##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

(MARK ONE)

|      |  |                                                                                                                                          
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|[X]   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
|     
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|     
|     
|      |  |                                                                                                                                          
|     
|     
|     
|     
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM        TO       

COMMISSION FILE NUMBER 0-17224

DORAL FINANCIAL CORPORATION

(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                                                 |  |                                        
|-------------------------------------------------------------------------------- |  | ---------------------------------------
|Puerto Rico                                                                      |  | 66-0312162                             
|                                                                                 |  |                                        
|(State or other jurisdiction of
incorporation or organization)                   |  | (I.R.S. employer
identification number)
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |  |                                        
|                                                                                
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|                                                                                
|1451 F.D. Roosevelt Avenue,
San Juan, Puerto Rico                                |  | 00920-2717                             
|                                                                                 |  |                                        
|(Address of principal executive offices)                                         |  | (Zip Code)                             
|                                                                                
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|                                                                                 |  |                                        
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|Registrants telephone number,
including area code                               |  | (787) 474-6700                         
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Former name, former address and
Former fiscal year, if changed
since last report |  | Not applicable                         

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD
THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

YES [X]     NO [   ]

NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT NOVEMBER 7, 2002: 71,844,848





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TABLE OF CONTENTS



|                                           |                                                                                               |                                                            |  |  |  |  |  | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART 1  FINANCIAL INFORMATION            
|                                           | ITEM 1.  FINANCIAL STATEMENTS                                                                
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION            
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                         
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                                           |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)    
|                                           | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                           | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                           | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION               
|                                           | ITEM 1  LEGAL PROCEEDINGS                                                                   
|                                           | ITEM 2  CHANGES IN SECURITIES                                                               
|                                           | ITEM 3  DEFAULTS UPON SENIOR SECURITIES                                                     
|                                           | ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|                                           | ITEM 5  OTHER INFORMATION                                                                   
|                                           | ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                                                    
|SIGNATURES                                
|EX-12.(A) COMPUTATION OF RATIO OF EARNINGS
|EX-12.(B) COMPUTATION OF RATIO OF EARNINGS



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##### Table of Contents



DORAL FINANCIAL CORPORATION
INDEX PAGE

|                               |  |                                                                                       |    |                                                                                                                                                                                        |    |      |   | 
|------------------------------ |  | ------------------------------------------------------------------------------------- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |  |                                                                                       |    |                                                                                                                                                                                        |    | PAGE
|PART I  FINANCIAL INFORMATION |  |                                                                                       |    |                                                                                                                                                                                       
|                              
|                              
|                              
|                              
|                              
|Item 1                        |  | Financial Statements                                                                  |    |                                                                                                                                                                                        |    |     
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Consolidated Statements of Financial Condition
(Unaudited) as of September 30, 2002 and December 31,
2001                                                                              |    |      | 4 | 
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Consolidated Statements of Income (Unaudited)  Quarters
ended September 30, 2002 and September 30, 2001 and nine
months ended September 30, 2002 and September 30, 2001               |    |      | 5 | 
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Consolidated Statements of Changes in Stockholders
Equity (Unaudited)  Nine months ended September 30, 2002
and September 30, 2001                                                   |    |      | 6 | 
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Consolidated Statements of Comprehensive Income
(Unaudited)  Quarters ended September 30, 2002 and
September 30, 2001 and nine months ended September 30,
2002 and September 30, 2001 |    |      | 7 | 
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Consolidated Statements of Cash Flows (Unaudited)  Nine
months ended September 30, 2002 and September 30, 2001                                                                        |    |      | 8 | 
|                              
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |    | Notes to Consolidated Financial Statements (Unaudited)                                                                                                                                 |    |      | 9 | 
|                              
|                              
|                              
|                              
|                              
|Item 2                        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |    |                                                                                                                                                                                        | 20 |     
|                              
|                              
|                              
|                              
|                              
|Item 3                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                                                                                                                                                                        | 48 |     
|                              
|                              
|                              
|                              
|                              
|Item 4                        |  | Controls and Procedures                                                               |    |                                                                                                                                                                                        | 48 |     
|                              
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION    |  |                                                                                       |    |                                                                                                                                                                                       
|                              
|                              
|                              
|                              
|Item 1                        |  | Legal Proceedings                                                                     |    |                                                                                                                                                                                        | 48 |     
|                              
|                              
|                              
|                              
|                              
|Item 2                        |  | Changes in Securities                                                                 |    |                                                                                                                                                                                        | 48 |     
|                              
|                              
|                              
|                              
|                              
|Item 3                        |  | Defaults Upon Senior Securities                                                       |    |                                                                                                                                                                                        | 48 |     
|                              
|                              
|                              
|                              
|                              
|Item 4                        |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                                                                                                                                                        | 49 |     
|                              
|                              
|                              
|                              
|                              
|Item 5                        |  | Other Information                                                                     |    |                                                                                                                                                                                        | 49 |     
|                              
|                              
|                              
|                              
|                              
|Item 6                        |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                                                                                                        | 49 |     
|                              
|                              
|                              
|                              
|                              
|SIGNATURES                     |  |                                                                                       | 50 |                                                                                                                                                                                       
|                              
|                              
|                              
|                              
|                              
|CEO and CFO Certifications     |  |                                                                                       |    |                                                                                                                                                                                       

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FORWARD LOOKING STATEMENTS

When used in this form 10-Q or future filings by the Company with the
Securities and Exchange Commission, in the Companys press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases would be,
will allow, intends to, will likely result, are expected to, will
continue, is anticipated, estimate, project or similar expressions are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.

The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and to
advise readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities, competitive and regulatory
factors and legislative changes, could affect the Companys financial
performance and could cause the Companys actual results for future periods to
differ materially from those anticipated or projected.

The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.

3



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##### Table of Contents












DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS OF DOLLARS, EXCEPT FOR SHARE INFORMATION)
(UNAUDITED)

|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |              |           |         |           | 
|-------------------- | ------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------- | --------- | ------------- | --------- | ------------ | --------- | ------- | --------- | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           | SEPTEMBER 30, |           | DECEMBER 31,
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           | 2002          |           | 2001        
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|ASSETS               |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                    
|                    
|                    
|                    
|                     | Cash and due from banks   |                                                                                                                                                                                                                                                                                                                      | $                                                  | 62,161                                            |           |               | $         | 45,970       |          
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     | Money market investments: |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |              |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Securities purchased under resell agreements       |                                                   |           | 422,239       |           |              |           | 54,866  |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Time deposits with other banks                     |                                                   |           | 1,055,573     |           |              |           | 493,549 |          
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total money market investments                    |           |               | 1,477,812 |              |           |         | 548,415   | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           | Pledged investment securities that can be re-pledged:                                                                                                                                                                                                                                                                |                                                    |                                                   |           |               |           |              |           |        
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Trading securities, at fair value                  |                                                   |           | 761,894       |           |              |           | 756,499 |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Securities available for sale, at fair value       |                                                   |           | 298,386       |           |              |           | 702,136 |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Securities held to maturity, at amortized cost     |                                                   |           | 527,425       |           |              |           | 762,247 |          
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total pledged investment securities               |           |               | 1,587,705 |              |           |         | 2,220,882 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           | Other investment securities:                                                                                                                                                                                                                                                                                         |                                                    |                                                   |           |               |           |              |           |        
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Trading securities, at fair value                  |                                                   |           | 470,398       |           |              |           | 236,829 |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Securities available for sale, at fair value       |                                                   |           | 160,768       |           |              |           | 226,043 |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Securities held to maturity, at amortized cost     |                                                   |           | 20,979        |           |              |           | 104,088 |          
|                    
|                    
|                    
|                    
|                     |                           |                                                                                                                                                                                                                                                                                                                      | Federal Home Loan Bank of NY (FHLB) stock, at cost |                                                   |           | 76,445        |           |              |           | 56,095  |          
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total other investment securities                 |           |               | 728,590   |              |           |         | 623,055   | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total investment securities and other instruments |           |               | 2,316,295 |              |           |         | 2,843,937 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|Loans:               |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                    
|                    
|                    
|                    
|                     |                           | Mortgage loans held for sale, at lower of cost or market, net                                                                                                                                                                                                                                                        |                                                    |                                                   | 2,329,624 |               |           |              | 1,947,494 |        
|                    
|                    
|                    
|                    
|                     |                           | Loans receivable, net of allowance for loan losses of $7,973 (2001 - $6,000)                                                                                                                                                                                                                                         |                                                    |                                                   | 769,393   |               |           |              | 644,113   |        
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total loans                                       |           |               | 3,099,017 |              |           |         | 2,591,607 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           | Receivables and mortgage servicing advances                                                                                                                                                                                                                                                                          |                                                    |                                                   | 46,480    |               |           |              | 43,725    |        
|                    
|                    
|                    
|                    
|                     |                           | Broker-dealers receivable                                                                                                                                                                                                                                                                                           |                                                    |                                                   | 306,898   |               |           |              | 274,422   |         |           | 
|                    
|                    
|                    
|                    
|                     |                           | Accrued interest receivable                                                                                                                                                                                                                                                                                          |                                                    |                                                   | 37,895    |               |           |              | 47,039    |        
|                    
|                    
|                    
|                    
|                     |                           | Servicing assets, net                                                                                                                                                                                                                                                                                                |                                                    |                                                   | 153,053   |               |           |              | 154,340   |        
|                    
|                    
|                    
|                    
|                     |                           | Premises and equipment, net                                                                                                                                                                                                                                                                                          |                                                    |                                                   | 114,130   |               |           |              | 99,935    |        
|                    
|                    
|                    
|                    
|                     |                           | Real estate held for sale, net                                                                                                                                                                                                                                                                                       |                                                    |                                                   | 11,777    |               |           |              | 8,414     |        
|                    
|                    
|                    
|                    
|                     |                           | Other assets                                                                                                                                                                                                                                                                                                         |                                                    |                                                   | 40,646    |               |           |              | 36,479    |        
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total assets                                      |           | $             | 7,666,164 |              |           | $       | 6,694,283 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|LIABILITIES          |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                    
|                    
|                    
|                    
|                     |                           | Securities sold under agreements to repurchase                                                                                                                                                                                                                                                                       |                                                    | $                                                 | 2,276,416 |               |           | $            | 2,573,772 |        
|                    
|                    
|                    
|                    
|                     |                           | Loans payable                                                                                                                                                                                                                                                                                                        |                                                    |                                                   | 202,080   |               |           |              | 161,101   |        
|                    
|                    
|                    
|                    
|                     |                           | Deposits                                                                                                                                                                                                                                                                                                             |                                                    |                                                   | 2,106,619 |               |           |              | 1,669,909 |        
|                    
|                    
|                    
|                    
|                     |                           | Notes payable                                                                                                                                                                                                                                                                                                        |                                                    |                                                   | 618,711   |               |           |              | 459,543   |        
|                    
|                    
|                    
|                    
|                     |                           | Advances from FHLB                                                                                                                                                                                                                                                                                                   |                                                    |                                                   | 1,061,500 |               |           |              | 687,500   |        
|                    
|                    
|                    
|                    
|                     |                           | Broker-dealers payable                                                                                                                                                                                                                                                                                              |                                                    |                                                   | 233,803   |               |           |              | 245,573   |        
|                    
|                    
|                    
|                    
|                     |                           | Accrued expenses and other liabilities                                                                                                                                                                                                                                                                               |                                                    |                                                   | 169,394   |               |           |              | 134,765   |        
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total liabilities                                 |           |               | 6,668,523 |              |           |         | 5,932,163 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           | Commitments and contingencies                                                                                                                                                                                                                                                                                        |                                                    |                                                   |           |               |           |              |           |        
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|STOCKHOLDERS EQUITY |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                    
|                    
|                    
|                    
|                     |                           | Preferred Stock ($1 par value, 10,000,000 shares authorized 7,635,000 and 3,495,000
shares issued and outstanding in 2002 and 2001, respectively) at aggregate liquidation
preference value                                                                                                                          |                                                    |                                                   | 228,250   |               |           |              | 124,750   |        
|                    
|                    
|                    
|                    
|                     |                           | Common stock, $1 par value, 200,000,000 shares authorized; 71,922,098 (including
23,973,064 shares issued on September 14, 2002 as a result of a three-for-two stock
split) and 47,866,334 shares issued in 2002 and 2001, respectively; 71,838,098 and
47,810,334 shares outstanding in 2002 and 2001, respectively |                                                    |                                                   | 71,922    |               |           |              | 47,866    |        
|                    
|                    
|                    
|                    
|                     |                           | Paid-in capital                                                                                                                                                                                                                                                                                                      |                                                    |                                                   | 191,120   |               |           |              | 217,594   |        
|                    
|                    
|                    
|                    
|                     |                           | Legal surplus                                                                                                                                                                                                                                                                                                        |                                                    |                                                   | 8,423     |               |           |              | 8,423     |        
|                    
|                    
|                    
|                    
|                     |                           | Retained earnings                                                                                                                                                                                                                                                                                                    |                                                    |                                                   | 500,882   |               |           |              | 375,855   |        
|                    
|                    
|                    
|                    
|                     |                           | Accumulated other comprehensive loss, net of income tax benefit of $1,292 - (2001 - $509)                                                                                                                                                                                                                            |                                                    |                                                   | (2,872    | )             |           |              | (12,312   | )      
|                    
|                    
|                    
|                    
|                     |                           | Treasury stock at par value, 84,000 shares held (including 28,000 shares issued on
September 14, 2002 as a result of a three-for-two stock split)                                                                                                                                                                    |                                                    |                                                   | (84       | )             |           |              | (56       | )      
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total stockholders equity                        |           |               | 997,641   |              |           |         | 762,120   | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    | Total liabilities and stockholders equity        |           | $             | 7,666,164 |              |           | $       | 6,694,283 | 
|                     |                           |                                                                                                                                                                                                                                                                                                                      |                                                    |                                                   |           |               |           |             

The accompanying notes are an integral part of these financial statements.

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##### Table of Contents






DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)

|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |         | 
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------ | ------------- | ------- | ------------------- | ------ | ------ | ------ | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                               |                                                                                                                                                                            |                                                                                    |        | QUARTER ENDED |         | NINE MONTH PERIOD  
|                                               |                                                                                                                                                                            |                                                                                    |        | SEPTEMBER 30, |         | ENDED SEPTEMBER 30,
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                    
|                                               |                                                                                                                                                                            |                                                                                    |        | 2002          |         | 2001                |        | 2002   |        | 2001
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |     
|Interest income:                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Loans                                                                                                                                                                      |                                                                                    | $      | 52,467        |         |                     | $      | 42,994 |        |      | $       | 148,983 |         |   | $       | 117,926 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Mortgage-backed securities                                                                                                                                                 |                                                                                    |        | 33,795        |         |                     |        | 26,347 |        |      |         | 94,767  |         |   |         | 70,750  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Investment securities                                                                                                                                                      |                                                                                    |        | 13,694        |         |                     |        | 13,654 |        |      |         | 51,915  |         |   |         | 53,721  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other interest-earning assets                                                                                                                                              |                                                                                    |        | 5,413         |         |                     |        | 9,831  |        |      |         | 12,117  |         |   |         | 22,323  |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Total interest income                                                              |        |               | 105,369 |                     |        |        | 92,826 |      |         |         | 307,782 |   |         |         | 264,720 | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Interest expense:                              |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Loans payable                                                                                                                                                              |                                                                                    |        | 1,639         |         |                     |        | 2,697  |        |      |         | 4,397   |         |   |         | 12,521  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Securities sold under agreements to repurchase                                                                                                                             |                                                                                    |        | 23,322        |         |                     |        | 31,193 |        |      |         | 75,239  |         |   |         | 94,609  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Deposits                                                                                                                                                                   |                                                                                    |        | 18,778        |         |                     |        | 17,676 |        |      |         | 54,242  |         |   |         | 53,342  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other borrowed funds                                                                                                                                                       |                                                                                    |        | 22,384        |         |                     |        | 16,569 |        |      |         | 61,095  |         |   |         | 49,213  |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Total interest expense                                                             |        |               | 66,123  |                     |        |        | 68,135 |      |         |         | 194,973 |   |         |         | 209,685 | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Net interest income                                                                |        |               | 39,246  |                     |        |        | 24,691 |      |         |         | 112,809 |   |         |         | 55,035  | 
|                                              
|                                              
|                                              
|                                              
|Provision for loan losses                      |                                                                                                                                                                            |                                                                                    | 2,055  |               |         |                     | 1,062  |        |        |      | 3,792   |         |         |   | 3,128   |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Net interest income after provision for loan losses                                |        |               | 37,191  |                     |        |        | 23,629 |      |         |         | 109,017 |   |         |         | 51,907  | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Non-interest income:                           |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Net gain on mortgage loan sales and fees                                                                                                                                   |                                                                                    |        | 53,001        |         |                     |        | 44,803 |        |      |         | 157,238 |         |   |         | 136,160 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Trading activities                                                                                                                                                         |                                                                                    |        | 4,806         |         |                     |        | (3,539 | )      |      |         | (6,893  | )       |   |         | (18,409 | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Gain on sale of investment securities                                                                                                                                      |                                                                                    |        | 10,119        |         |                     |        | 1,453  |        |      |         | 16,109  |         |   |         | 3,668   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Servicing (loss) income, net of amortization and impairment of
$14,078 - 2002 and $8,265 - 2001 for the quarter, and
$31,862 - 2002 and $18,275 - 2001 for the nine months |                                                                                    |        | (5,596        | )       |                     |        | (704   | )      |      |         | (6,310  | )       |   |         | 3,791   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Commissions, fees and other income                                                                                                                                         |                                                                                    |        | 5,662         |         |                     |        | 5,031  |        |      |         | 15,216  |         |   |         | 12,918  |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Total non-interest income                                                          |        |               | 67,992  |                     |        |        | 47,044 |      |         |         | 175,360 |   |         |         | 138,128 | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Non-interest expense:                          |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Compensation and benefits                                                                                                                                                  |                                                                                    |        | 13,449        |         |                     |        | 11,458 |        |      |         | 39,998  |         |   |         | 35,066  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Taxes, other than payroll and income taxes                                                                                                                                 |                                                                                    |        | 1,830         |         |                     |        | 1,078  |        |      |         | 4,069   |         |   |         | 3,294   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Advertising                                                                                                                                                                |                                                                                    |        | 2,918         |         |                     |        | 2,560  |        |      |         | 8,129   |         |   |         | 7,018   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Professional services                                                                                                                                                      |                                                                                    |        | 1,778         |         |                     |        | 1,272  |        |      |         | 5,249   |         |   |         | 4,102   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Communication and information systems                                                                                                                                      |                                                                                    |        | 3,318         |         |                     |        | 2,685  |        |      |         | 9,172   |         |   |         | 7,428   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Occupancy and other office expenses                                                                                                                                        |                                                                                    |        | 5,546         |         |                     |        | 4,279  |        |      |         | 15,171  |         |   |         | 12,403  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Depreciation and amortization                                                                                                                                              |                                                                                    |        | 3,263         |         |                     |        | 2,890  |        |      |         | 8,692   |         |   |         | 7,634   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other                                                                                                                                                                      |                                                                                    |        | 3,695         |         |                     |        | 2,304  |        |      |         | 9,945   |         |   |         | 4,230   |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Total non-interest expense                                                         |        |               | 35,797  |                     |        |        | 28,526 |      |         |         | 100,425 |   |         |         | 81,175  | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Income before income taxes and cumulative effect of change in
accounting principle |        |               | 69,386  |                     |        |        | 42,147 |      |         |         | 183,952 |   |         |         | 108,860 | 
|                                              
|                                              
|                                              
|                                              
|Income taxes                                   |                                                                                                                                                                            |                                                                                    | 11,102 |               |         |                     | 5,337  |        |        |      | 27,141  |         |         |   | 13,389  |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Income before cumulative effect of change in accounting principle                  |        |               | 58,284  |                     |        |        | 36,810 |      |         |         | 156,811 |   |         |         | 95,471  | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                            | Cumulative effect of change in accounting principle, net of tax                    |        |               |        |                     |        |        |       |      |         |         |        |   |         |         | 5,929   | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Net income:                                    |                                                                                                                                                                            | $                                                                                  | 58,284 |               |         | $                   | 36,810 |        |        | $    | 156,811 |         |         | $ | 101,400 |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Net income attributable to common shareholders |                                                                                                                                                                            | $                                                                                  | 54,048 |               |         | $                   | 34,458 |        |        | $    | 147,309 |         |         | $ | 94,344  |        
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|Earnings per common share:                     |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Basic:                                                                                                                                                                     |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                            | Income before cumulative effect of change in accounting principle                  |        | $             | 0.75    |                     |        | $      | 0.50   |      |         | $       | 2.05    |   |         | $       | 1.35    | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                            | Cumulative effect of change in accounting principle                                |        |               |        |                     |        |        |       |      |         |         |        |   |         |         | 0.09    | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Net income                                                                         |        | $             | 0.75    |                     |        | $      | 0.50   |      |         | $       | 2.05    |   |         | $       | 1.44    | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               | Diluted:                                                                                                                                                                   |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                            | Income before cumulative effect of change in accounting principle                  |        | $             | 0.74    |                     |        | $      | 0.49   |      |         | $       | 2.02    |   |         | $       | 1.33    | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                            | Cumulative effect of change in accounting principle                                |        |               |        |                     |        |        |       |      |         |         |        |   |         |         | 0.08    | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Net income                                                                         |        | $             | 0.74    |                     |        | $      | 0.49   |      |         | $       | 2.02    |   |         | $       | 1.41    | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        
|                                               |                                                                                                                                                                            | Dividends
per common share                                                         |        | $             | 0.11    |                     |        | $      | 0.08   |      |         | $       | 0.31    |   |         | $       | 0.23    | 
|                                               |                                                                                                                                                                            |                                                                                    |        |               |         |                     |        |        |        |      |         |         |         |   |         |         |        

The accompanying notes are an integral part of these financial statements.

5



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##### Table of Contents






DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)

|                                                            |                                                                                               |                          |         |                         |         |      |         |         |         |  
|----------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------ | ------- | ----------------------- | ------- | ---- | ------- | ------- | ------- | -
|                                                            |                                                                                               |                          |         | NINE MONTH PERIOD ENDED
|                                                            |                                                                                               |                          |         | SEPTEMBER 30,          
|                                                            |                                                                                               |                          |         |                        
|                                                            |                                                                                               |                          |         | 2002                    |         | 2001
|                                                            |                                                                                               |                          |         |                         |         |     
|PREFERRED STOCK:                                            |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          | $       | 124,750                 |         |      | $       | 124,750 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Shares issued (7.25% noncumulative monthly income, Series C)                                  |                          |         | 103,500                 |         |      |         |        |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | 228,250 |      |         |         | 124,750 |  
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|COMMON STOCK:                                               |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          |         | 47,866                  |         |      |         | 42,449  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Shares issued                                                                                 |                          |         |                        |         |      |         | 5,060   |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Shares issued under stock option plan                                                         |                          |         | 83                      |         |      |         | 351     |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Shares issued as a result of three-for-two stock split                                        |                          |         | 23,973                  |         |      |         |        |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | 71,922  |      |         |         | 47,860  |  
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|PAID-IN CAPITAL:                                            |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          |         | 217,594                 |         |      |         | 64,319  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Issuance cost of preferred stock                                                              |                          |         | (3,488                  | )       |      |         |        |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Common shares issued                                                                          |                          |         |                        |         |      |         | 148,364 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Common shares issued under stock option plan                                                  |                          |         | 959                     |         |      |         | 4,815   |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Adjustment for three-for-two stock split                                                      |                          |         | (23,945                 | )       |      |         |        |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | 191,120 |      |         |         | 217,498 |  
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|LEGAL SURPLUS:                                              |                                                                                               |                          | 8,423   |                         |         |      | 5,982   |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|RETAINED EARNINGS:                                          |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          |         | 375,855                 |         |      |         | 265,396 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net income                                                                                    |                          |         | 156,811                 |         |      |         | 101,400 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cash dividends declared on common stock                                                       |                          |         | (22,255                 | )       |      |         | (15,567 | )      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cash paid in lieu of fractional shares as a result of three-for-two stock split               |                          |         | (27                     | )       |      |         |        |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cash dividends declared on preferred stock                                                    |                          |         | (9,502                  | )       |      |         | (7,056  | )      
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | 500,882 |      |         |         | 344,173 |  
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
NET OF TAXES: |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          |         | (12,312                 | )       |      |         | 2,870   |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net gain in the fair value of investment securities available for sale, net
of deferred taxes |                          |         | 9,440                   |         |      |         | 862     |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | (2,872  | )    |         |         | 3,732   |  
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|TREASURY STOCK AT COST:                                     |                                                                                               |                          |         |                         |         |      |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Balance at beginning of period                                                                |                          |         | (56                     | )       |      |         | (56     | )      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Shares issued as a result of three-for-two stock split                                        |                          |         | (28                     | )       |      |         |        |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                         | (84     | )    |         |         | (56     | )
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        
|Total stockholders equity                                  |                                                                                               | $                        | 997,641 |                         |         | $    | 743,939 |        
|                                                            |                                                                                               |                          |         |                         |         |      |         |         |        

The accompanying notes are an integral part of these financial statements.

