    Exhibit 4.1 of the Groups registration statement on
    Form 8-A
    filed with the SEC on April 30, 1999.(5)
    
    Incorporated herein by reference to
    Exhibit 4.1 of the Groups registration statement on
    Form 8-A
    filed with the SEC on September 26, 2003.(6)
    
    Incorporated herein by reference to
    Exhibit 3.1 of the Groups current report on
    Form 8-K
    filed with the SEC on May 3, 2010.(7)
    
    Incorporated herein by reference to
    Exhibit 4.1 of the Groups quarterly report on
    Form 10-Q
    filed with the SEC on August 10, 2010.(8)
    
    Incorporated herein by reference to
    Exhibit 10.1 of the Groups quarterly report on
    Form 10-Q
    filed with the SEC on November 4, 2010.(9)
    
    Incorporated herein by reference to
    Exhibit 10.1 of the Groups current report on
    Form 8-K
    filed with the SEC on June 14, 2010.(10)
    
    Incorporated herein by reference to
    Exhibit 10.5 of the Groups annual report on
    Form 10-K
    filed with the SEC on September 13, 2005.(11)
    
    Incorporated herein by reference to
    Exhibit 10.6 of the Groups annual report on
    Form 10-K
    filed with the SEC on September 13, 2005.(12)
    
    Incorporated herein by reference to
    Exhibit 10.12 of the Groups annual report on
    Form 10-K
    filed with the SEC on September 13, 2005.(13)
    
    Incorporated herein by reference to
    Exhibit 10.13 of the Groups annual report on
    Form 10-K
    filed with the SEC on September 13, 2005.(14)
    
    Incorporated herein by reference to
    Exhibit 10.14 of the Groups annual report on
    Form 10-K
    filed with the SEC on September 13, 2005.(15)
    
    Incorporated herein by reference to
    Exhibit 10.1 of the Groups quarterly report on
    Form 10-Q
    filed with the SEC on October 17, 2006.(16)
    
    Incorporated herein by reference to
    Exhibit 10 of the Groups current report on
    Form 8-K
    filed with the SEC on December 15, 2006. 181




---



##### Table of Contents



(17)
    
    Incorporated herein by reference to
    Exhibit 10.23 of the Groups annual report on
    Form 10-K
    filed with the SEC on March 28, 2007.(18)
    
    Incorporated herein by reference to
    Exhibit 4.1 of the Groups registration statement on
    Form S-8
    filed with the SEC on October 21, 2010
    (No. 333-170064).(19)
    
    Incorporated herein by reference to
    Exhibit 10.1 of the Groups registration statement on
    Form S-8
    filed with the SEC on November 30, 2007.(20)
    
    Incorporated herein by reference to
    Exhibit 10.2 of the Groups registration statement on
    Form S-8
    filed with the SEC on November 30, 2007.(21)
    
    Incorporated herein by reference to
    Exhibit 10.27 of the Groups annual report on
    Form 10-K
    filed with the SEC on March 16, 2009.(22)
    
    Incorporated herein by reference to
    Exhibit 10.28 of the Groups quarterly report on
    Form 10-Q
    filed with the SEC on November 6, 2009. 182




---



##### Table of Contents



SIGNATURES
    ORIENTAL
    FINANCIAL GROUP INC.
  By:
    /s/  José
    Rafael FernándezJosé
    Rafael Fernández
    President and Chief Executive Officer

Dated: March 9, 2011By:
    /s/  Norberto
    GonzálezNorberto
    González
    Executive Vice President and Chief Financial Officer

Dated: March 9, 2011By:
    /s/  César
    A. OrtizCésar
    A. Ortiz
    Senior Vice President and Controller

Dated: March 9, 2011     By:
    /s/  José
    J. Gil de LamadridJosé
    J. Gil de Lamadrid
    Chairman of the Board

Dated: March 9, 2011By:
    /s/  José
    Rafael FernándezJosé
    Rafael Fernández
    Vice Chairman of the Board

Dated: March 9, 2011By:
    /s/  Juan
    Carlos AguayoJuan
    Carlos Aguayo
    Director

Dated: March 9, 2011By:
    /s/  Pablo
    I. AltieriDr. Pablo
    I. Altieri
    Director

Dated: March 9, 2011By:
    /s/  Francisco
    ArrivíFrancisco
    Arriví
    Director

Dated: March 9, 2011By:
    /s/  Julian
    InclánJulian
    Inclán
    Director

Dated: March 9, 2011 183




---



##### Table of Contents



By:
    /s/  Rafael
    MachargoRafael
    Machargo
    Director

Dated: March 9, 2011By:
    /s/  Pedro
    MorazzaniPedro
    Morazzani
    Director

Dated: March 9, 2011By:
    /s/  Josen
    RossiJosen
    Rossi
    Director

Dated: March 9, 2011  184