6



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##### Table of Contents



DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)

|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |        |   | 
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | ------------- | - | ------------- | ------ | ------ | - | ---- | ------- | ---------- |  | - | ------- | ------ | - | 
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         | NINE MONTH
|                                                                                             |                                                                                                                                                                                                                 |   |        | QUARTER ENDED |   | PERIOD ENDED 
|                                                                                             |                                                                                                                                                                                                                 |   |        | SEPTEMBER 30, |   | SEPTEMBER 30,
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |              
|                                                                                             |                                                                                                                                                                                                                 |   |        | 2002          |   | 2001          |        | 2002   |   | 2001
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |     
|Net income                                                                                   |                                                                                                                                                                                                                 | $ | 58,284 |               |   | $             | 36,810 |        |   | $    | 156,811 |            |  | $ | 101,400 |       
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|Other comprehensive income (loss), net of tax:                                               |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Unrealized net gains on securities arising during the period
(net of taxes of $2.6 million - 2002 and $1.1 million - 2001 for the quarter, and $2.2 million - 2002 and $268 - 2001 for the
nine months)         |   |        | 10,736        |   |               |        | 24,206 |   |      |         | 4,681      |  |   |         | 6,906  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Amortization of unrealized losses on securities reclassified to
held to maturity (net of taxes of $(153) - 2002 and $(317) - 2001 for the quarter, and $(356) - 2002 and $(403) - 2001 for the nine months)     |   |        | 459           |   |               |        | 953    |   |      |         | 1,069      |  |   |         | 1,210  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Reclassification adjustment for losses (gains) included in net
income (net of taxes of $80 - 2002 and $2.5 million - 2001 for the quarter, and $2.4 million - 2002 and $2.9 million - 2001 for the nine months) |   |        | (1,377        | ) |               |        | (7,405 | ) |      |         | 3,690      |  |   |         | (8,854 | )
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|Other comprehensive income (loss) before cumulative effect of
change in accounting principle |                                                                                                                                                                                                                 |   | 9,818  |               |   |               | 17,754 |        |   |      | 9,440   |            |  |   | (738    | )     
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|Cumulative effect of change in accounting principle, net of taxes                            |                                                                                                                                                                                                                 |   |       |               |   |               |       |        |   |      |        |            |  |   | 1,600   |       
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|Other comprehensive income                                                                   |                                                                                                                                                                                                                 |   | 9,818  |               |   |               | 17,754 |        |   |      | 9,440   |            |  |   | 862     |       
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       
|Comprehensive income, net of taxes                                                           |                                                                                                                                                                                                                 | $ | 68,102 |               |   | $             | 54,564 |        |   | $    | 166,251 |            |  | $ | 102,262 |       
|                                                                                             |                                                                                                                                                                                                                 |   |        |               |   |               |        |        |   |      |         |            |  |   |         |       

The accompanying notes are an integral part of these financial statements.

7



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##### Table of Contents






DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)

|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |            |         |          |  
|------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------ | ----------------------------------------- | ---------- | ------------------- | ---------- | ------- | ---------- | ------- | -------- | -
|                                      |                                                                               |                                                                                 |                          |                                           |            | NINE MONTH PERIOD  
|                                      |                                                                               |                                                                                 |                          |                                           |            | ENDED SEPTEMBER 30,
|                                      |                                                                               |                                                                                 |                          |                                           |            |                    
|                                      |                                                                               |                                                                                 |                          |                                           |            | 2002                |            | 2001   
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |        
|Cash flows from operating activities: |                                                                               |                                                                                 |                          |                                           |            |                     |            |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                                                                    |                                                                                 | $                        | 156,811                                   |            |                     | $          | 101,400 |           
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Adjustments to reconcile net income to net cash used in operating activities: |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Cumulative effect of change in accounting principle                             |                          |                                           |           |                     |            |         | (5,929     | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Depreciation and amortization                                                   |                          |                                           | 8,692      |                     |            |         | 7,634      |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Amortization of interest-only strips                                            |                          |                                           | 36,069     |                     |            |         | 21,516     |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Amortization of servicing assets                                                |                          |                                           | 31,862     |                     |            |         | 18,275     |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Deferred tax provision                                                          |                          |                                           | 7,471      |                     |            |         | 3,880      |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Provision for loan losses                                                       |                          |                                           | 3,792      |                     |            |         | 3,128      |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Provision for losses on real estate held for sale                               |                          |                                           | 2,111      |                     |            |         | 500        |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Origination and purchases of mortgage loans held for sale                       |                          |                                           | (3,332,680 | )                   |            |         | (2,730,308 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Principal repayment and sales of mortgage loans held for sale                   |                          |                                           | 1,502,302  |                     |            |         | 1,256,049  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Purchases of securities held for trading                                        |                          |                                           | (7,797,401 | )                   |            |         | (2,589,693 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Principal repayments and sales of trading securities                            |                          |                                           | 8,440,009  |                     |            |         | 3,388,251  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in interest only strips, net                                           |                          |                                           | (144,164   | )                   |            |         | (94,380    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in servicing assets                                                    |                          |                                           | (30,575    | )                   |            |         | (33,308    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in receivables and mortgage servicing advances                         |                          |                                           | (2,755     | )                   |            |         | (11,212    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in broker dealers receivable                                          |                          |                                           | (32,476    | )                   |            |         | (125,642   | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Decrease in accrued interest receivable                                         |                          |                                           | 9,144      |                     |            |         | 2,872      |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Decrease in payable related to short sales                                      |                          |                                           | (39,973    | )                   |            |         | (21,104    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase (decrease) in interest payable                                         |                          |                                           | 161        |                     |            |         | (10,374    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | (Decrease) increase in broker dealers payable                                  |                          |                                           | (11,770    | )                   |            |         | 124,203    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase (decrease) in accrued expenses and other liabilities                   |                          |                                           | 31,096     |                     |            |         | (4,610     | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in other assets                                                        |                          |                                           | (4,167     | )                   |            |         | (6,118     | )      
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               |                                                                                 |                          | Total adjustments                         |            |                     | (1,323,252 | )       |            |         | (806,370 | )
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               |                                                                                 |                          | Net cash used in operating activities     |            |                     | (1,166,441 | )       |            |         | (704,970 | )
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Cash flows from investing activities:                                         |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Purchase of securities held to maturity                                         |                          |                                           | (41,306    | )                   |            |         | (471,841   | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Principal repayments and maturities of securities held to maturity              |                          |                                           | 359,235    |                     |            |         | 955,102    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Origination of loans receivable                                                 |                          |                                           | (446,096   | )                   |            |         | (333,585   | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Principal repayments of loans receivable                                        |                          |                                           | 317,767    |                     |            |         | 149,047    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Purchases of securities available for sale                                      |                          |                                           | (3,986,107 | )                   |            |         | (2,048,443 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Proceeds from sales of securities available for sale                            |                          |                                           | 5,118,123  |                     |            |         | 1,722,143  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Principal repayments of securities available for sale                           |                          |                                           | 8,634      |                     |            |         | 477,661    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Purchase of FHLB stock                                                          |                          |                                           | (20,350    | )                   |            |         | (8,765     | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Purchase of premises and equipment                                              |                          |                                           | (22,887    | )                   |            |         | (29,086    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Proceeds from sales of real estate held for sale                                |                          |                                           | 2,272      |                     |            |         | 2,437      |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               |                                                                                 |                          | Net cash provided by investing activities |            |                     | 1,289,285  |         |            |         | 414,670  |  
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Cash flows from financing activities:                                         |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in deposits                                                            |                          |                                           | 436,710    |                     |            |         | 275,200    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | (Decrease) increase in securities sold under agreements to repurchase           |                          |                                           | (297,356   | )                   |            |         | 274,103    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase (decrease) in loans payable                                            |                          |                                           | 80,952     |                     |            |         | (131,840   | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Issuance of common stock, net                                                   |                          |                                           | 1,042      |                     |            |         | 158,590    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Issuance of preferred stock, net                                                |                          |                                           | 100,012    |                     |            |         |           |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in FHLB advances                                                       |                          |                                           | 374,000    |                     |            |         | 148,500    |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Increase in notes payable                                                       |                          |                                           | 159,168    |                     |            |         | 14,959     |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Dividends declared and paid                                                     |                          |                                           | (31,757    | )                   |            |         | (22,623    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Cash paid in lieu of fractional shares                                          |                          |                                           | (27        | )                   |            |         |           |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               |                                                                                 |                          | Net cash provided by financing activities |            |                     | 822,744    |         |            |         | 716,889  |  
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Net increase in cash and cash equivalents                                     |                                                                                 |                          | 945,588                                   |            |                     |            | 426,589 |           
|                                     
|                                     
|                                     
|                                     
|                                      | Cash and cash equivalents at beginning of period                              |                                                                                 |                          | 594,385                                   |            |                     |            | 428,319 |           
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Cash and cash equivalents at the end of period                                |                                                                                 | $                        | 1,539,973                                 |            |                     | $          | 854,908 |           
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Cash and cash equivalents includes:                                           |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               |                                                                                 | Cash and due from banks  |                                           | $          | 62,161              |            |         | $          | 63,157  |         
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               |                                                                                 | Money market investments |                                           |            | 1,477,812           |            |         |            | 791,751 |         
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               | $                                                                               | 1,539,973                |                                           |            | $                   | 854,908    |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Supplemental schedule of non-cash activities:                                 |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Loan securitizations                                                            |                          | $                                         | 1,439,760  |                     |            | $       | 777,266    |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               | Reclassification of investments held to maturity to available for sale category |                          | $                                         |           |                     |            | $       | 110,000    |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               | Reclassification of investments held to maturity to trading category            |                          | $                                         |           |                     |            | $       | 130,000    |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               | Shares
issued as a result of a three-for-two stock split                        |                          | $                                         | 23,973     |                     |            | $       |           |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      | Supplemental cash flows information:                                          |                                                                                 |                          |                                           |            |                     |            |         |           
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                               | Cash used to pay interest                                                       |                          | $                                         | 190,417    |                     |            | $       | 188,487    |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           
|                                      |                                                                               | Cash used to pay income taxes                                                   |                          | $                                         | 17,682     |                     |            | $       | 5,597      |        
|                                      |                                                                               |                                                                                 |                          |                                           |            |                     |            |         |           

The accompanying notes are an integral part of these financial statements.

8



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##### Table of Contents






DORAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



|a. |  | The Consolidated Financial Statements (unaudited) include the accounts of
Doral Financial Corporation (Doral Financial or the Company), Doral
Mortgage Corporation (Doral Mortgage), SANA Investment Mortgage Bankers,
Inc. (SANA), Centro Hipotecario de Puerto Rico, Inc., Doral Securities,
Inc. (Doral Securities), Doral Bank (Doral Bank PR), Doral Bank, FSB
(Doral Bank NY), Doral Money, Inc., Doral International, Inc., Doral
Properties, Inc. (Doral Properties) and Doral Insurance Agency, Inc.
(Doral Agency). References herein to Doral Financial or the Company
shall be deemed to refer to the Company and its consolidated subsidiaries,
unless otherwise provided. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Consolidated
Financial Statements (unaudited) have been prepared in conformity with the
accounting policies stated in the Companys Annual Audited Financial
Statements included in the Companys Annual Report for the year ended
December 31, 2001, and should be read in conjunction with the Notes to the
Consolidated Financial Statements appearing in that report. All
adjustments (consisting only of normal recurring accruals) which are, in
the opinion of management, necessary for a fair statement of results
for the interim periods have been reflected.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | The results of operations for the quarter and nine month period ended
September 30, 2002 are not necessarily indicative of the results to be
expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|c. |  | Cash dividends per share paid for the quarter and nine month periods
ended September 30, 2002 and 2001, adjusted to reflect the
three-for-two stock split effective September 14, 2002, were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                                   |  |               |       |                     |  |      |      |      |  |   |      |  |  |   |      | 
|-------------------------------------------------- |  | ------------- | ----- | ------------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                                   |  | QUARTER ENDED |       | NINE MONTH PERIOD  
|                                                   |  | SEPTEMBER 30, |       | ENDED SEPTEMBER 30,
|                                                   |  |               |       |                    
|                                                   |  | 2002          |       | 2001                |  | 2002 |      | 2001
|                                                   |  |               |       |                     |  |      |      |     
|7% Noncumulative Monthly Income Preferred Stock    |  | $             | 0.88  |                     |  | $    | 0.88 |      |  | $ | 2.64 |  |  | $ | 2.64 | 
|                                                  
|                                                  
|                                                  
|                                                  
|8.35% Noncumulative Monthly Income Preferred Stock |  | $             | 0.52  |                     |  | $    | 0.52 |      |  | $ | 1.56 |  |  | $ | 1.56 | 
|                                                  
|                                                  
|                                                  
|                                                  
|7.25% Noncumulative Monthly Income Preferred Stock |  | $             | 0.455 |                     |  | $    |     |      |  | $ | 0.61 |  |  | $ |     | 
|                                                  
|                                                  
|                                                  
|                                                  
|Common Stock                                       |  | $             | 0.11  |                     |  | $    | 0.08 |      |  | $ | 0.31 |  |  | $ | 0.23 | 



|d. |  | At September 30, 2002, escrow funds include approximately $82.1 million
deposited with Doral Bank PR. These funds are included in the Companys
financial statements. Escrow funds also include approximately $20.6
million deposited with other banks which are excluded from the Companys
assets and liabilities.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|e. |  | The reconciliation of the numerator and denominator, adjusted to reflect
three-for-two stock split effective September 14, 2002, of the basic and
diluted earnings-per-share follows:                                                                                                                               

9



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |      | 
|---------------------------- | ------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | - | ------------------------------------------------ | ---- | ------------------- | - | ---------- | ---- | ---- | - | ---------- | ---- |  | - | ---------- | ---- | 
|                             |                                                                                                         |                                                          |   | QUARTER ENDED                                    |      | NINE MONTH PERIOD  
|                             |                                                                                                         |                                                          |   | SEPTEMBER 30,                                    |      | ENDED SEPTEMBER 30,
|                             |                                                                                                         |                                                          |   |                                                  |      |                    
|                             |                                                                                                         |                                                          |   | 2002                                             |      | 2001                |   | 2002       |      | 2001
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |     
|                             |                                                                                                         |                                                          |   | (Dollars in thousands, except per share amounts)
|Net Income:                  |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |           
|                            
|                            
|                            
|                            
|                             | Income before cumulative gain effect of change in accounting principle                                  |                                                          | $ | 58,284                                           |      |                     | $ | 36,810     |      |      | $ | 156,811    |      |  | $ | 95,471     |     
|                            
|                            
|                            
|                            
|                             | Preferred stock dividend                                                                                |                                                          |   | (4,236                                           | )    |                     |   | (2,352     | )    |      |   | (9,502     | )    |  |   | (7,056     | )   
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             | Income available to common shareholders before cumulative gain
effect of change in accounting principle |                                                          | $ | 54,048                                           |      |                     | $ | 34,458     |      |      | $ | 147,309    |      |  | $ | 88,415     |     
|                            
|                            
|                            
|                            
|                             | Cumulative gain effect of change in accounting principle, net of tax                                    |                                                          |   |                                                 |      |                     |   |           |      |      |   |           |      |  |   | 5,929      |     
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             | Net income attributable to common stock                                                                 |                                                          | $ | 54,048                                           |      |                     | $ | 34,458     |      |      | $ | 147,309    |      |  | $ | 94,344     |     
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|Weighted Average Shares:     |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |           
|                            
|                            
|                            
|                            
|                             | Basic weighted average number of common shares outstanding                                              |                                                          |   | 71,835,781                                       |      |                     |   | 69,133,046 |      |      |   | 71,782,354 |      |  |   | 65,667,615 |     
|                            
|                            
|                            
|                            
|                             | Incremental shares issuable upon exercise of stock options*                                             |                                                          |   | 1,201,666                                        |      |                     |   | 1,126,818  |      |      |   | 1,130,874  |      |  |   | 1,043,750  |     
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             | Diluted weighted average number of common shares outstanding                                            |                                                          |   | 73,037,447                                       |      |                     |   | 70,259,864 |      |      |   | 72,913,228 |      |  |   | 66,711,365 |     
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|Net Income per Common Share: |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |           
|                            
|                            
|                            
|                            
|                             | Basic:                                                                                                  |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                            
|                            
|                            
|                            
|                             |                                                                                                         | Income before cumulative gain-effect                     |   | $                                                | 0.75 |                     |   | $          | 0.50 |      |   | $          | 2.05 |  |   | $          | 1.35 | 
|                            
|                            
|                            
|                            
|                             |                                                                                                         | Cumulative gain-effect of change in accounting principle |   |                                                  |     |                     |   |            |     |      |   |            |     |  |   |            | 0.09 | 
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             |                                                                                                         | Net income                                               |   | $                                                | 0.75 |                     |   | $          | 0.50 |      |   | $          | 2.05 |  |   | $          | 1.44 | 
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             | Diluted:                                                                                                |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                            
|                            
|                            
|                            
|                             |                                                                                                         | Income before cumulative gain-effect                     |   | $                                                | 0.74 |                     |   | $          | 0.49 |      |   | $          | 2.02 |  |   | $          | 1.33 | 
|                            
|                            
|                            
|                            
|                             |                                                                                                         | Cumulative gain-effect of change in accounting principle |   |                                                  |     |                     |   |            |     |      |   |            |     |  |   |            | 0.08 | 
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     
|                             |                                                                                                         | Net income                                               |   | $                                                | 0.74 |                     |   | $          | 0.49 |      |   | $          | 2.02 |  |   | $          | 1.41 | 
|                             |                                                                                                         |                                                          |   |                                                  |      |                     |   |            |      |      |   |            |      |  |   |            |     



---

|* |  | For the quarter and nine month periods ended September 30, 2002 and 2001, all stock options outstanding were included in the computation
of weighted average outstanding shares.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



|f. |  | Employee costs and other expenses are shown in the Consolidated
Statements of Income net of direct loan origination costs which, pursuant
to SFAS No. 91, are capitalized as part of the carrying cost of mortgage
loans and are offset against net gains on mortgage loan sales and fees
when the loans are sold or amortized as yield adjustment in the case of
loans held for investment (loans receivable).
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Set forth below is a reconciliation of the application of SFAS No. 91 to
employee costs and other expenses:                                                                                                                                                                                                                                                                                                    

|                                       |                     |               |        |                     |  |      |        |        |  |   |         |        |  |   |         |        | 
|-------------------------------------- | ------------------- | ------------- | ------ | ------------------- |  | ---- | ------ | ------ |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                       |                     | QUARTER ENDED |        | NINE MONTH PERIOD  
|(In thousands)                         |                     | SEPTEMBER 30, |        | ENDED SEPTEMBER 30,
|                                       |                     |               |        |                    
|                                       |                     | 2002          |        | 2001                |  | 2002 |        | 2001  
|                                       |                     |               |        |                     |  |      |        |       
|Employee costs, gross                  |                     | $             | 20,779 |                     |  | $    | 18,905 |        |  | $ | 62,855  |        |  | $ | 55,543  |       
|                                      
|                                      
|                                      
|                                      
|Deferred costs pursuant to SFAS No. 91 |                     |               | (7,330 | )                   |  |      | (7,447 | )      |  |   | (22,857 | )      |  |   | (20,477 | )     
|                                       |                     |               |        |                     |  |      |        |        |  |   |         |        |  |   |         |       
|                                       | Employee cost, net  |               | $      | 13,449              |  |      | $      | 11,458 |  |   | $       | 39,998 |  |   | $       | 35,066 | 
|                                       |                     |               |        |                     |  |      |        |        |  |   |         |        |  |   |         |       
|Other expenses, gross                  |                     | $             | 5,624  |                     |  | $    | 3,660  |        |  | $ | 16,383  |        |  | $ | 10,111  |       
|                                      
|                                      
|                                      
|                                      
|Deferred costs pursuant to SFAS No. 91 |                     |               | (1,929 | )                   |  |      | (1,356 | )      |  |   | (6,438  | )      |  |   | (5,881  | )     
|                                       |                     |               |        |                     |  |      |        |        |  |   |         |        |  |   |         |       
|                                       | Other expenses, net |               | $      | 3,695               |  |      | $      | 2,304  |  |   | $       | 9,945  |  |   | $       | 4,230  | 
|                                       |                     |               |        |                     |  |      |        |        |  |   |         |        |  |   |         |       



|g. |  | Segment information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company operates in four reportable segments identified by line of
business: mortgage banking, banking (including thrift operations),
institutional securities and investment banking operations and insurance
agency activities. Management made this determination based on operating
decisions particular to each business line and because each one targets
different customers and requires different strategies. The majority of
the Companys operations are conducted in Puerto Rico. The Company also
operates in the mainland United States, principally in the New York City
metropolitan area.
|  
|   |  | The Company monitors the performance of its reportable segments based on
pre-established goals for different financial parameters such as net
income, interest rate spread, loan production and increase in market
share.                                                                                                                                                                                                                                                                                                                                                                                     

11



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



| |  | The following tables present net interest income, non-interest income,
net income and identifiable assets for the Companys Puerto Rico and
mainland U.S. operations as well as for each of the Companys reportable
segments for the periods presented.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |                                  |           |             |  |              |         |        |  |  |          |   |  |   |           | 
|------------------- |  | -------------------------------- | --------- | ----------- |  | ------------ | ------- | ------ |  |  | -------- | - |  | - | --------- | 
|(In thousands)      |  |                                  |           |             |  |              |         |        |  |  |          |   |  |   |           | 
|                    |  | Puerto Rico                      |           | Mainland US |  | Eliminations |         | Totals
|                    |  |                                  |           |             |  |              |         |       
|                    |  | QUARTER ENDED SEPTEMBER 30, 2002
|                    |  |                                 
|Net interest income |  | $                                | 35,172    |             |  |              | 4,114   |        |  |  | (40      | ) |  | $ | 39,246    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                | 63,205    |             |  |              | 4,775   |        |  |  | 12       |   |  | $ | 67,992    | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                | 54,589    |             |  |              | 3,722   |        |  |  | (27      | ) |  | $ | 58,284    | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                | 7,384,445 |             |  |              | 421,128 |        |  |  | (139,409 | ) |  | $ | 7,666,164 | 
|                   
|                   
|                    |  | QUARTER ENDED SEPTEMBER 30, 2001
|                    |  |                                 
|Net interest income |  | $                                | 22,635    |             |  |              | 2,141   |        |  |  | (85      | ) |  | $ | 24,691    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                | 47,094    |             |  |              | (50     | )      |  |  |         |   |  | $ | 47,044    | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                | 36,570    |             |  |              | 325     |        |  |  | (85      | ) |  | $ | 36,810    | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                | 6,154,104 |             |  |              | 251,377 |        |  |  | (32,181  | ) |  | $ | 6,373,300 | 

|                    |  |                                            |           |             |  |              |         |        |  |  |          |   |  |   |           | 
|------------------- |  | ------------------------------------------ | --------- | ----------- |  | ------------ | ------- | ------ |  |  | -------- | - |  | - | --------- | 
|(In thousands)      |  |                                            |           |             |  |              |         |        |  |  |          |   |  |   |           | 
|                    |  | Puerto Rico                                |           | Mainland US |  | Eliminations |         | Totals
|                    |  |                                            |           |             |  |              |         |       
|                    |  | NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002
|                    |  |                                           
|Net interest income |  | $                                          | 102,777   |             |  |              | 10,790  |        |  |  | (758     | ) |  | $ | 112,809   | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                          | 172,123   |             |  |              | 5,996   |        |  |  | (2,759   | ) |  | $ | 175,360   | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                          | 154,445   |             |  |              | 5,882   |        |  |  | (3,516   | ) |  | $ | 156,811   | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                          | 7,384,445 |             |  |              | 421,128 |        |  |  | (139,409 | ) |  | $ | 7,666,164 | 
|                   
|                   
|                    |  | NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001
|                    |  |                                           
|Net interest income |  | $                                          | 50,463    |             |  |              | 4,840   |        |  |  | (268     | ) |  | $ | 55,035    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                          | 137,331   |             |  |              | 797     |        |  |  |         |   |  | $ | 138,128   | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                          | 100,888   |             |  |              | 780     |        |  |  | (268     | ) |  | $ | 101,400   | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                          | 6,154,104 |             |  |              | 251,377 |        |  |  | (32,181  | ) |  | $ | 6,373,300 | 

12



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

|                    |  |                                  |           |         |  |         |           |            |  |                 |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|------------------- |  | -------------------------------- | --------- | ------- |  | ------- | --------- | ---------- |  | --------------- | ------- | ------ |  |  | ------ |  |  |  | -------- | - |  | - | --------- | 
|(In thousands)      |  |                                  |           |         |  |         |           |            |  |                 |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|                    |  |                                  |           |         |  |         |           |            |  | Institutional   |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  |                                  |           |         |  |         |           |            |  | Securities      |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  |                                  |           |         |  |         |           |            |  | and             |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  | Mortgage                         |           |         |  |         |           | Investment |  | Insurance       |         |        |  |  |        |  |  | 
|                    |  | Banking                          |           | Banking |  | Banking |           | Agency     |  | Eliminations(1) |         | Totals
|                    |  |                                  |           |         |  |         |           |            |  |                 |         |       
|                    |  | QUARTER ENDED SEPTEMBER 30, 2002
|                    |  |                                 
|Net interest income |  | $                                | 17,309    |         |  |         | 20,743    |            |  |                 | 606     |        |  |  | 277    |  |  |  | 311      |   |  | $ | 39,246    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                | 28,729    |         |  |         | 36,616    |            |  |                 | 3,376   |        |  |  | 1,953  |  |  |  | (2,682   | ) |  | $ | 67,992    | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                | 20,042    |         |  |         | 37,331    |            |  |                 | 1,727   |        |  |  | 1,317  |  |  |  | (2,133   | ) |  | $ | 58,284    | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                | 3,054,011 |         |  |         | 4,579,007 |            |  |                 | 436,306 |        |  |  | 31,928 |  |  |  | (435,088 | ) |  | $ | 7,666,164 | 
|                   
|                   
|                    |  | QUARTER ENDED SEPTEMBER 30, 2001
|                    |  |                                 
|Net interest income |  | $                                | 7,728     |         |  |         | 19,250    |            |  |                 | 623     |        |  |  | 240    |  |  |  | (3,150   | ) |  | $ | 24,691    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                | 38,871    |         |  |         | 5,280     |            |  |                 | 2,426   |        |  |  | 1,249  |  |  |  | (782     | ) |  | $ | 47,044    | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                | 23,394    |         |  |         | 13,128    |            |  |                 | 706     |        |  |  | 874    |  |  |  | (1,292   | ) |  | $ | 36,810    | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                | 2,657,507 |         |  |         | 3,578,677 |            |  |                 | 529,750 |        |  |  | 27,726 |  |  |  | (420,360 | ) |  | $ | 6,373,300 | 

|                    |  |                                            |           |         |  |         |           |            |  |                 |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|------------------- |  | ------------------------------------------ | --------- | ------- |  | ------- | --------- | ---------- |  | --------------- | ------- | ------ |  |  | ------ |  |  |  | -------- | - |  | - | --------- | 
|(In thousands)      |  |                                            |           |         |  |         |           |            |  |                 |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|                    |  |                                            |           |         |  |         |           |            |  | Institutional   |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  |                                            |           |         |  |         |           |            |  | Securities      |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  |                                            |           |         |  |         |           |            |  | and             |         |        |  |  |        |  |  |  |          |   |  |  
|                    |  | Mortgage                                   |           |         |  |         |           | Investment |  | Insurance       |         |        |  |  |        |  |  | 
|                    |  | Banking                                    |           | Banking |  | Banking |           | Agency     |  | Eliminations(1) |         | Totals
|                    |  |                                            |           |         |  |         |           |            |  |                 |         |       
|                    |  | NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002
|                    |  |                                           
|Net interest income |  | $                                          | 42,650    |         |  |         | 67,394    |            |  |                 | 1,833   |        |  |  | 856    |  |  |  | 76       |   |  | $ | 112,809   | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                          | 114,296   |         |  |         | 54,859    |            |  |                 | 6,632   |        |  |  | 5,492  |  |  |  | (5,919   | ) |  | $ | 175,360   | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                          | 85,843    |         |  |         | 69,678    |            |  |                 | 3,238   |        |  |  | 3,626  |  |  |  | (5,574   | ) |  | $ | 156,811   | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                          | 3,054,011 |         |  |         | 4,579,007 |            |  |                 | 436,306 |        |  |  | 31,928 |  |  |  | (435,088 | ) |  | $ | 7,666,164 | 
|                   
|                   
|                    |  | NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001
|                    |  |                                           
|Net interest income |  | $                                          | 13,328    |         |  |         | 43,003    |            |  |                 | 1,784   |        |  |  | 240    |  |  |  | (3,320   | ) |  | $ | 55,035    | 
|                   
|                   
|                   
|                   
|Non-interest income |  | $                                          | 110,783   |         |  |         | 20,111    |            |  |                 | 6,468   |        |  |  | 2,982  |  |  |  | (2,216   | ) |  | $ | 138,128   | 
|                   
|                   
|                   
|                   
|Net income          |  | $                                          | 72,112    |         |  |         | 29,142    |            |  |                 | 1,338   |        |  |  | 1,699  |  |  |  | (2,891   | ) |  | $ | 101,400   | 
|                   
|                   
|                   
|                   
|Identifiable assets |  | $                                          | 2,657,507 |         |  |         | 3,578,677 |            |  |                 | 529,750 |        |  |  | 27,726 |  |  |  | (420,360 | ) |  | $ | 6,373,300 | 



---

|(1) |  | For purposes of
the intersegment eliminations in the above table, income includes
direct intersegment loan origination costs amortized as yield
adjustment and other income derived from intercompany transactions,
related principally to fees and commissions paid to the Companys
institutional securities subsidiary. Assets include internal funding
and investment in subsidiaries accounted for at cost.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|h.  |  | The fair value of the Companys trading securities and the fair value and
carrying value of its securities classified as available for sale and held
to maturity are shown below by category.                                                                                                                                                                                                                   

13



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



| |  | 1. The following table summarizes Doral Financials holdings of trading
securities as of September 30, 2002 and December 31, 2001.
| |  | ----------------------------------------------------------------------------------------------------------------------------------

|                                    |       |               |         |              |  |   |         |         | 
|----------------------------------- | ----- | ------------- | ------- | ------------ |  | - | ------- | ------- | 
|TRADING SECURITIES                  |       | SEPTEMBER 30, |         | DECEMBER 31,
|(IN THOUSANDS)                      |       | 2002          |         | 2001        
|                                    |       |               |         |             
|Mortgage-backed securities          |       | $             | 880,028 |              |  | $ | 740,797 |        
|                                   
|                                   
|                                   
|                                   
|Interest-only strips                |       |               | 344,563 |              |  |   | 236,468 |        
|                                   
|                                   
|                                   
|                                   
|Puerto Rico government and agencies |       |               | 7,407   |              |  |   | 4,728   |        
|                                   
|                                   
|                                   
|                                   
|Other                               |       |               | 294     |              |  |   | 11,335  |        
|                                    |       |               |         |              |  |   |         |         | 
|                                    | Total |               | $       | 1,232,292    |  |   | $       | 993,328 | 
|                                    |       |               |         |              |  |   |         |         | 



| |  | 2. The following tables summarize amortized costs, unrealized gains and
losses, approximate market values, weighted average yield and contractual
maturities of available for sale securities as of September 30, 2002 and
December 31, 2001.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Expected maturities of certain debt securities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

|                              |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |      |  
|----------------------------- | ------------------ | ------------------ | ------- | ---------- | ------- | ---------- | ----- | ------ | ----- | ------- | ----- | --- | --- | - | ------- | ------- | ------- | -------- | ---- | ---- | ---- | -
|SECURITIES AVAILABLE FOR SALE |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |     
|AS OF SEPTEMBER 30, 2002      |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |     
|(Dollars in thousands)        |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         | WEIGHTED
|                              |                    | AMORTIZED          |         | UNREALIZED |         | UNREALIZED |       | MARKET |       | AVERAGE
|                              |                    | COST               |         | GAINS      |         | LOSSES     |       | VALUE  |       | YIELD  
|                              |                    |                    |         |            |         |            |       |        |       |        
|MORTGAGE-BACKED SECURITIES    |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |     
|                             
|                             
|                             
|                             
|                              | GNMA               |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |     
|                             
|                             
|                             
|                             
|                              |                    | Due over ten years |         | $          | 63,462  |            |       | $      | 1,675 |         |       | $   | 662 |   |         | $       | 64,475  |          |      |      | 6.14 | %
|                             
|                              | FHLMC and FNMA     |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |     
|                             
|                             
|                             
|                             
|                              |                    | Due over ten years |         |            | 111,673 |            |       |        | 1,948 |         |       |     | 932 |   |         |         | 112,689 |          |      |      | 5.78 | %
|                             
|DEBT SECURITIES               |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |     
|                             
|                             
|                             
|                             
|                              | FHLB NOTES         |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |     
|                             
|                             
|                             
|                             
|                              |                    | Due over ten years |         |            | 45,000  |            |       |        | 338   |         |       |     |    |   |         |         | 45,338  |          |      |      | 6.75 | %
|                             
|                              | FHLB ZERO COUPON   |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |     
|                             
|                             
|                             
|                             
|                              |                    | Due over ten years |         |            | 104,384 |            |       |        | 16    |         |       |     |    |   |         |         | 104,400 |          |      |      | 6.87 | %
|                             
|                              | US
TREASURY        |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |     
|                             
|                             
|                             
|                             
|                              | Due over ten years |                    |         | 131,279    |         |            |       | 1,769  |       |         |       | 796 |     |   |         | 132,252 |         |          |      | 5.36 | %   
|                              |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |      |  
|                              |                    | $                  | 455,798 |            |         | $          | 5,746 |        |       | $       | 2,390 |     |     | $ | 459,154 |         |         |          | 6.05 | %   
|                              |                    |                    |         |            |         |            |       |        |       |         |       |     |     |   |         |         |         |          |      |      |      |  

14



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

|                              |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |      |  
|----------------------------- | ----------------- | -------------------------- | ------- | ---------- | ------- | ---------- | ----- | ------ | --- | ------- | ------ | - | ----- | - | ------- | - | ------- | -------- | ---- | - | ---- | -
|SECURITIES AVAILABLE FOR SALE |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |  
|AS OF DECEMBER 31, 2001       |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |  
|(Dollars in thousands)        |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         | WEIGHTED
|                              |                   | AMORTIZED                  |         | UNREALIZED |         | UNREALIZED |       | MARKET |     | AVERAGE
|                              |                   | COST                       |         | GAINS      |         | LOSSES     |       | VALUE  |     | YIELD  
|                              |                   |                            |         |            |         |            |       |        |     |        
|MORTGAGE-BACKED SECURITIES    |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |  
|                             
|                             
|                             
|                             
|                              | GNMA              |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |     
|                             
|                             
|                             
|                             
|                              |                   | Due from one to five years |         | $          | 1,712   |            |       | $      | 12  |         |        | $ |      |   |         | $ | 1,724   |          |      |   | 4.50 | %
|                              |                   | Due over ten years         |         |            | 60,069  |            |       |        | 136 |         |        |   | 1,064 |   |         |   | 59,141  |          |      |   | 6.38 | %
|                             
|                              | FHLMC and FNMA    |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |     
|                             
|                             
|                             
|                             
|                              |                   | Due over ten years         |         |            | 424,990 |            |       |        | 712 |         |        |   | 4,733 |   |         |   | 420,969 |          |      |   | 6.31 | %
|                             
|DEBT SECURITIES               |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |  
|                             
|                             
|                             
|                             
|                              | FHLB NOTES        |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |     
|                             
|                             
|                             
|                             
|                              |                   | Due over ten years         |         |            | 45,000  |            |       |        | 675 |         |        |   |      |   |         |   | 45,675  |          |      |   | 6.75 | %
|                             
|                              | FHLMC ZERO COUPON |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |     
|                             
|                             
|                             
|                             
|                              |                   | Due over ten years         |         |            | 62,061  |            |       |        | 39  |         |        |   |      |   |         |   | 62,100  |          |      |   | 7.65 | %
|                             
|                              | US TREASURY       |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |     
|                             
|                             
|                             
|                             
|                              |                   | Due from five to ten years |         |            | 49,520  |            |       |        |    |         |        |   | 145   |   |         |   | 49,375  |          |      |   | 5.00 | %
|                             
|                             
|                             
|                             
|                              |                   | Due over ten years         |         |            | 294,040 |            |       |        | 85  |         |        |   | 4,930 |   |         |   | 289,195 |          |      |   | 5.37 | %
|                              |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |      |  
|                              |                   | $                          | 937,392 |            |         | $          | 1,659 |        |     | $       | 10,872 |   |       | $ | 928,179 |   |         |          | 6.06 | %
|                              |                   |                            |         |            |         |            |       |        |     |         |        |   |       |   |         |   |         |          |      |   |      |  



| |  | 3. The following tables summarize amortized costs, unrealized gains and
losses, approximate market values, weighted average yields and
contractual maturities of held to maturity securities as of September 30,
2002 and December 31, 2001.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Expected maturities of certain mortgage-backed and debt securities
might differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

15



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|--------------------------- | ------------------------------------ | -------------------------- | ------- | ---------- | ------- | ---------- | ------ | ------ | ----- | ------- | ----- | - | ----- | - | ------- | - | ------- | -------- | ---- | - | ---- | -
|SECURITIES HELD TO MATURITY |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |  
|AS OF SEPTEMBER 30, 2002    |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |  
|(Dollars in thousands)      |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         | WEIGHTED
|                            |                                      | AMORTIZED                  |         | UNREALIZED |         | UNREALIZED |        | MARKET |       | AVERAGE
|                            |                                      | COST                       |         | GAINS      |         | LOSSES     |        | VALUE  |       | YIELD  
|                            |                                      |                            |         |            |         |            |        |        |       |        
|MORTGAGE-BACKED SECURITIES  |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |  
|                           
|                           
|                           
|                           
|                            | GNMA                                 |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         | $          | 2,356   |            |        | $      | 98    |         |       | $ |      |   |         | $ | 2,454   |          |      |   | 6.74 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 11,829  |            |        |        | 570   |         |       |   |      |   |         |   | 12,399  |          |      |   | 6.99 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | CMO CERTIFICATES                     |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 629     |            |        |        |      |         |       |   | 1     |   |         |   | 628     |          |      |   | 6.55 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 1,413   |            |        |        |      |         |       |   | 8     |   |         |   | 1,405   |          |      |   | 6.36 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 73,858  |            |        |        | 198   |         |       |   | 1,308 |   |         |   | 72,748  |          |      |   | 5.95 | %
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|DEBT SECURITIES             |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |  
|                           
|                           
|                           
|                           
|                            | FHLB NOTES                           |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 177,935 |            |        |        | 2,165 |         |       |   | 252   |   |         |   | 179,848 |          |      |   | 6.28 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | FHLB ZERO COUPON                     |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 161,178 |            |        |        | 2,069 |         |       |   | 181   |   |         |   | 163,066 |          |      |   | 7.02 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | FHLMC ZERO COUPON                    |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 36,420  |            |        |        | 324   |         |       |   | 602   |   |         |   | 36,142  |          |      |   | 7.87 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | PR HOUSING BANK                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 5,000   |            |        |        | 25    |         |       |   |      |   |         |   | 5,025   |          |      |   | 6.00 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 3,305   |            |        |        |      |         |       |   |      |   |         |   | 3,305   |          |      |   | 6.20 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | U.S. TREASURY                        |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 61,087  |            |        |        | 6,759 |         |       |   |      |   |         |   | 67,846  |          |      |   | 5.36 | %
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | P.R. ECONOMIC DEVELOPMENT BANK NOTES |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due within a year          |         |            | 2,000   |            |        |        |      |         |       |   |      |   |         |   | 2,000   |          |      |   | 6.60 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                            | OTHER                                |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 5,205   |            |        |        | 2     |         |       |   |      |   |         |   | 5,207   |          |      |   | 3.62 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 4,189   |            |        |        | 15    |         |       |   |      |   |         |   | 4,204   |          |      |   | 5.52 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 2,000   |            |        |        | 25    |         |       |   |      |   |         |   | 2,025   |          |      |   | 7.00 | %
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  
|                            |                                      | $                          | 548,404 |            |         | $          | 12,250 |        |       | $       | 2,352 |   |       | $ | 558,302 |   |         |          | 6.44 | %
|                            |                                      |                            |         |            |         |            |        |        |       |         |       |   |       |   |         |   |         |          |      |   |      |  

16



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|--------------------------- | ------------------------------------ | -------------------------- | ------- | ---------- | ------- | ---------- | ------ | ------ | ------ | ------- | ------ | - | ------ | - | ------- | - | ------- | -------- | ---- | - | ---- | -
|SECURITIES HELD TO MATURITY |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |  
|AS OF DECEMBER 31, 2001     |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |  
|(Dollars in thousands)      |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         | Weighted
|                            |                                      | Amortized                  |         | Unrealized |         | Unrealized |        | Market |        | Average
|                            |                                      | Cost                       |         | Gains      |         | Losses     |        | Value  |        | Yield  
|                            |                                      |                            |         |            |         |            |        |        |        |        
|MORTGAGE-BACKED SECURITIES  |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |  
|                           
|                           
|                           
|                           
|                            | GNMA                                 |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         | $          | 2,878   |            |        | $      | 52     |         |        | $ | -     |   |         | $ | 2,930   |          |      |   | 6.75 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 15,429  |            |        |        | 368    |         |        |   | -     |   |         |   | 15,797  |          |      |   | 6.99 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | CMO CERTIFICATES                     |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 3,139   |            |        |        | -     |         |        |   | 15     |   |         |   | 3,124   |          |      |   | 6.08 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 1,836   |            |        |        | -     |         |        |   | 9      |   |         |   | 1,827   |          |      |   | 6.50 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 100,936 |            |        |        | 420    |         |        |   | 1,598  |   |         |   | 99,758  |          |      |   | 5.89 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|DEBT SECURITIES             |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |  
|                           
|                           
|                           
|                           
|                            | FHLB NOTES                           |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 5,000   |            |        |        | 100    |         |        |   | -     |   |         |   | 5,100   |          |      |   | 7.89 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 336,492 |            |        |        | 10,202 |         |        |   | -     |   |         |   | 346,694 |          |      |   | 6.46 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | FHLB ZERO COUPON                     |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 320,862 |            |        |        |       |         |        |   | 10,816 |   |         |   | 310,046 |          |      |   | 7.16 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | PR HOUSING BANK                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 5,000   |            |        |        |       |         |        |   | -     |   |         |   | 5,000   |          |      |   | 6.00 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 3,305   |            |        |        | 17     |         |        |   | -     |   |         |   | 3,322   |          |      |   | 6.20 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | US TREASURY                          |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 61,088  |            |        |        | 1,084  |         |        |   | 1,764  |   |         |   | 60,408  |          |      |   | 5.36 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | P.R. ECONOMIC DEVELOPMENT BANK NOTES |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 2,000   |            |        |        | 10     |         |        |   | -     |   |         |   | 2,010   |          |      |   | 6.60 | %
|                           
|                           
|                           
|                           
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                           
|                           
|                           
|                           
|                            | OTHER                                |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |     
|                           
|                           
|                           
|                           
|                            |                                      | Due from one to five years |         |            | 5,025   |            |        |        | -     |         |        |   | -     |   |         |   | 5,025   |          |      |   | 4.09 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due from five to ten years |         |            | 1,345   |            |        |        | 10     |         |        |   | -     |   |         |   | 1,355   |          |      |   | 6.68 | %
|                           
|                           
|                           
|                           
|                            |                                      | Due over ten years         |         |            | 2,000   |            |        |        | 15     |         |        |   | -     |   |         |   | 2,015   |          |      |   | 7.00 | %
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  
|                            |                                      | $                          | 866,335 |            |         | $          | 12,278 |        |        | $       | 14,202 |   |        | $ | 864,411 |   |         |          | 6.58 | %
|                            |                                      |                            |         |            |         |            |        |        |        |         |        |   |        |   |         |   |         |          |      |   |      |  

17



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



|i. |  | The following table sets forth certain information regarding Doral
Financials mortgage loans held for sale as of the dates indicated:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------

|                                              |  |                    |           |                   |  |   |           | 
|--------------------------------------------- |  | ------------------ | --------- | ----------------- |  | - | --------- | 
|MORTGAGE LOANS HELD FOR SALE, NET             |  |                    |           |                   |  |   |           | 
|(In thousands)                                |  | SEPTEMBER 30, 2002 |           | DECEMBER 31, 2001
|                                              |  |                    |           |                  
|Conventional single family residential loans  |  | $                  | 1,958,602 |                   |  | $ | 1,530,601 | 
|                                             
|                                             
|                                             
|                                             
|FHA/VA loans                                  |  |                    | 93,859    |                   |  |   | 98,207    | 
|                                             
|                                             
|                                             
|                                             
|Mortgage loans on residential multifamily     |  |                    | 108,196   |                   |  |   | 178,372   | 
|                                             
|                                             
|                                             
|                                             
|Construction and commercial real estate loans |  |                    | 168,916   |                   |  |   | 140,169   | 
|                                             
|                                             
|                                             
|                                             
|Consumer loans secured by mortgages           |  |                    | 51        |                   |  |   | 145       | 
|                                              |  |                    |           |                   |  |   |           | 
|                                              |  | $                  | 2,329,624 |                   |  | $ | 1,947,494 | 
|                                              |  |                    |           |                   |  |   |           | 



|j. |  | The following table sets forth certain information regarding Doral
Financials loans receivable as of the dates indicated:
|-- |  | --------------------------------------------------------------------------------------------------------------------------

|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |     |  
|----------------------------------- | --------------------------------------------- | ------------------ | ------- | ----------------- | ------- |  | ------ | --- | ------- | - | ------- | ------- | - |  | -- | --- | -
|LOANS RECEIVABLE, NET               |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|(Dollars in thousands)              |                                               | SEPTEMBER 30, 2002 |         | DECEMBER 31, 2001
|                                    |                                               |                    |         |                  
|                                    |                                               |                    | AMOUNT  |                   | PERCENT |  | AMOUNT |     | PERCENT
|                                    |                                               |                    |         |                   |         |  |        |     |        
|Construction loans                  |                                               | $                  | 448,421 |                   |         |  | 56     | %   |         | $ | 368,961 |         |   |  | 55 | %  
|                                   
|                                   
|                                   
|                                   
|Residential mortgage loans          |                                               |                    | 64,835  |                   |         |  | 8      | %   |         |   | 63,546  |         |   |  | 9  | %  
|                                   
|                                   
|                                   
|                                   
|Commercial  secured by real estate |                                               |                    | 127,534 |                   |         |  | 16     | %   |         |   | 123,414 |         |   |  | 18 | %  
|                                   
|                                   
|                                   
|                                   
|Consumer  secured by real estate   |                                               |                    | 625     |                   |         |  | 0      | %   |         |   | 870     |         |   |  | 0  | %  
|                                   
|                                   
|                                   
|                                   
|Consumer  other                    |                                               |                    | 59,983  |                   |         |  | 7      | %   |         |   | 39,109  |         |   |  | 6  | %  
|                                   
|                                   
|                                   
|                                   
|Commercial non-real estate          |                                               |                    | 17,277  |                   |         |  | 2      | %   |         |   | 16,874  |         |   |  | 3  | %  
|                                   
|                                   
|                                   
|                                   
|Loans on saving deposits            |                                               |                    | 8,850   |                   |         |  | 1      | %   |         |   | 10,523  |         |   |  | 2  | %  
|                                   
|                                   
|                                   
|                                   
|Land secured                        |                                               |                    | 81,467  |                   |         |  | 10     | %   |         |   | 46,602  |         |   |  | 7  | %  
|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|                                    | Loans receivable, gross                       |                    |         | 808,992           |         |  |        | 100 | %       |   |         | 669,899 |   |  |    | 100 | %
|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|Less:                               |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|                                   
|                                   
|                                   
|                                   
|                                    | Undisbursed portion of loans
in process       |                    |         | (11,837           | )       |  |        |     |         |   |         | (10,302 | ) |  |    |     |  
|                                   
|                                   
|                                   
|                                   
|                                    | Unearned interest and deferred
loan fees, net |                    |         | (19,789           | )       |  |        |     |         |   |         | (9,484  | ) |  |    |     |  
|                                   
|                                   
|                                   
|                                   
|                                    | Allowance for loan losses(1)                  |                    |         | (7,973            | )       |  |        |     |         |   |         | (6,000  | ) |  |    |     |  
|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|                                    |                                               |                    | (39,599 | )                 |         |  |        |     |         |   | (25,786 | )       |   |  |    |    
|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    
|Loans receivable, net               |                                               | $                  | 769,393 |                   |         |  |        |     |         | $ | 644,113 |         |   |  |    |    
|                                    |                                               |                    |         |                   |         |  |        |     |         |   |         |         |   |  |    |    



---

| | (1) |  | Does not include $7.1 million and $6.5 million of allowance
for loan losses allocated to mortgage loans held for sale as of
September 30, 2002 and December 31, 2001, respectively.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|k. |  | Doral Financial is the guarantor of various serial and term bonds issued
by Doral Properties, a wholly-owned subsidiary, through the Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental Control
Facilities Financing Authority (AFICA). The bonds, in an aggregate
principal amount of $44,765,000, were issued on November 3, 1999 to
finance the construction and development of the Doral Financial Center,
which became the new headquarters of Doral Financial. The bonds have
varying interest rates, ranging from 6.10% to 6.90%, and maturities ranging from June 2003
to December 2029. The bonds are secured by a mortgage on the building
and underlying real property. On November 1, 2002, Doral Properties
issued an additional $7.6 million in bonds through the Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental Control
Facilities Financing Authority (AFICA) to finance additional
improvements to the Doral Financial Center. The additional bonds mature,
subject to prior amortization requirements, on December 2029, and are
also guaranteed by Doral Financial.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



|l. |  | The following table shows the changes in the Companys mortgage servicing
assets for each of the periods shown:
|-- |  | ---------------------------------------------------------------------------------------------------------------

|                                   |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |         |  
|---------------------------------- | ----------------------------- | - | ------------- | ------ | ------------------- | - | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|MORTGAGE SERVICING ASSETS ACTIVITY |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |        
|(IN THOUSANDS)                     |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |        
|                                   |                               |   | QUARTER ENDED |        | NINE MONTH PERIOD  
|                                   |                               |   | SEPTEMBER 30, |        | ENDED SEPTEMBER 30,
|                                   |                               |   |               |        |                    
|                                   |                               |   | 2002          |        | 2001                |   | 2002    |        | 2001
|                                   |                               |   |               |        |                     |   |         |        |     
|Balance at beginning of period     |                               | $ | 158,578       |        |                     | $ | 152,683 |        |      | $ | 154,340 |         |   | $ | 139,795 |        
|                                  
|                                  
|                                  
|                                  
|Capitalization of rights           |                               |   | 8,553         |        |                     |   | 10,410  |        |      |   | 30,575  |         |   |   | 33,308  |        
|                                  
|                                  
|                                  
|                                  
|Amortization:                      |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Scheduled                     |   |               | (6,619 | )                   |   |         | (5,162 | )    |   |         | (19,262 | ) |   |         | (14,332 | )
|                                  
|                                  
|                                  
|                                  
|                                   | Unscheduled
and impairment(1) |   |               | (7,459 | )                   |   |         | (3,103 | )    |   |         | (12,600 | ) |   |         | (3,943  | )
|                                   |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |        
|Balance at end of period           |                               | $ | 153,053       |        |                     | $ | 154,828 |        |      | $ | 153,053 |         |   | $ | 154,828 |        
|                                   |                               |   |               |        |                     |   |         |        |      |   |         |         |   |   |         |        



---

|(1) |  | Includes an impairment
allowance of $7.5 million recognized on the third quarter ended September 30, 2002.
Prior to July 1, 2002,
Doral Financial recorded impairment charges as a direct writedown of
servicing assets. Effective July 1, 2002, impairment is
recognized through a valuation allowance for each individual stratum
of mortgage loans subject to servicing rights. The valuation
allowance is adjusted to reflect the amount, if any, by which the
cost basis of the servicing asset for a given stratum of loans being
serviced exceeds its fair value. Any fair value in excess of the cost
basis of the servicing asset for a given stratum is not recognized.            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|m.  |  | Adoption of SFAS 133                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | The Company adopted Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended
(referred to hereafter as SFAS No. 133), on January 1, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | As part of the implementation of SFAS No. 133, the Company reclassified
$110 million of its held to maturity securities as available for sale and
$130 million as trading securities. As a result of this
reclassification, the Company recognized a gain of $1.6 million (net of
tax) in other comprehensive income and a gain of $5.9 million (net of
tax) in the income statement as cumulative effect of a change in
accounting principle. In connection with the adoption of the SFAS No.
133, the Company also recognized in earnings the fair value of $100
million of interest rate swaps previously excluded from the financial
statements, valued at an after tax loss of $196,000.
|   
|    |  | At September 30, 2002, December 31, 2001 and September 30, 2001, none of
the Companys derivatives were designated as hedges for
accounting purposes. Accordingly, such
derivatives are carried at fair values with changes therein reflected in
earnings for the period.                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|n.  |  | At September 30, 2002 and December 31, 2001, money market investments
include $577.5 million and $273.5 million, respectively, of pledged money
market investments. At September 30, 2002 and December 31, 2001, the
carrying value of securities purchased under resell agreements included in
money market investments was $422.2 million and $54.9 million,
respectively. The underlying securities were held on behalf of the
Company by the dealers that arranged the transactions. At September 30,
2002 and December 31, 2001, the Company has repledged approximately $219.2
million and $6.7 million, respectively, of the underlying securities.                                   
|   
|o.  |  | Certain amounts reflected in the 2001 Consolidated Financial Statements
have been reclassified to conform to the presentation for 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

19



---



##### Table of Contents








ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

Doral Financial Corporation is a financial holding company that, together
with its wholly-owned subsidiaries, is engaged in mortgage banking,
retail banking
(including thrift operations), institutional securities and investment banking
operations and insurance agency activities. Doral Financials mortgage banking
activities (its mortgage banking business), include the origination,
purchase, sale and servicing of mortgage loans on single-family residences, the
issuance and sale of various types of mortgage-backed securities, the holding
of mortgage loans, mortgage-backed securities and other investment securities
for sale or investment, the purchase and sale of servicing rights associated
with such mortgage loans and the origination of construction loans and mortgage
loans secured by income producing real estate and land.

Doral Financial is
currently in its 30th year of operations and is the leading
originator and servicer of mortgage loans on single-family
residences in Puerto Rico. The volume of loans originated and purchased by
Doral Financial during the quarters ended September 30, 2002 and 2001 was
approximately $1.3 billion and $1.1 billion, respectively. For the nine month
periods ended September 30, 2002 and 2001, the volume of loans originated and
purchased was approximately $3.8 billion and $3.1 billion, respectively. Doral
Financials mortgage servicing portfolio increased to approximately $10.9
billion as of September 30, 2002, from $9.7 billion as of September 30, 2001.
Doral Financials strategy is to increase the size of its mortgage servicing
portfolio by relying principally on internal loan originations and
supplementing such internal originations by purchases of
mortgage loans on a servicing released basis.

Doral Financial maintains a substantial portfolio of mortgage-backed
securities. At September 30, 2002, Doral Financial held securities for trading
with a fair market value of $1.2 billion, approximately $730.7 million of
which consisted of Puerto Rico GNMA securities, the interest on which is
tax-exempt to the Company. These securities are generally held by Doral
Financial for longer periods prior to sale in order to maximize the tax-exempt
interest received thereon. Trading securities are reflected on Doral
Financials consolidated financial statements at their fair market value with
resulting gains or losses included in operations as part of trading activities.

As part of its strategy to maximize net interest income, Doral Financial
also invests in securities that were classified as available for sale or held to
maturity. As of September 30, 2002, Doral Financial held approximately $548.4
million in securities and other investments that were classified as held to
maturity. As of September 30, 2002, Doral Financial also held $459.2 million
of investment securities that were classified as available for sale and
reported at fair value, with unrealized gains or losses included in
stockholders equity and reported as Accumulated other comprehensive loss, net
of income tax, in Doral Financials consolidated financial statements.

For the quarters ended September 30, 2002 and 2001, Doral Financials
banking subsidiaries contributed approximately $37.3 million and $13.1 million,
or 64% and 36%, respectively, to the Companys consolidated net income. For
the first nine months of 2002 and 2001, Doral Financials banking subsidiaries
contributed approximately $69.7 million and $29.1 million or 44% and 29%,
respectively, to Doral Financials consolidated net income.

The Companys institutional securities and investment banking operation is
conducted through Doral Securities, a NASD member subsidiary that provides
institutional brokerage, financial advisory and investment banking services in
Puerto Rico. For the quarters ended September 30, 2002 and 2001, Doral
Securities had net income of approximately $1.7 million and $706,000,
respectively. For the nine month periods ended September 30, 2002 and 2001,
Doral Securities net income was approximately $3.2 million and $1.3 million,
respectively.

Doral Financial conducts its insurance agency activities in Puerto Rico
through Doral Insurance Agency, Inc. For the quarters ended September 30, 2002
and 2001, Doral Agencys net income was approximately $1.3 million and
$874,000, respectively. For the nine month periods ended September 30, 2002
and 2001, Doral Agencys net income was approximately $3.6 million and $1.7
million, respectively.

20



---



##### Table of Contents



For information regarding net interest income, non-interest income, net
income and identifiable assets broken down by Doral Financials mortgage
banking, banking, institutional securities and investment banking and insurance
agency activities segments, please refer to note g of the accompanying
Consolidated Financial Statements.

Doral Financial has significant assets and operations at the parent
company level. HF Mortgage Bankers, one of Doral Financials principal
mortgage banking units, and Doral Overseas, an international banking
entity, are organized as operating divisions within the parent
company. As of September 30, 2002, Doral Financial had assets of $3.2 billion
at the parent company level.

For a discussion regarding Doral Financials critical accounting policies
please refer to the Managements Discussion and Analysis of Financial Condition
and Results of Operations section of Doral Financials Annual Report on Form
10-K for the year ended December 31, 2001.

RESULTS OF OPERATIONS FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2002
AND 2001

Doral Financials results of operations are mainly the result of: (1) its
level of loan production; (2) the behavior of its mortgage loan servicing
assets; (3) the relationship between interest rates on its interest-bearing
assets and its costs of funds; (4) the credit losses related to loan
activities; and (5) its ability to manage its liquidity demands and capital
resources. These factors are, in turn, primarily influenced by: (a) the level
and direction of interest rates; (b) the level of demand for mortgage credit;
and (c) the strength of the economy and housing market in Puerto Rico, Doral
Financials principal market.

The components of Doral Financials revenues are: (1) net interest income;
(2) net gain on mortgage loan sales and fees; (3) servicing income; (4) trading
activities; (5) gain on sale of investment securities; and (6) commissions,
fees and other income.

NET INCOME

Doral Financials net income for the quarter ended September 30, 2002 was
$58.3 million, an increase of $21.5 million, or 58%, from $36.8 million for the
2001 period. For the first nine months of 2002 and 2001, the Companys net
income amounted to $156.8 million and $101.4 million, respectively, an increase
of 55%. The increase for the first nine months of 2002 was $61.3 million or
64% when compared to income before the cumulative gain-effect of a change in
accounting principle of $95.5 million for the first nine months of 2001.
Consolidated results include the operations of Doral Bank PR and Doral Bank NY,
Doral Financials retail banking units, which contributed approximately $69.7 million
to Doral Financials consolidated net income for the nine months ended
September 30, 2002, compared to $29.1 million for the respective 2001 period.
Doral Securities, Doral Financials investment banking and institutional
securities unit, contributed $3.2 million to consolidated net income for the
nine months ended September 30, 2002, compared to $1.3 million for the
respective 2001 period. Doral Agency, Doral Financials insurance agency,
contributed $3.6 million to consolidated net income for the nine months ended
September 30, 2002 compared to $1.7 million for the respective 2001 period.
Diluted earnings per common share for the third quarter of 2002 were $0.74, an
increase of 51% over the $0.49 per diluted share recorded for the same period a
year ago. Diluted earnings per common share for the nine months ended
September 30, 2002 were $2.02, an increase of 52% over the $1.33 per diluted
share before the cumulative effect of a change in accounting principle recorded
for the same period a year ago.

Net Interest Income

Net interest income is the excess of interest earned by Doral Financial on
its interest-earning assets over the interest incurred on its interest-bearing
liabilities.

Net interest income for the third quarter of 2002 and 2001 was $39.2
million and $24.7 million, respectively, an increase of 59%. For the first
nine months of 2002 and 2001 net interest income amounted to $112.8 million and
$55.0 million, respectively, an increase of 105%. The increase in net interest
income for the
third quarter and first nine months of 2002, compared to the respective 2001
periods, was principally due to the combined effect of an increase in

21



---



##### Table of Contents



Doral
Financials average balance of net interest-earning assets and increases in
Doral Financials net interest spread and margin resulting from the reduction
of borrowing costs experienced during the periods.

The
Companys retail banking subsidiaries contributed $20.7 million to the
consolidated net interest income for the third quarter of 2002, compared to
$19.3 million for the third quarter of 2001. During the first nine months of
2002, the Companys retail banking subsidiaries contributed approximately $67.4
million to the consolidated net interest income, compared to $43.0 million for
the first nine months of 2001.

The following tables present, for the periods indicated, Doral Financials
average balance sheet, the total dollar amount of interest income from average
interest-earning assets and the related yields, as well as the interest expense
on average interest-bearing liabilities expressed both in dollars and rates,
and the net interest margin. The tables do not reflect any effect of income
taxes. All average balances are based on the average daily balances.

TABLE A
AVERAGE BALANCE SHEET AND SUMMARY OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)

|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |      |  
|------------------------------------------ | -------------------------------- | --------------------------------------------------- | --------- | --------------------------- | --------- | -------- | ------ | ---------- | ------- | ------- | ------ | -------- | ---- | ---------- | --------- | --------- | --------- | ------- | ------ | ------ | ------ |  | ------ | ---- | ---- | -
|                                           |                                  |                                                     |           | QUARTER ENDED SEPTEMBER 30,
|                                           |                                  |                                                     |           |                            
|                                           |                                  |                                                     |           | 2002                        |           | 2001    
|                                           |                                  |                                                     |           |                             |           |         
|                                           |                                  |                                                     |           | AVERAGE                     |           |          |        |            |         | AVERAGE |        | AVERAGE  |      |            |           |           |           | AVERAGE
|                                           |                                  |                                                     |           | BALANCE                     |           | INTEREST |        | YIELD/RATE |         | BALANCE |        | INTEREST |      | YIELD/RATE
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |           
|ASSETS:                                    |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest-Earning Assets:                   |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|                                           | Total Loans(1)                   |                                                     | $         | 2,970,270                   |           |          | $      | 52,467     |         |         |        | 7.01     | %    |            | $         | 2,256,236 |           |         | $      | 42,994 |        |  |        | 7.56 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Mortgage-Backed
Securities(2)    |                                                     |           | 1,563,330                   |           |          |        | 33,795     |         |         |        | 8.58     | %    |            |           | 1,760,976 |           |         |        | 26,347 |        |  |        | 5.94 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Investment Securities            |                                                     |           | 939,125                     |           |          |        | 13,694     |         |         |        | 5.79     | %    |            |           | 977,480   |           |         |        | 13,654 |        |  |        | 5.54 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Other Interest-Earning Assets(3) |                                                     |           | 1,323,820                   |           |          |        | 5,413      |         |         |        | 1.62     | %    |            |           | 745,980   |           |         |        | 9,831  |        |  |        | 5.23 | %   
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|                                           |                                  | Total Interest-Earning Assets/Interest Income       |           |                             | 6,796,545 |          |        | $          | 105,369 |         |        |          | 6.15 | %          |           |           | 5,740,672 |         |        | $      | 92,826 |  |        |      | 6.42 | %
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Total Non-Interest-Earning Assets          |                                  |                                                     | 606,596   |                             |           |          |        |            |         |         |        |          |      |            | 679,269   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Total Assets                               |                                  | $                                                   | 7,403,141 |                             |           |          |        |            |         |         |        |          |      | $          | 6,419,941 |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|LIABILITIES AND STOCKHOLDERS EQUITY:      |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest-Bearing Liabilities:              |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|                                           | Loans Payable                    |                                                     | $         | 205,753                     |           |          | $      | 1,639      |         |         |        | 3.16     | %    |            | $         | 230,020   |           |         | $      | 2,697  |        |  |        | 4.65 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Repurchase Agreements            |                                                     |           | 2,379,665                   |           |          |        | 23,322     |         |         |        | 3.89     | %    |            |           | 2,685,744 |           |         |        | 31,193 |        |  |        | 4.61 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits                         |                                                     |           | 2,126,517                   |           |          |        | 18,778     |         |         |        | 3.50     | %    |            |           | 1,534,892 |           |         |        | 17,676 |        |  |        | 4.57 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Other Borrowed Funds(4)          |                                                     |           | 1,539,652                   |           |          |        | 22,384     |         |         |        | 5.77     | %    |            |           | 971,541   |           |         |        | 16,569 |        |  |        | 6.77 | %   
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|                                           |                                  | Total Interest-Bearing Liabilities/Interest Expense |           |                             | 6,251,587 |          |        | $          | 66,123  |         |        |          | 4.20 | %          |           |           | 5,422,197 |         |        | $      | 68,135 |  |        |      | 4.99 | %
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Total Non-Interest-Bearing Liabilities     |                                  |                                                     | 188,865   |                             |           |          |        |            |         |         |        |          |      |            | 346,451   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Total Liabilities                          |                                  |                                                     | 6,440,452 |                             |           |          |        |            |         |         |        |          |      |            | 5,768,648 |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|Stockholders Equity                       |                                  |                                                     | 962,689   |                             |           |          |        |            |         |         |        |          |      |            | 651,293   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Total Liabilities and Stockholders Equity |                                  | $                                                   | 7,403,141 |                             |           |          |        |            |         |         |        |          |      | $          | 6,419,941 |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                     |           |                             |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |        |  |        |      |     
|Net Interest-Earning Assets                |                                  | $                                                   | 544,958   |                             |           |          |        |            |         |         |        |          |      | $          | 318,475   |           |           |         |        |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|                                          
|Net Interest Income                        |                                  |                                                     |           |                             |           | $        | 39,246 |            |         |         |        |          |      |            |           |           |           | $       | 24,691 |        |        |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest Rate
Spread(5)                    |                                  |                                                     |           |                             |           |          |        |            |         |         | 1.95   | %        |      |            |           |           |           |         |        |        |        |  | 1.43   | %   
|                                          
|                                          
|                                          
|                                          
|Interest Rate Margin(5)                    |                                  |                                                     |           |                             |           |          |        |            |         |         | 2.29   | %        |      |            |           |           |           |         |        |        |        |  | 1.71   | %   
|                                          
|                                          
|                                          
|                                          
|Net Interest-Earning Assets Ratio          |                                  |                                                     |           |                             |           |          |        |            |         |         | 108.72 | %        |      |            |           |           |           |         |        |        |        |  | 105.87 | %   



---

|(1) |  | Average loan balances include the average balance of non-accruing loans, on which no interest income is recognized.                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes interest income
received with respect to interest-only strips (IOs).                                                                                                                                                                                                                                         
|   
|   
|   
|   
|(3) |  | Consists of money market instruments, reverse repurchase agreements and deposits in other banks.                                                                                                                                                                                                                        
|   
|   
|   
|   
|(4) |  | Consists of advances from FHLB-NY and notes payable.                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|(5) |  | Interest rate spread represents the difference between Doral Financials weighted average yield on interest-earning assets and the weighted average rate on interest-bearing liabilities. Interest rate
margin represents net interest income on an annualized basis as a percentage of average interest-earning assets.

22



---



##### Table of Contents



TABLE B
AVERAGE BALANCE SHEET AND SUMMARY OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)

|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |      |  
|------------------------------------------ | -------------------------------- | --------------------------------------------------- | --------- | ------------------------------------- | --------- | -------- | ------- | ---------- | ------- | ------- | ------ | -------- | ---- | ---------- | --------- | --------- | --------- | ------- | ------ | ------- | ------- |  | ------ | ---- | ---- | -
|                                           |                                  |                                                     |           | NINE MONTH PERIOD ENDED SEPTEMBER 30,
|                                           |                                  |                                                     |           |                                      
|                                           |                                  |                                                     |           | 2002                                  |           | 2001    
|                                           |                                  |                                                     |           |                                       |           |         
|                                           |                                  |                                                     |           | AVERAGE                               |           |          |         |            |         | AVERAGE |        | AVERAGE  |      |            |           |           |           | AVERAGE
|                                           |                                  |                                                     |           | BALANCE                               |           | INTEREST |         | YIELD/RATE |         | BALANCE |        | INTEREST |      | YIELD/RATE
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |           
|ASSETS:                                    |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest-Earning Assets:                   |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|                                           | Total
Loans(1)                   |                                                     | $         | 2,851,064                             |           |          | $       | 148,983    |         |         |        | 6.99     | %    |            | $         | 2,081,941 |           |         | $      | 117,926 |         |  |        | 7.57 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Mortgage-Backed Securities(2)    |                                                     |           | 1,674,480                             |           |          |         | 94,767     |         |         |        | 7.57     | %    |            |           | 1,558,007 |           |         |        | 70,750  |         |  |        | 6.07 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Investment Securities            |                                                     |           | 1,125,295                             |           |          |         | 51,915     |         |         |        | 6.17     | %    |            |           | 1,093,941 |           |         |        | 53,721  |         |  |        | 6.57 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Other Interest-Earning Assets(3) |                                                     |           | 997,800                               |           |          |         | 12,117     |         |         |        | 1.62     | %    |            |           | 585,880   |           |         |        | 22,323  |         |  |        | 5.09 | %   
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|                                           |                                  | Total Interest-Earning Assets/Interest Income       |           |                                       | 6,648,639 |          |         | $          | 307,782 |         |        |          | 6.19 | %          |           |           | 5,319,769 |         |        | $       | 264,720 |  |        |      | 6.65 | %
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Total Non-Interest-Earning Assets          |                                  |                                                     | 591,410   |                                       |           |          |         |            |         |         |        |          |      |            | 639,580   |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Total Assets                               |                                  | $                                                   | 7,240,049 |                                       |           |          |         |            |         |         |        |          |      | $          | 5,959,349 |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|LIABILITIES AND STOCKHOLDERS EQUITY:      |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest-Bearing Liabilities:              |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|                                           | Loans Payable                    |                                                     | $         | 193,048                               |           |          | $       | 4,397      |         |         |        | 3.05     | %    |            | $         | 284,660   |           |         | $      | 12,521  |         |  |        | 5.88 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Repurchase Agreements            |                                                     |           | 2,585,526                             |           |          |         | 75,239     |         |         |        | 3.89     | %    |            |           | 2,446,625 |           |         |        | 94,609  |         |  |        | 5.17 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits                         |                                                     |           | 1,985,966                             |           |          |         | 54,242     |         |         |        | 3.65     | %    |            |           | 1,427,660 |           |         |        | 53,342  |         |  |        | 5.00 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Other Borrowed Funds(4)          |                                                     |           | 1,400,294                             |           |          |         | 61,095     |         |         |        | 5.83     | %    |            |           | 984,751   |           |         |        | 49,213  |         |  |        | 6.68 | %   
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|                                           |                                  | Total Interest-Bearing Liabilities/Interest Expense |           |                                       | 6,164,834 |          |         | $          | 194,973 |         |        |          | 4.23 | %          |           |           | 5,143,696 |         |        | $       | 209,685 |  |        |      | 5.45 | %
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Total Non-Interest-Bearing Liabilities     |                                  |                                                     | 216,470   |                                       |           |          |         |            |         |         |        |          |      |            | 241,622   |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Total Liabilities                          |                                  |                                                     | 6,381,304 |                                       |           |          |         |            |         |         |        |          |      |            | 5,385,318 |           |           |         |        |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|Stockholders Equity                       |                                  |                                                     | 858,745   |                                       |           |          |         |            |         |         |        |          |      |            | 574,031   |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Total Liabilities and Stockholders Equity |                                  | $                                                   | 7,240,049 |                                       |           |          |         |            |         |         |        |          |      | $          | 5,959,349 |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Net Interest-Earning Assets                |                                  | $                                                   | 483,805   |                                       |           |          |         |            |         |         |        |          |      | $          | 176,073   |           |           |         |        |         |         |  |        |     
|                                           |                                  |                                                     |           |                                       |           |          |         |            |         |         |        |          |      |            |           |           |           |         |        |         |         |  |        |      |     
|Net Interest Income                        |                                  |                                                     |           |                                       |           | $        | 112,809 |            |         |         |        |          |      |            |           |           |           | $       | 55,035 |         |         |  |        |     
|                                          
|                                          
|                                          
|                                          
|Interest
Rate Spread(5)                    |                                  |                                                     |           |                                       |           |          |         |            |         |         | 1.96   | %        |      |            |           |           |           |         |        |         |         |  | 1.20   | %   
|                                          
|                                          
|                                          
|                                          
|Interest Rate Margin(5)                    |                                  |                                                     |           |                                       |           |          |         |            |         |         | 2.27   | %        |      |            |           |           |           |         |        |         |         |  | 1.38   | %   
|                                          
|                                          
|                                          
|                                          
|Net Interest-Earning Assets Ratio          |                                  |                                                     |           |                                       |           |          |         |            |         |         | 107.85 | %        |      |            |           |           |           |         |        |         |         |  | 103.42 | %   



---

|(1) |  | Average loan balances include the average balance of non-accruing loans, on which no interest income is recognized.                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes interest income
received with respect to IOs.                                                                                                                                                                                                                                                                  
|   
|   
|   
|   
|(3) |  | Consists of money market instruments, reverse repurchase agreements and deposits in other banks.                                                                                                                                                                                                                        
|   
|   
|   
|   
|(4) |  | Consists of advances from FHLB-NY and notes payable.                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|(5) |  | Interest rate spread represents the difference between Doral Financials weighted average yield on interest-earning assets and the weighted average rate on interest-bearing liabilities. Interest rate
margin represents net interest income on an annualized basis as a percentage of average interest-earning assets.

23



---



##### Table of Contents



The following tables describe the extent to which changes in interest
rates and changes in volume of interest-earning assets and interest-bearing
liabilities have affected Doral Financials interest income and interest
expense during the periods indicated. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to: (i) changes in volume (change in volume multiplied by prior
year rate), (ii) changes in rate (change in rate multiplied by current year
volume), and (iii) total change in rate and volume. The combined effect of
changes in both rate and volume has been allocated in proportion to the
absolute dollar amounts of the changes due to rate and volume.

TABLE C
NET INTEREST INCOME VARIANCE ANALYSIS
(IN THOUSANDS)

|                                |                               |   |                             |        |      |   |         |         |   |   |        |        |  
|------------------------------- | ----------------------------- | - | --------------------------- | ------ | ---- | - | ------- | ------- | - | - | ------ | ------ | -
|                                |                               |   | QUARTER ENDED              
|                                |                               |   | SEPTEMBER 30,              
|                                |                               |   |                            
|                                |                               |   | 2002 COMPARED TO 2001      
|                                |                               |   | INCREASE (DECREASE) DUE TO:
|                                |                               |   |                            
|                                |                               |   | VOLUME                      |        | RATE |   | TOTAL  
|                                |                               |   |                             |        |      |   |        
|INTEREST INCOME VARIANCE        |                               |   |                             |        |      |   |         |         |   |   |        |       
|                               
|                               
|                               
|                               
|                                | TOTAL LOANS                   |   | $                           | 13,495 |      |   | $       | (4,022  | ) |   | $      | 9,473  |  
|                               
|                               
|                               
|                               
|                                | MORTGAGE-BACKED SECURITIES    |   |                             | (2,935 | )    |   |         | 10,383  |   |   |        | 7,448  |  
|                               
|                               
|                               
|                               
|                                | INVESTMENT SECURITIES         |   |                             | (531   | )    |   |         | 571     |   |   |        | 40     |  
|                               
|                               
|                               
|                               
|                                | OTHER INTEREST EARNING ASSETS |   |                             | 7,555  |      |   |         | (11,973 | ) |   |        | (4,418 | )
|                                |                               |   |                             |        |      |   |         |         |   |   |        |       
|TOTAL INTEREST INCOME VARIANCE  |                               | $ | 17,584                      |        |      | $ | (5,041  | )       |   | $ | 12,543 |       
|                                |                               |   |                             |        |      |   |         |         |   |   |        |       
|INTEREST EXPENSE VARIANCE       |                               |   |                             |        |      |   |         |         |   |   |        |       
|                               
|                               
|                               
|                               
|                                | LOANS PAYABLE                 |   |                             | (282   | )    |   |         | (776    | ) |   |        | (1,058 | )
|                               
|                               
|                               
|                               
|                                | REPURCHASE AGREEMENTS         |   |                             | (3,528 | )    |   |         | (4,343  | ) |   |        | (7,871 | )
|                               
|                               
|                               
|                               
|                                | DEPOSITS                      |   |                             | 6,759  |      |   |         | (5,657  | ) |   |        | 1,102  |  
|                               
|                               
|                               
|                               
|                                | OTHER BORROWED FUNDS          |   |                             | 9,615  |      |   |         | (3,800  | ) |   |        | 5,815  |  
|                                |                               |   |                             |        |      |   |         |         |   |   |        |       
|TOTAL INTEREST EXPENSE VARIANCE |                               |   | 12,564                      |        |      |   | (14,576 | )       |   |   | (2,012 | )     
|                                |                               |   |                             |        |      |   |         |         |   |   |        |       
|NET INTEREST INCOME VARIANCE    |                               | $ | 5,020                       |        |      | $ | 9,535   |         |   | $ | 14,555 |       
|                                |                               |   |                             |        |      |   |         |         |   |   |        |       

24



---



##### Table of Contents



TABLE D
NET INTEREST INCOME VARIANCE ANALYSIS
(IN THOUSANDS)

|                                |                               |   |                             |        |      |   |         |         |   |   |         |         |  
|------------------------------- | ----------------------------- | - | --------------------------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                |                               |   | NINE MONTH PERIOD ENDED    
|                                |                               |   | SEPTEMBER 30,              
|                                |                               |   |                            
|                                |                               |   | 2002 COMPARED TO 2001      
|                                |                               |   | INCREASE (DECREASE) DUE TO:
|                                |                               |   |                            
|                                |                               |   | VOLUME                      |        | RATE |   | TOTAL  
|                                |                               |   |                             |        |      |   |        
|INTEREST INCOME VARIANCE        |                               |   |                             |        |      |   |         |         |   |   |         |        
|                               
|                               
|                               
|                               
|                                | TOTAL LOANS                   |   | $                           | 43,667 |      |   | $       | (12,610 | ) |   | $       | 31,057  |  
|                               
|                               
|                               
|                               
|                                | MORTGAGE-BACKED SECURITIES    |   |                             | 5,302  |      |   |         | 18,715  |   |   |         | 24,017  |  
|                               
|                               
|                               
|                               
|                                | INVESTMENT SECURITIES         |   |                             | 1,545  |      |   |         | (3,351  | ) |   |         | (1,806  | )
|                               
|                               
|                               
|                               
|                                | OTHER INTEREST EARNING ASSETS |   |                             | 15,725 |      |   |         | (25,931 | ) |   |         | (10,206 | )
|                                |                               |   |                             |        |      |   |         |         |   |   |         |        
|TOTAL INTEREST INCOME VARIANCE  |                               | $ | 66,239                      |        |      | $ | (23,177 | )       |   | $ | 43,062  |        
|                                |                               |   |                             |        |      |   |         |         |   |   |         |        
|INTEREST EXPENSE VARIANCE       |                               |   |                             |        |      |   |         |         |   |   |         |        
|                               
|                               
|                               
|                               
|                                | LOANS PAYABLE                 |   |                             | (4,040 | )    |   |         | (4,084  | ) |   |         | (8,124  | )
|                               
|                               
|                               
|                               
|                                | REPURCHASE AGREEMENTS         |   |                             | 5,386  |      |   |         | (24,756 | ) |   |         | (19,370 | )
|                               
|                               
|                               
|                               
|                                | DEPOSITS                      |   |                             | 20,936 |      |   |         | (20,036 | ) |   |         | 900     |  
|                               
|                               
|                               
|                               
|                                | OTHER BORROWED FUNDS          |   |                             | 20,819 |      |   |         | (8,937  | ) |   |         | 11,882  |  
|                                |                               |   |                             |        |      |   |         |         |   |   |         |        
|TOTAL INTEREST EXPENSE VARIANCE |                               | $ | 43,101                      |        |      | $ | (57,813 | )       |   | $ | (14,712 | )      
|                                |                               |   |                             |        |      |   |         |         |   |   |         |        
|NET INTEREST INCOME VARIANCE    |                               | $ | 23,138                      |        |      | $ | 34,636  |         |   | $ | 57,774  |        
|                                |                               |   |                             |        |      |   |         |         |   |   |         |        

INTEREST INCOME

Total interest income increased from $92.8 million during the third
quarter of 2001, to $105.4 million during the third quarter of 2002, an
increase of 14%. For the nine months ended September 30, 2002 interest income
increased by approximately $43.1 million to $307.8 million compared to $264.7
million for the first nine months of 2001. The increases in interest income
during both periods are primarily related to the increase in Doral Financials
total average balance of interest-earning assets, which increased from $5.3
billion for the nine months ended September 30, 2001 to $6.6 billion for the
nine months ended September 30, 2002.

Interest income on loans increased by $9.5 million or 22% during the third
quarter of 2002, compared to the respective 2001 period. For the first nine
months of 2002, interest income on loans increased by $31.1 million or 26% as
compared to the respective 2001 period. The increases during 2002 reflect an
increase in the level of loans held by Doral Financial compared to 2001, due to
the increased volume of loan originations and purchases.

Interest
income on mortgage-backed securities, including IOs, for the third quarter of
2002 increased by 29% compared to the respective 2001 period. For the quarters
ended September 30, 2002 and 2001, interest income on mortgage-backed
securities amounted to $33.8 million and $26.3 million, respectively. During
the first nine months of 2002, interest income on mortgage-backed securities
was $94.8 million, versus $70.8 million for the comparable 2001 period. The
results for the 2002 periods reflect increased yields on the
Company's holdings of IOs. Doral Financial creates IOs in connection with the sale
of mortgage loans in bulk. See Amortization of IOs and Servicing Assets.
During the first nine months of 2002, Doral Financial was generally able to
collect higher amounts on its IOs net of amortization because the pass-through
rates paid to investors tied to floating rates tended to decline more than the
weighted average interest rates of the loans (generally non-conforming loans)
underlying the IOs, thereby increasing the interest rate spread earned by Doral
Financial on its IOs. The increase also reflects increased holdings of tax-exempt Puerto
Rico GNMA securities, U.S. FHLMC/FNMA
mortgage-backed securities and IOs. The interest earned on such U.S.
mortgage-backed securities is tax-exempt to Doral Financials international
banking entities under Puerto Rico law and is not subject to U.S. income
taxation because such entities are considered foreign corporations for U.S.
income tax purposes and are entitled to the portfolio interest deduction with
respect to interest earned on these securities.

25



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##### Table of Contents



Interest income on investment securities amounted to $13.7 million during
the third quarter of 2002, and was essentially unchanged, as compared to the
respective 2001 period. For the first nine months of 2002, interest income on
investment securities decreased by $1.8 million or 3%, as compared to the
respective 2001 period. The decrease in interest income on investment
securities during this period reflects the redemption prior to their stated
maturity of a significant amount of callable debt securities.

Interest income on other interest-earning assets decreased by $4.4 million
or 45% during the third quarter ended September 30, 2002 as compared to the
same quarter of 2001. Interest income on other interest-earning assets was
$12.1 million for the nine months ended September 30, 2002, as compared to
$22.3 million for the comparable period of 2001. Other interest-earning assets
consist primarily of money market instruments, overnight deposits, term
deposits, and reverse repurchase agreements. The decrease from 2001 to 2002 was
due primarily to reductions in short-term interest rates.

INTEREST EXPENSE

Total interest expense decreased to $66.1 million during the third quarter
of 2002, from $68.1 million for the respective 2001 period, a reduction of 3%.
Total interest expense for the first nine months of 2002 was $195.0 million,
compared to $209.7 million for the same period of 2001, a decrease of 7%. The
decrease in interest expense for the 2002 periods was due to a decrease in the
average cost of borrowings due to the declining interest rate environment that
was partly offset by increased borrowings to finance Doral Financials loan
production and investment activities. Average balance of interest-bearing
liabilities increased to $6.2 billion at an average cost of 4.23% for the nine
month period ended September 30, 2002, compared to $5.1 billion at an average
cost of 5.45% for the nine month period ended September 30, 2001.

Interest expense related to loans payable decreased by $1.1 million or 39%
during the third quarter of 2002 compared to the same period of 2001. For the
first nine months of 2002 interest expense related to loans payable was $4.4
million, a decrease of 65% compared to $12.5 million for the same period of
2001. The decrease in interest expense on loans payable was principally due to
the decrease in the average balance of loans payable outstanding from $284.7
million to $193.0 million for the nine month period ended September 30, 2001
and September 30, 2002, respectively. The decrease in loans payable reflects
Doral Financials use of alternative funding sources such as repurchase
agreements and FHLB advances to fund its activities. The weighted-average
interest rate cost for borrowings under Doral Financials loans payable was
3.16% and 4.65% for the third quarters of 2002 and 2001, respectively, and
3.05% and 5.88% for the nine month periods then ended, respectively.

Interest expense related to securities sold under agreements to repurchase
decreased by $7.9 million or 25% during the third quarter of 2002 compared to
the same period of 2001. During the first nine months of 2002 interest expense
related to securities sold under agreements to repurchase was $75.2 million
versus $94.6 million for the corresponding 2001 period, a decrease of 21%. The
decrease in interest expense on securities sold under agreements to repurchase
during the third quarter of 2002 reflected lower borrowing costs, as compared
to the respective 2001 period. The weighted average interest rate cost of
borrowings under repurchase agreements was 3.89% and 4.61% for the third
quarter of 2002 and 2001, respectively. For the first nine months of 2002, the
decrease in interest expense on securities sold under agreements to repurchase
reflected lower borrowing costs that were offset in part by increased
borrowings to finance mortgage-backed securities and other investment
securities. The weighted average interest rate cost of borrowings under
repurchase agreements was 3.89% and 5.17% for the nine month periods ended
September 30, 2002 and 2001, respectively.

Interest expense on deposits increased by $1.1 million, or 6%, for the
third quarter of 2002 as compared to the respective 2001 period. The increase
in interest expense on deposits reflects the increase in deposits held at
Doral Financials retail banking subsidiaries. The average balance of deposits
increased to $2.1 billion for the quarter ended September 30, 2002, from $1.5
billion for the third quarter of 2001. For the first nine months of 2002,
interest expense on deposits was $54.2 million, an increase of 2% as compared
to $53.3 million recorded for the same period of 2001. This increase is
primarily related to the increase in the average balance of deposits during the
period. The average balance of deposits was $2.0 billion for the nine month
period ended September 30, 2002, compared to $1.4 billion for

26



---



##### Table of Contents



the nine month
period ended September 30, 2001, an increase of 43%. The average interest cost
on deposits was 3.50% and 3.65%, respectively, for the quarter and nine month
periods ended September 30, 2002, compared to 4.57% and 5.00% for the
respective 2001 periods.

Interest expense on other borrowed funds was $22.4 million for the quarter
ended September 30, 2002, compared to $16.6 million for the same period a year
ago, an increase of 35%. For the first nine months of 2002, interest expense
on other borrowed funds increased by 24% to $61.1 million from $49.2 million in
2001. This increase is due to an increase in FHLB advances of $524.0 million from September 30, 2001 to
September 30, 2002 and in notes payable of $159.0 million from September 30, 2001
to September 30, 2002. For the third quarter and first nine months of 2002,
the weighted average interest rate for other borrowed funds was 5.77% and
5.83%, respectively, compared to 6.77% and 6.68%, for the corresponding 2001
periods.

PROVISION FOR LOSSES

The provision for loan losses relates to loans held by Doral Financial.
The provision is charged to earnings to bring the total allowance for loan
losses to a level considered appropriate by management based on Doral
Financials loss experience, current delinquency rates, known and inherent risk
in the loan portfolio, the estimated value and equity of any underlying
collateral, and an assessment of current economic conditions. While management
believes that the current provision for loan losses is sufficient, future
additions to the allowance for loan losses could be necessary if economic
conditions change substantially from the assumptions used by Doral Financial in
determining the allowance for loan losses. Doral Financial made provisions to
its allowance for loan losses of $2.1 and $3.8 million, respectively, for the
quarter and nine month periods ended September 30, 2002, compared to
approximately $1.1 million and $3.1 million for the respective 2001 periods.

NON-INTEREST INCOME

Net Gains on Mortgage Loan Sales and Fees. Net gains from mortgage loan
sales and fees increased by 18% during the third quarter of 2002 to $53.0
million, compared to $44.8 million for the same period of 2001. For the nine
month periods ended September 30, 2002 and 2001, mortgage loans sales and fees
were $157.2 million and $136.2 million, respectively, an increase of 15%. The
increase for 2002 was mainly the result of a greater volume of loan
securitizations and sales and the ability of the Company to obtain higher
profitability through higher loan fees and the creation of interest-only strips
(IOs) in connection with bulk sales of mortgage loans to institutional
investors. See Amortization of IOs and Servicing Assets.

Servicing Income.Servicing income represents revenues earned for
administering mortgage loans. The main component of Doral Financials
servicing income is loan servicing fees, which depend on the type of mortgage
loan being serviced. The fees on residential mortgage loans generally range
from 0.25% to 0.50% of the declining outstanding principal amount of the
serviced loan. As of September 30, 2002, the weighted average servicing fee
rate for the entire portfolio was 0.34%. The size of Doral Financials loan
servicing portfolio has increased substantially since its inception as a result
of increases in loan production and bulk purchases of servicing rights. Net
servicing losses, for the quarters ended September 30, 2002 and 2001 was
approximately $5.6 million and $704,000, respectively. For the nine month
period ended September 30, 2002, net servicing loss was approximately $6.3
million compared to a gain of $3.8 million for the corresponding period of
2001.

The decrease in the amount of loan servicing income for the third quarter
and first nine months of 2002 was primarily due to the increase in the
amortization and impairment of mortgage servicing assets. Increased
amortization and impairment offset the increase in gross servicing fees of 12%
and 16% for the third quarter and first nine months of 2002, respectively,
compared to the respective 2001 periods, produced by the increase in the
size of the servicing portfolio. The increase in amortization was the result
of a larger servicing portfolio and an increase in unscheduled amortization and
impairment related to actual and expected increases in prepayments due to
declining mortgage interest rates. Prior to July 1, 2002, Doral Financial
recorded impairment charges as a direct write down of servicing assets.
Effective July 1, 2002, impairment is recognized through a valuation allowance
for each individual stratum of mortgage loans subject to servicing rights. The
valuation allowance is adjusted to reflect the amount, if any, by which the
cost basis

27



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##### Table of Contents



of the servicing asset for a given stratum of loans being serviced
exceeds its fair value. Any fair value in excess of the cost basis of the
servicing asset for a given stratum is not recognized. Total amortization and
impairment charges were $14.1 million and $8.3 million for the quarters ended
September 30, 2002 and 2001, respectively. For the first nine months of 2002
and 2001 total amortization and impairment charges were $31.9 million and $18.3
million, respectively. Doral Financial recognized unscheduled amortization of
$5.1 million plus an impairment charge of $7.5 million during the first nine
months of 2002, due to the increase in prepayment estimates associated with
falling interest rates. See Note 1 to the unaudited consolidated financial
statements contained herein. The mortgage servicing portfolio was approximately
$10.9 billion at September 30, 2002, compared to $9.7 billion as of September
30, 2001. The value of the servicing asset assigned to a mortgage loan reduces
the basis of the related mortgage loan and thereby results in increased Net
Gains on Mortgage Loans Sales and Fees at the time of sale. During the nine
months ended September 30, 2002 and 2001, Doral Financial recognized servicing
assets of $25.8 million and $29.2 million, respectively, in connection with the
sale of internally originated loans.

Trading Activities.Trading activities include all gains or losses,
whether realized or unrealized, in the market value of Doral Financials
trading securities, as well as gains or losses on options, future contracts and
other derivative instruments used for interest rate management purposes.
Trading activities for the quarters ended September 30, 2002 resulted in a gain
of $4.8 million compared to a loss of $3.5 million for the third quarter of
2001. Gain on trading activities was related primarily to realized and
unrealized gains with respect to trading securities, partly offset by realized
and unrealized losses on derivative instruments. Net realized gains on sale of
trading securities was $47.6 million for the quarter ended September 30, 2002
compared to a loss of approximately $250,000 for the 2001 period. The increase
in realized gains was primarily tied to increased volume in trading activities
at the Companys international banking entities. Trading activities for the
quarters ended September 30, 2002 and 2001, included $2.7 million of unrealized
gains and $1.9 million of unrealized losses, respectively, on the value of its
trading securities pursuant to SFAS No. 115. For the quarters ended September
30, 2002 and 2001, net realized and unrealized losses on derivative instruments
were $45.5 million and $1.4 million, respectively. The higher losses sustained
on derivative instruments during the 2002 period resulted from derivative
contracts entered into to protect Doral Financials net interest income and the
value of its trading assets from a possible rise in interest rates that did not
materialize during the period. Trading activities for the nine month period
ended September 30, 2002, resulted in losses of $6.9 million compared to $18.4
million in losses during the respective 2001 period. For the nine month period
ended September 30, 2002, net realized gains on sales of trading securities
were $59.2 million compared to losses of $2.7 million for 2001 period. For the
nine months ended September 30, 2002 and 2001 net realized and unrealized
losses on derivative instruments were $75.7 million and $8.2 million,
respectively. Trading activities for the nine month periods ended September
30, 2002 and 2001 included $9.6 million of unrealized gains and $7.5 million of
unrealized losses, respectively, on the value of its trading securities
pursuant to SFAS No. 115. Set forth below is a summary of the components of
gains and losses from trading activities:

28



---



##### Table of Contents



TABLE E
COMPONENTS OF TRADING ACTIVITIES
(DOLLARS IN THOUSANDS)

|                                                               |  |               |         |                    |  |      |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------- | ------- | ------------------ |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                               |  | QUARTER ENDED |         | NINE MONTH PERIOD 
|                                                               |  | SEPTEMBER 30, |         | ENDED SEPTEMBER 30
|                                                               |  |               |         |                   
|                                                               |  | 2002          |         | 2001               |  | 2002 |        | 2001
|                                                               |  |               |         |                    |  |      |        |     
|Net realized gains and (losses) on sales of trading securities |  | $             | 47,581  |                    |  | $    | (250   | )    |  | $ | 59,185  |   |  | $ | (2,650  | )
|                                                              
|                                                              
|                                                              
|                                                              
|Net unrealized gains and (losses) on trading securities        |  |               | 2,721   |                    |  |      | (1,878 | )    |  |   | 9,602   |   |  |   | (7,533  | )
|                                                              
|                                                              
|                                                              
|                                                              
|Net realized and unrealized losses on derivative instruments   |  |               | (45,496 | )                  |  |      | (1,411 | )    |  |   | (75,680 | ) |  |   | (8,226  | )
|                                                               |  |               |         |                    |  |      |        |      |  |   |         |   |  |   |         |  
|Total                                                          |  | $             | 4,806   |                    |  | $    | (3,539 | )    |  | $ | (6,893  | ) |  | $ | (18,409 | )
|                                                               |  |               |         |                    |  |      |        |      |  |   |         |   |  |   |         |  

Gain on Sale of Investment Securities. Gain on sale of investment
securities represents the impact on income of transactions involving
the sales
of securities classified as available for sale. For the third quarter and
first nine months of 2002, sale of investment securities resulted in a gain of
$10.1 million and $16.1 million, respectively, compared to gains of $1.5
million and $3.7 million, respectively, for the corresponding 2001 periods,
reflecting increased sales activities and favorable pricing due to
the declining interest rate environment. Proceeds from sales of securities
available for sale amounted to $5.1 billion for the first nine months of 2002
compared to $1.7 billion for the first nine months of 2001.

Commissions, Fees and Other Income.Other income, commissions and fees
increased 14% during the third quarter of 2002 from $5.0 million for the
quarter ended September 30, 2001 to $5.7 million for the quarter ended
September 30, 2002. For the first nine months of 2002, commissions, fees and
other income increased 18%, compared to the respective 2001 period. The
increases during the 2002 periods were due primarily to increased commissions
and fees earned by Doral Financials retail banking and insurance agency subsidiaries.
For the third quarter and first nine months of 2002, insurance agency
activities produced commissions of $1.8 million and $5.0 million, respectively,
compared to $1.2 million and $2.9 million for the corresponding 2001 periods.
Deposit and other retail banking fees increased from $1.5 million for the third
quarter of 2001 to $2.0 million for the third quarter of 2002 and from $3.5
million for the first nine months of 2001 to $5.6 million for the first nine
months of 2002. Set forth below is a summary of Doral Financials principal
sources of fees and commissions.

TABLE F
FEES AND COMMISSIONS
(DOLLARS IN THOUSANDS)

|                                      |  |               |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------- |  | ------------- | ------ | ------------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                      |  | QUARTER ENDED |        | NINE MONTH PERIOD  
|                                      |  | SEPTEMBER 30, |        | ENDED SEPTEMBER 30,
|                                      |  |               |        |                    
|                                      |  | 2002          |        | 2001                |  | 2002 |        | 2001
|                                      |  |               |        |                     |  |      |        |     
|Deposit and other retail banking fees |  | $             | 2,015  |                     |  | $    | 1,459  |      |  | $ | 5,570  |   |  | $ | 3,507  |  
|                                     
|                                     
|                                     
|                                     
|Securities fees and commissions       |  |               | 2,824  |                     |  |      | 1,449  |      |  |   | 4,492  |   |  |   | 3,409  |  
|                                     
|                                     
|                                     
|                                     
|Insurance fees and commissions        |  |               | 1,759  |                     |  |      | 1,185  |      |  |   | 5,027  |   |  |   | 2,918  |  
|                                     
|                                     
|                                     
|                                     
|Other Income                          |  |               | 2,821  |                     |  |      | 3,587  |      |  |   | 5,785  |   |  |   | 5,733  |  
|                                     
|                                     
|                                     
|                                     
|Eliminations
intersegment(1)          |  |               | (3,757 | )                   |  |      | (2,649 | )    |  |   | (5,658 | ) |  |   | (2,649 | )
|                                      |  |               |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Total                                 |  | $             | 5,662  |                     |  | $    | 5,031  |      |  | $ | 15,216 |   |  | $ | 12,918 |  
|                                      |  |               |        |                     |  |      |        |      |  |   |        |   |  |   |        |  



---

|(1) |  | Related primarily to fees and commissions paid to the Companys institutional securities subsidiary, intercompany rental income and other miscellaneous income.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

NON-INTEREST EXPENSE

Total non-interest expense increased by 25% during the third quarter ended
September 30, 2002, compared to the respective 2001 period. The increase
reflects increases in compensation, advertising, occupancy and other expenses
resulting from the continued expansion of Doral Financials retail mortgage
banking and banking franchises and expenses related to increased loan
originations and servicing. For the nine months period ended September 30,
2002 total non-interest expense increased by 24% from the comparable
2001 period. For the quarter and nine months ended

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September 30, 2002,
compensation and benefits, which is the largest component of non-interest
expense, increased by 17% and 14%, respectively, due to increases in salaries
and incentives. As of September 30, 2002, Doral Financial had 2,000 employees
compared to 1,831 employees as of September 30, 2001.

INCOME TAXES

The maximum statutory corporate income tax rate in Puerto Rico is 39%.
For the third quarters of 2002 and 2001, the effective income tax rate of Doral
Financial was 16% and 13%, respectively. For the nine month periods ended
September 30, 2002 and 2001, the effective income tax rate of Doral Financial
was 15% and 12%, respectively. The increase in the effective tax
rates for the 2002 periods reflected increased revenues from the
Companys non-tax advantaged operations such as its insurance
agency and institutional securities operations.

The lower effective tax rates experienced by Doral Financial compared to
the maximum statutory rates reflect the fact that the portion of the net
interest income derived from certain FHA and VA mortgage loans secured by
properties located in Puerto Rico and on GNMA securities backed by such
mortgage loans is exempt from income tax under Puerto Rico law. Doral
Financial also invests in U.S. Treasury and agency securities that are exempt
from Puerto Rico taxation and are not subject to federal income taxation
because Doral Financial is entitled to rely on the portfolio interest
deduction. In addition, Doral Financials international banking entities may
invest in various U.S. securities the income on which is exempt from Puerto
Rico income taxation and excluded from federal income taxation on the basis of
the portfolio interest deduction. Net income tax savings to Doral Financial
attributable to tax-exempt income amounted to approximately $56.1 million and
$32.5 million for the nine month periods ended September 30, 2002 and 2001,
respectively.

Except for the operations of Doral Bank-NY and Doral Money, substantially all
of the Companys operations are conducted through Puerto Rico subsidiaries in
Puerto Rico. Doral Bank-NY and Doral Money are US corporations and are subject
to U.S. income-tax on their income derived from all sources. For the
nine month periods ended September 30, 2002 and 2001, the
provision for income taxes for the Companys U.S. subsidiaries
amounted to approximately $4.6 million and $246,000, respectively.

AMORTIZATION OF IOs AND SERVICING ASSETS

Whenever Doral Financial sells a mortgage loan, it allocates the cost of
the loan between the loan, the related mortgage servicing right (the servicing
asset or mortgage servicing right) and any IOs retained in connection with
such sale based on their relative fair values. Doral Financial creates
IOs in connection with the sale of loans in bulk or in
securitization transactions. IOs are created on the sale of mortgage loans
with servicing retained and represent the estimated present value of the cash
flows that Doral Financial expects to receive in the future on the economic
interest it retains on loans sold or securitized. The value of IOs reflects
the present value of the excess of the weighted-average coupon on the loans
sold over the sum of: (i) the pass-through interest paid to the investor and
(ii) a servicing fee generally equal to 25 basis points, after adjusting such
amount for expected losses and prepayments. The pass-through interest rate
payable to the investor may be a fixed rate or a floating rate, which in the
later case is generally based on a spread over the three-month LIBOR rate. The
IOs are recorded at the time of the sale of the related loans as an
adjustment to the carrying basis of the loans sold. To compute the value of
the IOs, Doral Financial multiplies the interest spread it is entitled to
retain on the loans sold by the principal balance of the mortgage pool being
sold. The resulting product is then multiplied by a market factor which Doral
Financial obtains from an independent third party financial institution that in
turn derives the factor by reference to internal valuation models that
incorporate assumptions regarding discount rates and mortgage prepayment rates.
The market factor used by Doral Financial to value IOs ranged from 4.25% to
5.50% during the first nine months of 2002 compared to 5.50% during the first
nine months of 2001. While Doral Financial has consistently sold some IOs in
private sales, currently there is no liquid market for the purchase and sale of
IOs.

The value assigned to the IOs reduces the basis of the related mortgage
loan sold and thereby results in increased Net Gain on Mortgage Loan Sales and
Fees at the time of sale. Doral Financial recognized IOs with a value of
approximately $48.8 million during the third quarter of 2002, compared to $36.3
million for the third quarter of 2001. For the nine month periods ended
September 30, 2002 and 2001, the Company recorded IOs in the amount of $139.4
million and $103.4 million, respectively.

30



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##### Table of Contents



The initial recorded value of IOs is amortized over the expected life of
the asset, and the amortization is recorded as a reduction of interest income.
The amortization of IOs is based on the amount and timing of estimated future
cash flows to be received with respect to the IOs. Throughout the life of the
IOs, Doral Financial continues to monitor changes in interest rates to
determine whether the assumptions selected to value the IOs are still
appropriate in light of changes in market conditions. It also attempts to
corroborate the value assigned to the IOs through use of internal valuation
models that incorporate assumptions regarding the direction of interest rates
and prepayment rates. The reasonableness of managements assumptions are
confirmed through independent valuations performed by third parties on a
quarterly basis. To the extent changes in interest rates or prepayment rates so
warrant, Doral Financial will increase or decrease the recorded value of the
IOs and increase or decrease the level of amortization. Amortization of IOs
for each of the quarters ended September 30, 2002 and 2001, was approximately
$9.5 million and $8.7 million, respectively. For the nine month periods ended
September 30, 2002 and 2001 amortization of IOs was approximately $36.1 million
and $21.5 million, respectively. The increase in the amortization for the nine
month period ended September 30, 2002 compared to the corresponding 2001 period
is due to the increase in the amount of IOs as well as increased amortization
resulting from increased mortgage prepayment rates tied to decreases in
interest rates. The carrying amount of the IOs is reflected in Doral
Financials consolidated statements of condition as a component of Trading
securities, at fair value. As of September 30 2002 and 2001, the carrying
amount of IOs and other residual interests retained in securitization
transactions recorded on Doral Financials financial statements was $344.6
million and $230.9 million, respectively.

The servicing asset represents the present value of the servicing fees
expected to be received on the loan over the expected term of the loan. Doral
Financial determines the fair value of its servicing assets by reference to
prices paid by independent third parties in market transactions for similar
mortgage servicing rights. During the first nine months of 2002 and 2001, the
market prices used to value Doral Financials servicing assets varied from
1.50% to 2.30% of the principal amount of the loans subject to the servicing
rights, with GNMA, FNMA and FHLMC servicing rights generally having higher
prices than servicing rights for non-conforming loans. In addition, the value
of Doral Financials FNMA, FHLMC and GNMA mortgage servicing portfolio is
evaluated on a periodic basis by an independent third party.

The value of the servicing asset assigned to a mortgage loan reduces the
basis of the related mortgage loan and thereby results in increased Net Gain
on Mortgage Loan Sales and Fees at the time of sale. During the nine months
ended September 30, 2002 and 2001, Doral Financial recognized servicing assets
of $25.8 million, and $29.2 million, respectively, in connection with the sale
of internally originated loans. Servicing assets purchased in bulk from third
parties are initially recorded on Doral Financials financial statement at the
amount paid for such assets. The unamortized balance of the servicing assets
is reflected on Doral Financials Consolidated Statements of Financial
Condition. No servicing assets have been recognized for the portion of Doral
Financials mortgage servicing portfolio consisting of loans internally
originated by Doral Financial prior to the adoption in 1995 of SFAS No. 122
amounting to approximately $525.7 million.

Doral Financials servicing assets are amortized in proportion to, and
over the period of, estimated servicing income. Amortization of servicing
assets is included as a component of Servicing Income in Doral Financials
Consolidated Statements of Income.

For additional information regarding the unamortized balance of Doral
Financials servicing assets and amortization for the quarters and nine month
periods ended September 30, 2002 and 2001, please refer to Note l to the
unaudited consolidated financial statements contained herein.

Increases in prepayment rates or credit loss rates over anticipated levels
used in calculating the value of IOs and servicing assets can adversely affect
Doral Financials revenues and liquidity by increasing the amortization rates
for servicing assets and IOs, as well as requiring Doral Financial to recognize
an impairment against income over and above scheduled amortization. See
Interest Rate Risk Management.

31



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##### Table of Contents



BALANCE SHEET AND OPERATING DATA ANALYSIS

LOAN PRODUCTION

The following table sets forth the number and dollar amount of Doral
Financials loan production for the periods indicated:

TABLE G
LOAN PRODUCTION
(Dollars in Thousands,
Except for Average Initial Loan Balance)

|                                                   |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |           | 
|-------------------------------------------------- | ----------------------- | - | ------------- | --------- | ------------------- | - | ------- | --------- | ---- | - | ------- | --------- |  | - | ------- | --------- | 
|                                                   |                         |   | QUARTER ENDED |           | NINE MONTH PERIOD  
|                                                   |                         |   | SEPTEMBER 30, |           | ENDED SEPTEMBER 30,
|                                                   |                         |   |               |           |                    
|                                                   |                         |   | 2002          |           | 2001                |   | 2002    |           | 2001
|                                                   |                         |   |               |           |                     |   |         |           |     
|FHA/VA mortgage loans                              |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Number of loans         |   |               | 1,405     |                     |   |         | 1,369     |      |   |         | 4,694     |  |   |         | 4,466     | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Volume of loans         |   | $             | 125,415   |                     |   | $       | 111,042   |      |   | $       | 413,657   |  |   | $       | 394,490   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Percent of total volume |   |               | 9%        |                     |   |         | 10%       |      |   |         | 11%       |  |   |         | 13%       | 
|                                                  
|
|                                                  
|                                                  
|                                                  
|                                                  
|Conventional conforming mortgage loans             |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Number of loans         |   |               | 3,454     |                     |   |         | 2,924     |      |   |         | 10,490    |  |   |         | 8,405     | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Volume of loans         |   | $             | 511,672   |                     |   | $       | 451,656   |      |   | $       | 1,511,815 |  |   | $       | 1,036,767 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Percent of total volume |   |               | 39%       |                     |   |         | 41%       |      |   |         | 40%       |  |   |         | 34%       | 
|                                                  
|
|                                                  
|                                                  
|                                                  
|                                                  
|Conventional non  conforming mortgage
loans(1)(2) |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Number of loans         |   |               | 6,849     |                     |   |         | 5,895     |      |   |         | 17,362    |  |   |         | 15,253    | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Volume of loans         |   | $             | 523,631   |                     |   | $       | 380,778   |      |   | $       | 1,350,611 |  |   | $       | 1,249,843 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Percent of total volume |   |               | 39%       |                     |   |         | 35%       |      |   |         | 36%       |  |   |         | 41%       | 
|                                                  
|
|                                                  
|                                                  
|                                                  
|                                                  
|Other(3)                                           |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Number of loans         |   |               | 534       |                     |   |         | 378       |      |   |         | 1,473     |  |   |         | 1,201     | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Volume of loans         |   | $             | 168,545   |                     |   | $       | 149,847   |      |   | $       | 494,947   |  |   | $       | 378,386   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Percent of total volume |   |               | 13%       |                     |   |         | 14%       |      |   |         | 13%       |  |   |         | 12%       | 
|                                                  
|
|                                                  
|                                                  
|                                                  
|                                                  
|Total loans                                        |                         |   |               |           |                     |   |         |           |      |   |         |           |  |   |         |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Number of loans         |   |               | 12,242    |                     |   |         | 10,566    |      |   |         | 34,019    |  |   |         | 29,325    | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Volume of loans         |   | $             | 1,329,263 |                     |   | $       | 1,093,323 |      |   | $       | 3,771,030 |  |   | $       | 3,059,486 | 
|                                                  
|
|                                                  
|                                                  
|                                                  
|                                                  
|Average initial loan balance                       |                         | $ | 108,582       |           |                     | $ | 103,475 |           |      | $ | 110,851 |           |  | $ | 104,330 |          



---

|(1) |  | Includes $15.1 million and $13.7 million in second mortgages for
the quarters ended September 30, 2002 and 2001, respectively and $44.1
million and $43.3 million in second mortgages for the nine month
periods ended September 30, 2002 and 2001, respectively.                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes $30.7 million and $24.9 million in home equity or
personal loans secured by real estate mortgages of up to $40,000 for
the quarters ended September 30, 2002 and 2001, respectively and $69.7
million and $98.7 million for the nine month periods ended September
30, 2002 and 2001, respectively.
|   
|   
|   
|   
|(3) |  | Consists of construction loans on residential projects, mortgage
loans secured by multi-family and commercial properties as well as
other commercial, land and consumer loans.                                                                                                                              

A substantial portion of Doral Financials total mortgage loan
originations has consistently been comprised of refinance loans. For the nine
months ended September 30, 2002 and 2001, refinance loans represented
approximately 55% and 50%, respectively, of the total dollar volume of
mortgage loans originated (excluding loans purchased from third parties) for
both periods. Doral Financials future results could be adversely affected by
a significant increase in mortgage interest rates that may reduce refinancing
activity. However, the Company believes that refinancing activity

32



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is less
sensitive to interest rate changes in Puerto Rico
than in the mainland United States because a significant amount of
refinance loans are made for debt consolidation purposes.

The following table sets forth the sources of Doral Financials loan
production as a percentage of total loan originations for the periods
indicated:

TABLE H
LOAN ORIGINATION SOURCES

|                         |  |                                       |    |      |  |       |   |             |  |    |    |       |  |  |    |   |  |  |   |   |  |  |    |  
|------------------------ |  | ------------------------------------- | -- | ---- |  | ----- | - | ----------- |  | -- | -- | ----- |  |  | -- | - |  |  | - | - |  |  | -- | -
|                         |  | NINE MONTH PERIOD ENDED SEPTEMBER 30,
|                         |  |                                      
|                         |  | 2002                                  |    | 2001
|                         |  |                                       |    |     
|                         |  | Puerto Rico                           |    | US   |  | Total |   | Puerto Rico |  | US |    | Total
|                         |  |                                       |    |      |  |       |   |             |  |    |    |      
|Retail                   |  |                                       | 54 | %    |  |       |  |             |  |    | 54 | %     |  |  | 56 | % |  |  |  |   |  |  | 56 | %
|                        
|                        
|                        
|                        
|Wholesale(1)             |  |                                       | 31 | %    |  |       | 1 | %           |  |    | 32 | %     |  |  | 30 | % |  |  |  |   |  |  | 30 | %
|                        
|                        
|                        
|                        
|New Housing Developments |  |                                       | 10 | %    |  |       |  |             |  |    | 10 | %     |  |  | 8  | % |  |  | 1 | % |  |  | 9  | %
|                        
|                        
|                        
|                        
|Multi-family             |  |                                       |   |      |  |       | 1 | %           |  |    | 1  | %     |  |  |   |   |  |  | 1 | % |  |  | 1  | %
|                        
|                        
|                        
|                        
|Other(2)                 |  |                                       | 2  | %    |  |       | 1 | %           |  |    | 3  | %     |  |  | 3  | % |  |  | 1 | % |  |  | 4  | %



---

|(1) |  | Refers to purchases of
mortgage loans from other financial institutions and mortgage lenders.
Puerto Rico wholesale purchases include U.S. mortgage loans purchased by
Doral Financials Puerto Rico based companies.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Refers to commercial, consumer
and land loans originated through the retail
banking subsidiaries and other specialized units.                                                                                        

MORTGAGE LOAN SERVICING

Doral Financials principal source of servicing rights has traditionally
been its internal mortgage loan production. However, Doral Financial also
purchases mortgage loans on a servicing released basis as well as servicing
rights in bulk. During the third quarters of 2002 and 2001, Doral Financial
purchased servicing rights to approximately $83.1 million and $99.9 million,
respectively, in principal amount of mortgage loans. For the nine month
periods ended September 30, 2002 and 2001, the Company purchased servicing
rights to approximately $275.2 million and $259.3 million, respectively, in
principal amount of mortgage loans. Doral Financial intends to continue
growing its mortgage servicing portfolio by internal loan originations and
wholesale purchases of loans on a servicing released basis but will also
continue to seek and consider attractive opportunities for bulk purchases of
servicing rights from third parties.

33



---



##### Table of Contents



The following table sets forth certain information regarding the total
mortgage loan servicing portfolio of Doral Financial for the periods indicated:

TABLE I
MORTGAGE LOAN SERVICING
(Dollars in Thousands, Except for Average Size of Loans Prepaid)

|                                                                  |                               |   |                     |           |      |   |           |           | 
|----------------------------------------------------------------- | ----------------------------- | - | ------------------- | --------- | ---- | - | --------- | --------- | 
|                                                                  |                               |   | AS OF SEPTEMBER 30,
|                                                                  |                               |   |                    
|                                                                  |                               |   | 2002                |           | 2001
|                                                                  |                               |   |                     |           |     
|COMPOSITION OF SERVICING PORTFOLIO AT PERIOD END:                 |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|GNMA                                                              |                               | $ | 3,185,036           |           |      | $ | 3,279,140 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|FHLMC/FNMA                                                        |                               |   | 2,724,419           |           |      |   | 2,594,788 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Doral Financial grantor trusts                                    |                               |   | 53,432              |           |      |   | 70,164    |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other conventional mortgage loans(1)                              |                               |   | 4,960,373           |           |      |   | 3,781,089 |          
|                                                                  |                               |   |                     |           |      |   |           |          
|Total servicing portfolio                                         |                               | $ | 10,923,260          |           |      | $ | 9,725,181 |          
|                                                                  |                               |   |                     |           |      |   |           |          
|SELECTED DATA REGARDING MORTGAGE LOANS SERVICED:                  |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Number of loans                                                   |                               |   | 140,061             |           |      |   | 133,952   |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Weighted average interest rate                                    |                               |   | 7.47                | %         |      |   | 7.67      | %        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Weighted average remaining maturity (months)                      |                               |   | 255                 |           |      |   | 253       |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Weighted average servicing fee rate                               |                               |   | .3378               | %         |      |   | .3231     | %        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Average servicing portfolio                                       |                               | $ | 10,583,886          |           |      | $ | 9,279,544 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Principal prepayments                                             |                               | $ | 1,187,139           |           |      | $ | 927,219   |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Prepayments to average portfolio (annualized)                     |                               |   | 15                  | %         |      |   | 13        | %        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Average size of loans prepaid                                     |                               | $ | 76,937              |           |      | $ | 68,693    |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|DELINQUENT MORTGAGE LOANS AND PENDING
FORECLOSURES AT PERIOD END: |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|60-89 days past due                                               |                               |   | 1.30                | %         |      |   | 1.45      | %        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|90 days or more past due                                          |                               |   | 2.04                | %         |      |   | 2.15      | %        
|                                                                  |                               |   |                     |           |      |   |           |          
|Total delinquencies excluding foreclosures                        |                               |   | 3.34                | %         |      |   | 3.60      | %        
|                                                                  |                               |   |                     |           |      |   |           |          
|Foreclosures pending                                              |                               |   | 1.57                | %         |      |   | 1.31      | %        
|                                                                  |                               |   |                     |           |      |   |           |          
|SERVICING
PORTFOLIO ACTIVITY:                                     |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Beginning servicing portfolio                                     |                               | $ | 10,006,380          |           |      | $ | 8,804,706 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Add:                                                              |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Loans funded and purchased(2) |   |                     | 2,167,514 |      |   |           | 1,907,052 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Bulk servicing acquired       |   |                     | 275,236   |      |   |           | 259,348   | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Less:                                                             |                               |   |                     |           |      |   |           |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Servicing sales transferred   |   |                     | 59,219    |      |   |           | 138,548   | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Run-off(3)                    |   |                     | 1,466,651 |      |   |           | 1,107,377 | 
|                                                                  |                               |   |                     |           |      |   |           |          
|Ending servicing portfolio                                        |                               | $ | 10,923,260          |           |      | $ | 9,725,181 |          
|                                                                  |                               |   |                     |           |      |   |           |          



---

|(1) |  | Includes $2.0 billion and $1.2 billion of loans owned by
Doral Financial at September 30, 2002 and 2001, respectively, which
represented 18% and 12% of the total servicing portfolio as of such
dates.                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Excludes approximately $1.6 billion and $1.2 billion of
commercial, consumer, construction and other loans not included in
Doral Financials mortgage servicing portfolio as of September 30,
2002 and 2001, respectively.
|   
|   
|   
|   
|(3) |  | Run-off refers to regular amortization of loans, prepayments
and foreclosures.                                                                                                                                            

Substantially all of the mortgage loans in Doral Financials servicing
portfolio are secured by single (one-to-four) family residences secured by real
estate located in Puerto Rico. At September 30, 2002 and 2001, approximately
4% and 5%, respectively, of Doral Financials mortgage servicing portfolio was
related to mortgages secured by real property located outside Puerto
Rico in the U.S. mainland.

The amount of principal prepayments on mortgage loans serviced by Doral
Financial was $1.2 billion and $927.2 million for the nine months ended
September 30, 2002 and 2001, respectively. This represented approximately 15%
and 13%, respectively, on an annualized basis of the average principal amount
of mortgage loans serviced. Doral

34



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Financial reduces the sensitivity of its servicing
income to increases in prepayment rates through a strong retail origination
network that has permitted Doral Financial to increase or maintain the size of
its servicing portfolio even during periods of declining interest rates and
high prepayments.

CREDIT RISKS RELATED TO LOAN ACTIVITIES

With respect to mortgage loans originated for sale as part of its mortgage
banking business, Doral Financial is generally at risk for any mortgage loan
default from the time it originates the mortgage loan until the time it sells
the loan or packages it into a mortgage-backed security. With respect to FHA
loans, Doral Financial is fully insured as to principal by the FHA against
foreclosure loss. VA loans are guaranteed up to 25% to 50% of the principal
amount of the loan subject to a maximum, ranging from $22,500 to $50,750.
Loan-to-value ratios for residential mortgage loans generally do not exceed 80%
(85% for certain qualifying home purchase transactions through Doral Bank PR) unless
private mortgage insurance is obtained.

Loans that do not qualify for the insurance or guarantee programs of FHA
and VA, or the sale or exchange programs of FNMA or FHLMC (non-conforming
loans), including loans secured by multi-family projects, are often sold to
investors on a partial or full recourse basis. In such cases, Doral Financial
retains part or all of the credit risk associated with such loan after sale.
As of September 30, 2002, the outstanding principal balance of loans sold
subject to full recourse or partial recourse was $2.2 billion. The maximum
amount of loans that Doral Financial would have been required to repurchase if
all loans subject to recourse defaulted was $1.4 billion. As of September 30,
2002, Doral Financial maintained a reserve of $2.8 million for potential losses
from such arrangements which is included in Accrued expenses and other
liabilities in Doral Financials Consolidated Financial Statements.

Loans secured by income-producing residential and commercial properties
involve greater credit risk because they are larger in size and more risk is
concentrated in a single borrower. The properties securing these loans are
also more difficult to dispose of in case of foreclosure.

Doral Financial is also subject to credit risk with respect to its
portfolio of loans receivable. Loans receivable represent loans that Doral
Financial holds for investment and, therefore, Doral Financial is at risk for
the term of the loan. As of September 30, 2002, approximately 56% or $448.4
million of Doral Financials gross loans receivable portfolio totaling $809.0
million consisted of construction loans, primarily for residential
projects.

Doral Financial manages credit risk by maintaining sound underwriting
standards, monitoring the quality of the loan portfolio, assessing reserves and
loan concentrations, recruiting qualified credit officers, implementing and
monitoring lending policies and collateral requirements, maintaining
appropriate collection procedures and instituting
procedures to ensure appropriate actions to comply with laws and regulations.
Doral Financials collateral requirements for loans depend on the financial
strength of the borrower and the type of loan involved. Acceptable collateral
principally includes cash, deposit and investment accounts and real estate,
and, to a lesser extent, liens on accounts receivable, lease receivables,
inventory and personal property. In the case of non-conforming loans sold
subject to recourse, Doral Financial also generally requires lower
loan-to-value ratios to protect itself from possible losses on foreclosure.

Because most of Doral Financials loans are made to borrowers located in
Puerto Rico and secured by properties located in Puerto Rico, Doral Financial
is subject to greater credit risks tied to adverse economic, political or
business developments and natural hazards, such as hurricanes, that may affect
Puerto Rico. For example, if Puerto Ricos real estate market were to
experience an overall decline in property values, the Companys rates of loss
on foreclosure would probably increase.

NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

Non-performing assets (NPAs) consist of loans past due 90 days and still
accruing, loans on a non-accrual basis and other real estate owned. Beginning
in the second quarter of 2002, conventional mortgage loans held for sale by Doral
Financials mortgage banking units are placed on a non-accrual basis after they
have been delinquent for more than 180 days to the extent concern exists as to
ultimate collectibility based on the loan-to-value ratio. When the loan is placed

35



---



##### Table of Contents



on non-accrual, its accrued interest
to date is fully reserved. Prior to the second quarter of 2002, mortgage loans
held-for-sale by Doral Financials mortgage banking units were placed on a
non-accrual basis if they had been delinquent for over a year and concern
existed as to ultimate collectibility based on loan-to-value ratios
and only accrued interest over one year was fully reserved. This
change in policy resulted in an increase in the amount of residential mortgage
loans held by the mortgage banking units classified as non-accrual as reflected
in the table below. Doral Financial believes that its non-accrual policy for
mortgage loans held for sale in its mortgage banking units is reasonable
because these loans are adequately secured by real estate, usually have a low
loan-to-value ratio, and the amounts due on the loans have
historically been recovered
through the sale of the property after foreclosure or negotiated settlements
with borrowers. Doral Financials banking subsidiaries place all loans more
than 90 days past due on a non-accrual basis, at which point a reserve for all
unpaid interest previously accrued is established. Interest income is
recognized when the borrower makes a payment, and the loan will return to an
accrual basis when it is no longer more than 90 days delinquent and
collectibility is reasonably assured. As of September 30, 2002 and 2001, Doral
Financial would have recognized $5.0 million and $1.4 million, respectively, in
additional interest income had all delinquent loans been accounted for on an
accrual basis. Doral Financial evaluates loans receivable for impairment.
Impaired loans as of September 30, 2002 and December 31, 2001 amounted to
approximately $497,000 and $2.1 million, respectively. Under the sale
agreement, Doral Financial is required to advance scheduled payments of
principal and interest on the loans. During the nine months ended September
30, 2002, the Company sold approximately $64.0 million of residential FHA
insured or VA guaranteed delinquent loans. No FHA/VA delinquent loans were
sold during the third quarter of 2002. Doral Financial determined that, given
the fair value of the loans collateral, no impairment allowance was necessary
at September 30, 2002 or December 31, 2001.

The following table sets forth information with respect to Doral
Financials non-accrual loans, other real estate owned (OREO) and other
non-performing assets as of the dates indicated. Doral Financial did not have
any troubled debt restructurings as of any of the periods presented.

36



---



##### Table of Contents



TABLE J
NON-PERFORMING ASSETS
(DOLLARS IN THOUSANDS)

|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|------------------------------------------------------ | ------------------------------------------------------------------------------------------------ | ----------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ----- | 
|                                                       |                                                                                                  |                               |   | AS OF              |        | AS OF            
|                                                       |                                                                                                  |                               |   | SEPTEMBER 30, 2002 |        | DECEMBER 31, 2001
|                                                       |                                                                                                  |                               |   |                    |        |                  
|Mortgage banking business:                             |                                                                                                  |                               |   |                    |        |                   |   |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Non-accrual loans:                                                                               |                               |   |                    |        |                   |   |        |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Construction loans            |   | $                  | 497    |                   |   | $      | 705   | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Residential mortgage loans(1) |   |                    | 13,883 |                   |   |        | 3,742 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Construction loans past due 90 days and still accruing                                           |                               |   | 2,101              |        |                   |   |       |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Loans held-for-sale past due 90 days and still accruing(2)                                       |                               |   | 56,519             |        |                   |   | 55,966 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | OREO                                                                                             |                               |   | 10,834             |        |                   |   | 7,924  |      
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|                                                       | Total NPAs of mortgage banking business                                                          |                               |   | 83,834             |        |                   |   | 68,337 |      
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|Other lending activities through banking subsidiaries: |                                                                                                  |                               |   |                    |        |                   |   |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Non-accrual loans:                                                                               |                               |   |                    |        |                   |   |        |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Construction                  |   |                    | 654    |                   |   |        | 1,184 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Residential mortgage loans    |   |                    | 8,081  |                   |   |        | 5,276 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Commercial real estate        |   |                    | 4,152  |                   |   |        | 1,651 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Consumer                      |   |                    | 1,028  |                   |   |        | 463   | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Commercial non-real estate    |   |                    | 30     |                   |   |        | 418   | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                  | Land loans                    |   |                    |       |                   |   |        | 70    | 
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|                                                       | Total non-accrual loans                                                                          |                               |   | 13,945             |        |                   |   | 9,062  |      
|                                                      
|                                                       | Residential mortgage loans past due 90 days and still
accruing                                   |                               |   | 506                |        |                   |   |       |      
|                                                      
|                                                       | Construction loans past due 90 days and still accruing                                           |                               |   | 49                 |        |                   |   |       |      
|                                                       |                                                                                                  |                               |  
|                                                       | OREO                                                                                             |                               |   | 943                |        |                   |   | 490    |      
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|                                                       | Total NPAs of banking subsidiaries                                                               |                               |   | 15,443             |        |                   |   | 9,552  |      
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|                                                       | Total NPAs of Doral Financial (consolidated)                                                     |                               | $ | 99,277             |        |                   | $ | 77,889 |      
|                                                       |                                                                                                  |                               |   |                    |        |                   |   |        |       | 
|                                                       | Total NPAs of banking subsidiaries as a percentage
of their loans receivable, net, and OREO      |                               |   | 2.14               | %      |                   |   | 1.58   | %    
|                                                      
|                                                       | Total NPAs of Doral Financial as a percentage of
consolidated total assets                       |                               |   | 1.30               | %      |                   |   | 1.16   | %    
|                                                      
|                                                       | Ratio of allowance for loan losses to total
non-performing loans at end of period (consolidated) |                               |   | 17.26              | %      |                   |   | 17.95  | %    



---

|(1) |  | During the second quarter of 2002, the Company adopted a new
policy in which mortgage loans held-for-sale by its mortgage
banking units are placed on a non-accrual basis after they are
delinquent for more than 180 days and if the loan-to-value ratio
indicates that there is a concern as to the ultimate
collectibility of the loan. Prior to the second quarter of 2002,
mortgage loans held-for-sale by Doral Financials mortgage
banking units were placed on a non-accrual basis if they had been
delinquent for over a year and if the loan-to-value ratio
indicated concern as to the ultimate collectibility of the loan.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Does not include approximately $26.5 million and $12.7
million of 90 days past due FHA/VA loans as of September 30, 2002
and December 31, 2001, respectively, which are not considered
non-performing assets by Doral Financial because the principal
balance of these loans is insured or guaranteed under applicable
FHA and VA programs and interest is, in most cases, fully
recovered in foreclosure proceedings.                                                                                                                                                                                                                 

37



---



##### Table of Contents



The following table summarizes certain information regarding Doral
Financials allowance for loan losses and losses on other real estate owned
(OREO), for both Doral Financials banking and mortgage banking business for
the periods indicated.

TABLE K
ALLOWANCE FOR LOAN LOSSES AND OREO
(DOLLARS IN THOUSANDS)

|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |      |  
|----------------------------------------------------------------------------------------- | ---------------------------- | - | ------------- | ---- | ------------------- | - | ------ | ---- | ---- | - | ------ | ---- | - | - | ------ | ---- | -
|                                                                                          |                              |   | QUARTER ENDED |      | NINE MONTH PERIOD  
|                                                                                          |                              |   | SEPTEMBER 30, |      | ENDED SEPTEMBER 30,
|                                                                                          |                              |   |               |     
|                                                                                          |                              |   | 2002          |      | 2001                |   | 2002   |      | 2001
|                                                                                          |                              |   |               |      |                     |   |        |     
|OREO:                                                                                     |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Balance at beginning of period                                                            |                              | $ | 2,280         |      |                     | $ | 1,588  |      |      | $ | 1,365  |      |   | $ | 1,530  |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Provision for losses                                                                      |                              |   | 1,220         |      |                     |   | 230    |      |      |   | 2,111  |      |   |   | 500    |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net gains, charge-offs and others                                                         |                              |   | (391          | )    |                     |   | 185    |      |      |   | (367   | )    |   |   | (27    | )   
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Balance at end of period                                                                  |                              | $ | 3,109         |      |                     | $ | 2,003  |      |      | $ | 3,109  |      |   | $ | 2,003  |     
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Allowance for Loan Losses:                                                                |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Balance at beginning of period                                                            |                              | $ | 13,531        |      |                     | $ | 10,907 |      |      | $ | 12,472 |      |   | $ | 9,387  |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Provision for loan losses                                                                 |                              |   | 2,055         |      |                     |   | 1,062  |      |      |   | 3,792  |      |   |   | 3,128  |     
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Charge  offs:                                                                            |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Mortgage loans held-for-sale |   |               |     |                     |   |        |     |      |   |        | (90  | ) |   |        | (234 | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Construction                 |   |               |     |                     |   |        |     |      |   |        |     |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Residential mortgage loans   |   |               |     |                     |   |        |     |      |   |        |     |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Commercial real estate       |   |               |     |                     |   |        |     |      |   |        |     |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Consumer                     |   |               | (471 | )                   |   |        | (143 | )    |   |        | (997 | ) |   |        | (530 | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Commercial non-real estate   |   |               | (78  | )                   |   |        | (37  | )    |   |        | (98  | ) |   |        | (47  | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other                        |   |               | (19  | )                   |   |        |     |      |   |        | (116 | ) |   |        |     |  
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Total Charge-offs                                                                         |                              |   | (568          | )    |                     |   | (180   | )    |      |   | (1,301 | )    |   |   | (811   | )   
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Recoveries:                                                                               |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Mortgage loans held-for-sale |   |               |     |                     |   |        |     |      |   |        |     |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Construction                 |   |               |     |                     |   |        |     |      |   |        |     |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Residential mortgage loans   |   |               |     |                     |   |        |     |      |   |        | 14   |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Commercial real estate       |   |               | 1    |                     |   |        |     |      |   |        | 1    |   |   |        |     |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Consumer                     |   |               | 61   |                     |   |        | 44   |      |   |        | 112  |   |   |        | 96   |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Commercial non-real estate   |   |               | 11   |                     |   |        |     |      |   |        | 14   |   |   |        | 33   |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other                        |   |               |     |                     |   |        |     |      |   |        | 11   |   |   |        |     |  
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Total recoveries                                                                          |                              |   | 73            |      |                     |   | 44     |      |      |   | 152    |      |   |   | 129    |     
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Net charge-offs                                                                           |                              |   | (495          | )    |                     |   | (136   | )    |      |   | (1,149 | )    |   |   | (682   | )   
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Other Adjustments                                                                         |                              |   | 12            |      |                     |   | (148   | )    |      |   | (12    | )    |   |   | (148   | )   
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Balance at end of period(1)                                                               |                              | $ | 15,103        |      |                     | $ | 11,685 |      |      | $ | 15,103 |      |   | $ | 11,685 |     
|                                                                                          |                              |   |               |      |                     |   |        |      |      |   |        |      |   |   |        |     
|Allowance for loan losses as a percentage of
total loans outstanding at the end of period |                              |   | 0.49          | %    |                     |   | 0.50   | %    |      |   | 0.49   | %    |   |   | 0.50   | %   
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net charge-offs to average loans outstanding                                              |                              |   | 0.02          | %    |                     |   | 0.01   | %    |      |   | 0.04   | %    |   |   | 0.03   | %   



---

|(1) |  | Includes the allowance of mortgage loans held-for-sale of $7.1 million
for 2002 and $5.9 million for 2001 and the allowance for loans receivable held
for investment of $8.0 million for 2002 and $5.8 million for 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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The allowance for loan losses relating to loans held by Doral Financial
was $15.1 million at September 30, 2002, compared to $11.7 million as of
September 30, 2001. The increase in the allowance was primarily the result of
the increase in the size of the loan portfolio.

LIQUIDITY AND CAPITAL RESOURCES

Doral Financial has an ongoing need for capital to finance its lending,
servicing and investing activities. This need is expected to increase as the
volume of the loan originations and investing activity increases. Doral
Financials cash requirements arise mainly from loan originations and
purchases, purchases and holding of securities, repayments of debt upon
maturity, payments of operating and interest expenses and servicing advances
and loan repurchases pursuant to recourse or warranty obligations.

Servicing agreements relating to the mortgage-backed securities programs
of FNMA, FHLMC and GNMA, and to mortgage loans sold to certain other investors,
require Doral Financial to advance funds to make scheduled payments of
principal, interest, taxes and insurance, if such payments have not been
received from the borrowers. While Doral Financial generally recovers funds
advanced pursuant to these arrangements within 30 days, it must absorb the cost
of the funds it advances during the time the advance is outstanding. During
the nine month period ended September 30, 2002, the monthly average amount of
funds advanced by Doral Financial under such servicing agreements was
approximately $8.6 million, compared to $10.1 million for the same period
during 2001.

Doral Financials primary sources of liquidity are sales in the secondary
mortgage market of the loans it originates and purchases, short-term borrowings
under warehouse, gestation and repurchase agreement lines of credit secured by
pledges of its loans and mortgage-backed securities and revenues from
operations. Doral Financials banking subsidiaries also rely on deposits and
borrowings from the FHLB-NY. Doral Financial has also relied on
privately-placed and publicly offered debt financings and public offerings of
preferred and common stock. During the second quarter of 2002, Doral Financial
sold 4,140,000 shares of nonconvertible noncumulative perpetual preferred stock
at a price to the public of $25.00 per share pursuant to a public underwritten
offering. The net proceeds to Doral Financial after the underwriting discounts
and expenses were approximately $100,013,000.

The following table shows Doral Financials sources of borrowings and the
related average interest rate as of September 30, 2002 and December 31, 2001:

TABLE L
SOURCES OF BORROWINGS
(DOLLARS IN THOUSANDS)

|                      |  |                          |           |                         |  |             |      |         |  |   |           |  |  |  |      |  
|--------------------- |  | ------------------------ | --------- | ----------------------- |  | ----------- | ---- | ------- |  | - | --------- |  |  |  | ---- | -
|                      |  | AS OF SEPTEMBER 30, 2002 |           | AS OF DECEMBER 31, 2001
|                      |  |                          |           |                        
|                      |  | AMOUNT                   |           | AVERAGE                 |  | AMOUNT      |      | AVERAGE
|                      |  | OUTSTANDING              |           | RATE                    |  | OUTSTANDING |      | RATE   
|                      |  |                          |           |                         |  |             |      |        
|Repurchase Agreements |  | $                        | 2,276,416 |                         |  |             | 3.91 | %       |  | $ | 2,573,772 |  |  |  | 4.00 | %
|                     
|                     
|                     
|                     
|Loans Payable         |  |                          | 202,080   |                         |  |             | 2.84 | %       |  |   | 161,101   |  |  |  | 3.67 | %
|                     
|                     
|                     
|                     
|Deposits              |  |                          | 2,106,619 |                         |  |             | 3.02 | %       |  |   | 1,669,909 |  |  |  | 3.65 | %
|                     
|                     
|                     
|                     
|Notes Payable         |  |                          | 618,711   |                         |  |             | 7.79 | %       |  |   | 459,543   |  |  |  | 7.98 | %
|                     
|                     
|                     
|                     
|Advances from FHLB    |  |                          | 1,061,500 |                         |  |             | 4.14 | %       |  |   | 687,500   |  |  |  | 4.80 | %

Doral Financial had warehousing, gestation and repurchase agreements lines
of credit totaling $7.6 billion as of September 30, 2002,
of which $2.5 billion
was outstanding as of such date. Of the aggregate amount of funding available
under Doral Financials warehousing and repurchase lines of credit,
approximately $1.9 billion represented committed facilities under which the
lender is committed to advance funds subject to compliance with various
conditions. The remaining funding was available under uncommitted lines
pursuant to which advances are made at the discretion of the lender. Doral
Financials committed lines of credit generally require Doral Financial to
comply with various financial covenants and ratios. Failure to comply with any
of these covenants permits the lender to require immediate

39



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##### Table of Contents



repayment of all
amounts previously advanced and to
stop making any further advances to Doral Financial. As of September 30,
2002, Doral Financial was in compliance with all such financial covenants and
ratios.

The following table presents the average balance and the annualized
average rate paid on each deposit type for the periods indicated:

TABLE M
AVERAGE DEPOSIT BALANCE
(DOLLARS IN THOUSANDS)

|                         |                |   |                          |           |                   |  |         |      |         |   |         |           |  |  |      |      |  
|------------------------ | -------------- | - | ------------------------ | --------- | ----------------- |  | ------- | ---- | ------- | - | ------- | --------- |  |  | ---- | ---- | -
|                         |                |   | NINE MONTH PERIOD        |           | YEAR ENDED       
|                         |                |   | ENDED SEPTEMBER 30, 2002 |           | DECEMBER 31, 2001
|                         |                |   |                          |           |                  
|                         |                |   | AVERAGE                  |           | AVERAGE           |  | AVERAGE |      | AVERAGE
|                         |                |   | BALANCE                  |           | RATE              |  | BALANCE |      | RATE   
|                         |                |   |                          |           |                   |  |         |      |        
|Certificates of deposit  |                | $ | 1,137,763                |           |                   |  | 4.07    | %    |         | $ | 904,910 |           |  |  | 4.87 | %   
|                        
|                        
|                        
|                        
|Regular passbook savings |                |   | 178,270                  |           |                   |  | 2.98    | %    |         |   | 101,038 |           |  |  | 4.33 | %   
|                        
|                        
|                        
|                        
|Now accounts             |                |   | 406,598                  |           |                   |  | 2.30    | %    |         |   | 299,486 |           |  |  | 2.80 | %   
|                        
|                        
|                        
|                        
|Non-interest bearing     |                |   | 263,335                  |           |                   |  |        |      |         |   | 177,862 |           |  |  |     |     
|                         |                |   |                          |           |                   |  |         |      |         |   |         |           |  |  |      |     
|                        
|                        
|                        
|                        
|                         | Total deposits |   | $                        | 1,985,966 |                   |  |         | 3.65 | %       |   | $       | 1,483,296 |  |  |      | 4.75 | %
|                         |                |   |                          |           |                   |  |         |      |         |   |         |           |  |  |      |     

The following table sets forth the maturities of certificates of deposit
having principal amounts of $100,000 or more at September 30, 2002.

TABLE N
DEPOSIT MATURITIES
(IN THOUSANDS)

|                                 |                                |  |        |         | 
|-------------------------------- | ------------------------------ |  | ------ | ------- | 
|                                 |                                |  | AMOUNT
|                                 |                                |  |       
|Certificates of deposit maturing |                                |  |        |        
|                                
|                                
|                                
|                                
|                                 | Three months or less           |  | $      | 186,893 | 
|                                
|                                
|                                
|                                
|                                 | Over three through six months  |  |        | 127,614 | 
|                                
|                                
|                                
|                                
|                                 | Over six through twelve months |  |        | 164,176 | 
|                                
|                                
|                                
|                                
|                                 | Over twelve months             |  |        | 451,907 | 
|                                 |                                |  |        |         | 
|                                 | Total                          |  | $      | 930,590 | 
|                                 |                                |  |        |         | 

As
of September 30, 2002 and December 31, 2001, Doral
Financials retail banking
subsidiaries had approximately $687.4 million and $418.1 million, respectively,
in brokered deposits obtained through broker-dealers. Brokered deposits are
used by Doral Financials banking subsidiaries as a source of long-term funds.
Brokered deposits, however, are generally considered a less stable source of
funding than core deposits obtained through retail bank branches. Investors
that invest in brokered deposits are generally very sensitive to interest rates
and will generally move funds from one depository institution to another based
on minor differences in rates offered on deposits.

As of September 30, 2002, Doral Financial, Doral Bank PR and Doral Bank NY
were in compliance with all the regulatory capital requirements that were
applicable to them as a bank holding company, state non-member bank and Federal
savings bank, respectively (i.e., total capital and Tier 1 capital to risk
weighted assets of at least 8% and 4%, respectively, and Tier 1 capital to
average assets of at least 4%). Set forth below are Doral Financials, Doral
Bank PRs and Doral Bank NYs regulatory capital ratios as of September 30,
2002, based on existing Federal Reserve, FDIC and OTS guidelines, respectively.

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##### Table of Contents



TABLE O
REGULATORY CAPITAL RATIOS

|                                                              |  |           |      |         |  |            |      |   |  |  |      |  
|------------------------------------------------------------- |  | --------- | ---- | ------- |  | ---------- | ---- | - |  |  | ---- | -
|                                                              |  | DORAL     |      | DORAL   |  | DORAL     
|                                                              |  | FINANCIAL |      | BANK PR |  | BANK NY(1)
|                                                              |  |           |      |         |  |           
|Tier 1 Capital Ratio (Tier 1 capital to risk weighted assets) |  |           | 18.6 | %       |  |            | 14.3 | % |  |  | 23.1 | %
|                                                             
|                                                             
|                                                             
|                                                             
|Total Capital (total capital to risk weighted assets)         |  |           | 18.9 | %       |  |            | 14.6 | % |  |  | 23.2 | %
|                                                             
|                                                             
|                                                             
|                                                             
|Leverage Ratio(2)                                             |  |           | 13.4 | %       |  |            | 7.4  | % |  |  | 11.3 | %



---

|(1) |  | In connection with the chartering of Doral Bank NY in
October 1999, the FDIC required that it be initially capitalized
with $25 million. As Doral Bank NY continues to increase its
assets, its capital ratios can be expected to decline.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Tier 1 capital to average assets in the case of Doral
Financial and Doral Bank PR and Tier 1 capital to adjusted total
assets in the case of Doral Bank NY.                                                                               

As of September 30, 2002, Doral Bank PR and Doral Bank NY were
considered well-capitalized banks for purposes of the prompt
corrective action regulations adopted by the FDIC pursuant to the
Federal Deposit Insurance Corporation Improvement Act of 1991. To be
considered a well capitalized institution under the FDICs
regulations, an institution must maintain a Leverage Ratio of at least
5%, a Tier 1 Capital Ratio of at least 6% and a Total Capital Ratio of
at least 10% and not be subject to any written agreement or directive
to meet a specific capital ratio.

On November 29, 2001, the federal banking and thrift regulatory
agencies adopted a final rule that changes the regulatory capital
treatment of recourse obligations, residual interests and direct
credit substitutes. The new rules became effective on January 1, 2002,
for transactions settled on or after January 1, 2002. For transactions
entered into before January 1, 2002, Doral Financial is not required
to implement the rule until December 31, 2002. The new rule attempts
to more consistently treat recourse obligations for the agencies
risk-based capital requirements. The rule also imposes a new
dollar-for-dollar capital requirement on residual interests retained
in sale or securitization transactions and a 25% limit on the amount
of Tier 1 capital that may consist of credit-enhancing interest-only
strips, a subset of residual interests.

The rule clarifies that, subject to certain exceptions, the
entire amount of assets sold with recourse, not just the contractual
amount of the recourse obligation is converted into an on-balance
sheet credit equivalent amount. The credit equivalent amount, less any
recourse liability reflected on the balance sheet, is then risk
weighted for purposes of applying the applicable capital requirement.
The risk weighting for residential mortgage loans is currently 50%. As
of September 30, 2002, Doral Financials outstanding balance of loans
sold with full or partial recourse was $2.2 billion.

Currently, most of the IOs created in connection with the sale by
Doral Financial of its non-conforming loans are treated as
credit-enhancing interest-only strips under the new rules and thus are
subject to a dollar-for-dollar capital requirement for risk based
capital purposes and to the 25% concentration limit for Tier 1 capital
purposes. The capital ratios set forth above incorporate the impact
of the new capital rules for IOs created after January 1, 2002.

Substantially all of Doral Financials recourse obligations and
IOs are recorded at the parent company level and, accordingly, the new
rule only directly impacts the regulatory requirements applicable to
Doral Financial as a bank holding company. While the full
implementation of the new rule effective on December 31, 2002 is
expected to reduce Doral Financials regulatory capital ratios at the
holding company level, Doral Financial anticipates that it will
continue to comply with all applicable capital requirements. Set forth
below, are Doral Financials pro-forma capital ratios for risk-based
capital purposes as of September 30, 2002 assuming full implementation
of the new rules as of such date.

|                     |  |                 |      |  
|-------------------- |  | --------------- | ---- | -
|                     |  | DORAL FINANCIAL
|                     |  |                
|Tier 1 Capital Ratio |  |                 | 15.0 | %
|                    
|                    
|                    
|                    
|Total Capital Ratio  |  |                 | 15.2 | %
|                    
|                    
|                    
|                    
|Leverage Ratio       |  |                 | 12.3 | %

41



---



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Doral Financial expects that it will continue to have adequate liquidity,
financing arrangements and capital resources to finance its
operations and will continue to explore alternative and supplementary methods of
financing its operations, including both debt and equity financing. There can
be no assurance, however, that Doral Financial will be successful in
consummating any such transactions.

ASSETS AND LIABILITIES

At September 30, 2002, Doral Financials total assets were $7.7 billion
compared to $6.7 billion at December 31, 2001. The increase in assets was due
primarily to a net increase in the loan portfolio of approximately $507.4
million and a net increase in money market investments of approximately $929.4
million which were offset in part by a decrease of
$548.0 million in the investment
securities portfolio. Total liabilities were $6.7 billion at September 30,
2002, compared to $5.9 billion at December 31, 2001. The increase in
liabilities was largely the result of an increase in deposit accounts, notes
payable and advances from FHLB which were offset in part by a decrease of
$297.4 million in securities sold under agreements to repurchase. At September
30, 2002, deposit accounts totaled $2.1 billion, compared to $1.7 billion at
December 31, 2001. As of September 30, 2002, Doral
Financials retail banking
subsidiaries had $4.6 billion in assets, compared to $3.7 billion at December
31, 2001.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The tables below summarize Doral Financials contractual obligations and
other commercial commitments as of September 30, 2002.

TABLE P
CONTRACTUAL OBLIGATIONS
(DOLLARS IN THOUSANDS)

|                                              |  |                       |           |        |  |           |           |           |  |       |           |  |  |   |         |         |  |   |           | 
|--------------------------------------------- |  | --------------------- | --------- | ------ |  | --------- | --------- | --------- |  | ----- | --------- |  |  | - | ------- | ------- |  | - | --------- | 
|                                              |  | PAYMENT DUE BY PERIOD
|                                              |  |                      
|                                              |  |                       |           |        |  | LESS THAN |           |           |  |       |           |  |  |   |         | AFTER 5
|CONTRACTUAL OBLIGATIONS                       |  | TOTAL                 |           | 1 YEAR |  | 1-3 YEARS |           | 3-5 YEARS |  | YEARS
|                                              |  |                       |           |        |  |           |           |           |  |      
|Repurchase and warehousing lines
of credit(1) |  | $                     | 2,478,496 |        |  | $         | 1,336,618 |           |  | $     | 55,000    |  |  | $ | 200,000 |         |  | $ | 886,878   | 
|                                             
|                                             
|                                             
|                                             
|Deposits                                      |  |                       | 2,106,619 |        |  |           | 1,585,860 |           |  |       | 302,574   |  |  |   | 216,704 |         |  |   | 1,481     | 
|                                             
|                                             
|                                             
|                                             
|Other borrowed funds                          |  |                       | 1,680,211 |        |  |           | 163,775   |           |  |       | 641,995   |  |  |   | 104,407 |         |  |   | 770,034   | 
|                                             
|                                             
|                                             
|                                             
|Non-cancellable operating leases              |  |                       | 52,605    |        |  |           | 4,976     |           |  |       | 8,688     |  |  |   | 8,289   |         |  |   | 30,652    | 
|                                              |  |                       |           |        |  |           |           |           |  |       |           |  |  |   |         |         |  |   |           | 
|Total Contractual Cash Obligations            |  | $                     | 6,317,931 |        |  | $         | 3,091,229 |           |  | $     | 1,008,257 |  |  | $ | 529,400 |         |  | $ | 1,689,045 | 
|                                              |  |                       |           |        |  |           |           |           |  |       |           |  |  |   |         |         |  |   |           | 



---

|(1) |  | Includes $1.1 billion of long-term repurchase agreement with call features.
|--- |  | ---------------------------------------------------------------------------

TABLE Q
OTHER COMMERCIAL COMMITMENTS
(DOLLARS IN THOUSANDS)

|                                          |  |                                            |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |   |         | 
|----------------------------------------- |  | ------------------------------------------ | --------- | --------- |  | --------- | ------- | --------- |  | ----- | ------- |  |  | ------- | ------ |  |  | - | ------- | 
|                                          |  | AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
|                                          |  |                                           
|                                          |  | TOTAL                                      |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |  
|                                          |  | AMOUNT                                     |           | LESS THAN |  |           |         |           |  |       |         |  |  | AFTER 5
|OTHER COMMERCIAL COMMITMENTS              |  | COMMITTED                                  |           | 1 YEAR    |  | 1-3 YEARS |         | 3-5 YEARS |  | YEARS
|                                          |  |                                            |           |           |  |           |         |           |  |      
|Standby Repurchase (Recourse) Obligations |  | $                                          | 1,362,382 |           |  | $         | 352,278 |           |  | $     | 333,105 |  |  | $       | 23,491 |  |  | $ | 653,508 | 
|                                          |  |                                            |           |           |  |           |         |           |  |      

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INTEREST RATE RISK MANAGEMENT

General. Interest rate fluctuation is the primary market risk affecting
Doral Financial. The effect of changes in interest rates on the volume of
mortgage loan originations, the net interest income earned on Doral Financials
portfolio of loans and securities, the amount of gain on sale of loans, and the
value of Doral Financials loan servicing portfolio and securities holdings, as
well as Doral Financials strategies to manage such effects, are discussed in
Doral Financials Annual Report to Shareholders, which information is also
incorporated by reference into the Companys Annual Report on Form 10-K for the
year ended December 31, 2001 under Managements Discussion and Analysis of
Financial Condition and Results of Operations  Interest Rate Risk Management.

In the future, Doral Financial may use alternative hedging techniques
including futures, options, interest rate swap agreements or other hedge
instruments to help mitigate interest rate and market risk. However, there can
be no assurance that any of the above hedging techniques will be successful. To
the extent they are not successful, Doral Financials profitability may be
adversely affected. For additional information on the use of derivatives to
manage interest rate risk, see Derivatives below.

Interest Rate Sensitivity Analysis.The following table summarizes the
contractual maturities or repricing of Doral Financials interest-earning
assets and interest-bearing liabilities as of September 30, 2002. Condensed
information as of December 31, 2001 is also shown. In addition, investments
held by Doral Financial which have call features are presented according to
their contractual maturity date. Interest rate swap agreements are presented
on the basis of the notional amounts used to calculate the contractual amounts
to be exchanged under such swap agreements.

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TABLE R
INTEREST RATE SENSITIVITY ANALYSIS
(DOLLARS IN THOUSANDS)

|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |           | 
|---------------------------------------- | ------------------------------------------ | ------- | -------- | --------- | ------ | ----- | ---------- | ------- | ------ | ------- | ---------- | ------- |  | - | --------- | --------- |  |  | -------- | --------- |  |  | - | --------- | 
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  | NON-     |           |  |  |  
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  | INTEREST |           |  |  |  
|                                         |                                            |         | 1 YEAR   |           | 1 TO 3 |       | 3 TO 5     |         | OVER 5 |         | RATE       |         |  |   |          
|AS OF SEPTEMBER 30, 2002                 |                                            | OR LESS |          | YEARS     |        | YEARS |            | YEARS   |        | BEARING |            | TOTAL  
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |        
|ASSETS                                   |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|                                         | Cash and Money Market                      |         | $        | 1,539,973 |        |       | $          |        |        |         | $          |        |  |   | $         |          |  |  | $        |          |  |  | $ | 1,539,973 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Total Loans                                |         |          | 468,296   |        |       |            | 254,327 |        |         |            | 165,605 |  |   |           | 2,210,789 |  |  |          |          |  |  |   | 3,099,017 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Securities Held-for-Trading                |         |          | 326,809   |        |       |            | 1,616   |        |         |            | 11,241  |  |   |           | 892,626   |  |  |          |          |  |  |   | 1,232,292 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Securities Available for Sale              |         |          |          |        |       |            |        |        |         |            |        |  |   |           | 459,154   |  |  |          |          |  |  |   | 459,154   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Securities Held-to-Maturity                |         |          | 2,000     |        |       |            | 5,077   |        |         |            | 5,757   |  |   |           | 535,570   |  |  |          |          |  |  |   | 548,404   | 
|                                        
|                                        
|                                        
|                                        
|                                         | FHLB Stock                                 |         |          |          |        |       |            |        |        |         |            |        |  |   |           | 76,445    |  |  |          |          |  |  |   | 76,445    | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other Assets                               |         |          |          |        |       |            |        |        |         |            |        |  |   |           |          |  |  |          | 710,879   |  |  |   | 710,879   | 
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                         | Total
Assets                               |         | $        | 2,337,078 |        |       | $          | 261,020 |        |         | $          | 182,603 |  |   | $         | 4,174,584 |  |  | $        | 710,879   |  |  | $ | 7,666,164 | 
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|LIABILITIES AND
STOCKHOLDERS EQUITY     |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|                                         | Loans Payable                              |         | $        | 202,080   |        |       | $          |        |        |         | $          |        |  |   | $         |          |  |  | $        |          |  |  | $ | 202,080   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Repurchase Agreements                      |         |          | 1,134,538 |        |       |            | 55,000  |        |         |            | 200,000 |  |   |           | 886,878   |  |  |          |          |  |  |   | 2,276,416 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Deposits                                   |         |          | 1,315,568 |        |       |            | 302,574 |        |         |            | 216,704 |  |   |           | 1,481     |  |  |          | 270,292   |  |  |   | 2,106,619 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other Borrowed Funds                       |         |          | 163,775   |        |       |            | 641,995 |        |         |            | 104,407 |  |   |           | 770,034   |  |  |          |          |  |  |   | 1,680,211 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other Liabilities                          |         |          |          |        |       |            |        |        |         |            |        |  |   |           |          |  |  |          | 403,197   |  |  |   | 403,197   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Stockholders Equity                       |         |          |          |        |       |            |        |        |         |            |        |  |   |           |          |  |  |          | 997,641   |  |  |   | 997,641   | 
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                         | Total
Liabilities and Stockholders Equity |         | $        | 2,815,961 |        |       | $          | 999,569 |        |         | $          | 521,111 |  |   | $         | 1,658,393 |  |  | $        | 1,671,130 |  |  | $ | 7,666,164 | 
|                                         |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|Notional amount of -                     |                                            |         |          |           |        |       |            |         |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|Interest Rate Swaps                      |                                            | $       | 200,000  |           |        | $     |           |         |        | $       | (200,000   | )       |  | $ |          |           |  |  |          |           |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|Interest Rate Sensitivity Gap            |                                            |         | (278,883 | )         |        |       | (738,549   | )       |        |         | (538,508   | )       |  |   | 2,516,191 |           |  |  | (960,251 | )         |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|Cumulative Interest Rate Sensitivity Gap |                                            |         | (278,883 | )         |        |       | (1,017,432 | )       |        |         | (1,555,940 | )       |  |   | 960,251   |           |  |  |          |           |  |  |   |          
|                                        
|                                        
|                                        
|                                        
|Cumulative Gap to Interest-Earning Asset |                                            |         | (4.01%   | )         |        |       | (14.63%    | )       |        |         | (22.37%    | )       |  |   | 13.81%    |           |  |  |          |           |  |  |   |          

|                                          |                     |         |            |        |  |        |            |         |   |  |            |   |  |  |           |   | 
|----------------------------------------- | ------------------- | ------- | ---------- | ------ |  | ------ | ---------- | ------- | - |  | ---------- | - |  |  | --------- | - | 
|CONDENSED INTEREST RATE                   |                     |         |            |        |  |        |            |         |   |  |            |   |  |  |           |  
|SENSITIVITY ANALYSIS                      |                     |         |            |        |  |        |            |         |   |  |            |   |  |  |           |  
|AS OF DECEMBER 31, 2001                   |                     | 1 YEAR  |            | 1 TO 3 |  | 3 TO 5 |            | OVER 5 
|(DOLLARS IN THOUSANDS)                    |                     | OR LESS |            | YEARS  |  | YEARS  |            | YEARS  
|                                          |                     |         |            |        |  |        |            |        
|Off-Balance Sheet Instruments -           |                     |         |            |        |  |        |            |         |   |  |            |   |  |  |           |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest Rate Swaps |         | $          | 50,000 |  |        | $          | (50,000 | ) |  | $          |  |  |  | $         |  | 
|                                         
|                                         
|                                         
|                                         
|Interest Rate Sensitivity Gap             |                     |         | (2,035,260 | )      |  |        | (189,331   | )       |   |  | (431,058   | ) |  |  | 3,357,634 |  
|                                         
|                                         
|                                         
|                                         
|Cumulative Interest Rate Sensitivity Gap  |                     |         | (2,035,260 | )      |  |        | (2,224,591 | )       |   |  | (2,655,649 | ) |  |  | 701,985   |  
|                                         
|                                         
|                                         
|                                         
|Cumulative Gap to Interest-Earning Assets |                     |         | (33.75%    | )      |  |        | (36.89%    | )       |   |  | (44.04%    | ) |  |  | 11.64%    |  

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Gap analysis measures the volume of assets and liabilities at a point in
time and their repricing during future periods. The net balance of assets and
liabilities (the gap) repricing during future periods is an indicator of the
degree of interest rate risk being assumed by the Company. A positive gap
generally denotes asset sensitivity and that increases in interest rates would
have a positive effect on net interest income while a decrease in interest
rates would have a negative effect on net interest income. A negative gap
generally denotes liability sensitivity and means that an increase in interest
rates would have a negative effect on net interest income while a decrease in
rates would have a positive effect on net interest income. While static gap
analysis may be a useful measure for determining short-term risk to future net
interest income under certain circumstances, it does not measure the
sensitivity of the market value of assets and liabilities to changes in
interest rates. In addition, since the static gap analysis is presented on the
basis of contractual maturities, it does not take into account that a large
portion of Doral Financials loans held for sale and trading securities will be
sold or prepaid before their contractual maturities.

Derivatives.Doral Financial uses derivatives to
manage its exposure to interest rate
risk caused by changes in interest rates beyond the control of
management. Derivatives include interest rate swaps, interest rate
collars, futures, forwards and options.
Derivatives are generally either privately-negotiated over-the-counter (OTC)
or standard contracts transacted through regulated exchanges. OTC contracts
generally consist of swaps, forwards and options. Exchange traded derivatives
include futures and options.

In
March 2002, Doral Financial purchased two interest rate collars,
designated to protect the Company against rising interest rates, with an
aggregate notional amount of $200 million expiring in March 2007. Under the
terms of the collars, Doral Financial is entitled to receive the excess between
the 3 month LIBOR and 5.5% provided that the 3 month LIBOR is less than 8.5%.
Doral Financial will not receive any payments if the 3 month LIBOR is less than
5.5% or greater than 8.5%. The premium paid by Doral Financial amounted to
$3,680,000 and the fair value of the collars as of September 30, 2002 was
approximately $849,000. These collars are accounted for at fair value with
changes in the fair value accounted for in the trading activities of the
statements of income.

In
June 2002, Doral Financial purchased an interest rate collar,
designated to protect the Company against rising interest rates, with a
notional amount of $200 million expiring in June 2006. Under the terms of the
collar, Doral Financial is entitled to receive the excess between the 3 month
LIBOR and 5.0%. Doral Financial will not receive any payments if the 3 month
LIBOR, is less than 5.0%. The premium paid by Doral Financial amounted to
$4,865,000 and the fair value of the collar as of September 30, 2002 was
approximately $1,914,000. The collar is accounted for at fair value with
changes in the fair value accounted for in the trading activities of the
statements of income.

In August 2002, Doral Financial Corporation purchased an interest rates
collar, designated to protect the Company against rising interest rates, with a notional amount of $200 million expiring in March 2007. Under
the terms of the collar, Doral Financial is entitled to receive the excess
between the 3 month LIBOR and 5.5% provided that the 3 month LIBOR is less
than 8.5%. Doral Financial will not receive any payments if the 3 month LIBOR
is less than 5.5% or greater than 8.5%. The premium paid by Doral Financial
amounted to $2,080,000, and the fair value of the collar as of September 30,
2002, was approximately $849,000. The collar is accounted for at fair value
with the changes in the fair value accounted for in the trading activities of
the statements of income.

In September 2002, Doral Financial Corporation purchased five interest
rates collars, designated to protect the Company against rising interest
rates, with an aggregate notional amount of $600 million expiring in
September 2007. Under the terms of the collars, Doral Financial is entitled to
receive the excess between the 3 month LIBOR and 5.5% provided that the 3
month LIBOR is less than 8.5%. Doral Financial will not receive any payments
if the 3 month LIBOR is less than 5.5% or greater than 8.5%. The premium paid
by Doral Financial amounted to $5,570,000, and the fair value of the collars as
of September 30, 2002, was $3,840,000. These collars are accounted for at fair
value with the changes in the fair value accounted for in the trading
activities of the statements of income.

Doral
Bank PR utilizes interest rate swap agreements to manage its
interest rate exposure. Interest rate swap agreements generally involve an
agreement between two parties to exchange payments that are based,
respectively, on fixed and floating interest rates that are calculated on
the basis of a specified amount of principal (the notional amount). The
parties are not, however, required to make any payments of principal.
Non-performance by the counterparty exposes Doral Bank PR to interest rate and
credit risk. At September 30, 2002, Doral Bank PR had

45



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outstanding four
interest rate swaps agreements. The agreements are for a notional
principal amount of $50,000,000, $50,000,000, $100,000,000 and
$100,000,000, respectively, and are designated to protect Doral Bank PR from
the repricing of its short-term liabilities during a rising interest
rate environment. These agreements end on November
5, 2002, January 16, 2003, September 11, 2007, and September 12, 2007,
respectively. The interest rate to be received by Doral Bank PR under each of
the swaps agreements is 100% of the three-month LIBOR rate. The rates being
received by Doral Bank on these swap agreements was 1.81%, 1.86%, 1.80%, and
1.82%, respectively, as of September 30, 2002. The fixed interest rate to be
paid by Doral Bank under these agreements was 6.125%, 5.495%, 3.69% and 3.655%,
respectively, as of September 30, 2002. At September 30, 2002, the agreements
had an aggregate negative fair value of $5.1 million which is recorded as a
liability in Doral Financials Consolidated Financial Statements.

Although Doral Financial uses derivatives to manage market risk, for
financial reporting purposes its general policy is to account for such
instruments on a marked-to-market basis with gains or losses charged to
operations as they occur. Contracts with positive fair values are recorded as
assets and contracts with negative fair values as liabilities, after the
application of netting arrangements. For the nine months ended September 30,
2002 average assets and liabilities related to derivatives were $18.2 million
and $16.3 million, respectively. The notional amounts of assets and
liabilities related to these derivatives totaled $102.5 billion and $80.3
billion, respectively, as of September 30, 2002. Notional amounts indicate the
volume of derivatives activity but do not represent Doral Financials exposure
to market or credit risk.

The table below summarizes the fair values of Doral Financials
derivatives, as well the source of the fair values.

TABLE S
FAIR VALUE RECONCILIATION
(DOLLARS IN THOUSANDS)

|                                                                   |  |   |         |  
|------------------------------------------------------------------ |  | - | ------- | -
|Fair value of contracts outstanding at the beginning of the period |  | $ | 1,534   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Contracts realized or otherwise settled during the period          |  |   | (33,093 | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Fair value of new contracts entered into during the period         |  |   | 19,108  |  
|                                                                   |  |   |         |  
|Fair value of contracts outstanding at the end of the period       |  | $ | (12,451 | )
|                                                                   |  |   |         |  

TABLE T
SOURCE OF FAIR VALUE
(DOLLARS IN THOUSANDS)

|                                          |  |                       |         |           |  |           |        |            |  |            |       |          |  |   |   |  |  |   |         |  
|----------------------------------------- |  | --------------------- | ------- | --------- |  | --------- | ------ | ---------- |  | ---------- | ----- | -------- |  | - | - |  |  | - | ------- | -
|                                          |  | PAYMENT DUE BY PERIOD
|                                          |  |                      
|                                          |  | MATURITY              |         |           |  |           |        |            |  |            |       | MATURITY |  |   |   | 
|                                          |  | LESS THAN             |         | MATURITY  |  | MATURITY  |        | IN EXCESS  |  | TOTAL FAIR
|SOURCE OF FAIR VALUE                      |  | 1 YEAR                |         | 1-3 YEARS |  | 3-5 YEARS |        | OF 5 YEARS |  | VALUE     
|                                          |  |                       |         |           |  |           |        |            |  |           
|Prices actively quoted                    |  | $                     | (13,155 | )         |  | $         | (1,655 | )          |  | $          |      |          |  | $ |  |  |  | $ | (14,810 | )
|                                         
|                                         
|                                         
|                                         
|Prices provided by other external sources |  |                       | (1,097  | )         |  |           |       |            |  |            | 3,456 |          |  |   |  |  |  |   | 2,359   |  
|                                          |  |                       |         |           |  |           |        |            |  |            |       |          |  |   |   |  |  |   |         |  
|                                          |  | $                     | (14,252 | )         |  | $         | (1,655 | )          |  | $          | 3,456 |          |  | $ |  |  |  | $ | (12,451 | )
|                                          |  |                       |         |           |  |           |        |            |  |            |       |          |  |   |   |  |  |   |         |  

The use of derivatives involves market and credit risk. The market risk
of derivatives arises principally from the potential for changes in the value
of derivative contracts based on changes in interest rates. Doral Financial
generally manages its risks by taking risk-offsetting positions.

The credit risk of derivatives arises from the potential of a counterparty
to default on its contractual obligations. Credit risk related to derivatives
depend on the following: the current fair value of outstanding contracts with
an entity; the potential credit exposure on the derivative over time; the
extent to which legally enforceable netting arrangements

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allow the offsetting
of contracts with the same entity to be netted against each
other; the extent to which collateral held against the contract reduces
credit risk; and the likelihood of defaults by the counterparty.

To manage this credit risk, Doral Financial deals with counterparties of
good credit standing, enters into master netting agreements whenever possible
and, when appropriate, obtains collateral. Master netting agreements
incorporate rights of set-off that provide for the net settlement of contracts
with the same counterparty in the event of default. The credit risk associated
with futures contracts is also limited due to daily cash settlement of the net
change in the value of open contracts with the exchange on which the contract
is traded.

INFLATION

General and administrative expenses increase with inflation. However, the
increase in real estate values in Puerto Rico in recent years has been a
positive factor for Doral Financials mortgage banking business. The average
size of loans originated tends to increase as home values appreciate, which
serves to increase loan origination fees and servicing income faster than the
cost of providing such services. Additionally, appreciation in real estate
property values reduces the loan-to-value ratios of existing loans. Interest
rates normally increase during periods of high inflation and decrease during
periods of low inflation. See Interest Rate Risk Management in the
Managements Discussion and Analysis of Financial Condition and Results of
Operations section of the Companys Annual Report on Form 10-K for the year
ended December 31, 2001 for a discussion of the effects of changes of interest
rates on Doral Financials operations.

CHANGES IN ACCOUNTING STANDARDS

Goodwill and Intangible Assets.On January 1, 2002, Doral Financial
adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142).
SFAS No. 142 addresses financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes APB Opinion No. 17, Intangible
Assets. It addresses how intangible assets that are acquired individually or
with a group of other assets (but not those acquired in a business combination)
should be accounted for in financial statements upon their acquisition. SFAS
No. 142 also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements.

Under SFAS No. 142, goodwill and intangible assets that have indefinite
useful lives will not be amortized but rather will be tested at least annually
for impairment. Intangible assets that have finite useful lives will continue
to be amortized over their useful lives, but without the constraint of an
arbitrary ceiling. SFAS No. 142 provides specific guidance for testing
goodwill for impairment. In addition, it provides specific guidance on testing
intangible assets that will not be amortized for impairment and thus removes
those intangible assets from the scope of other impairment guidance. In
connection with the adoption of SFAS No. 142, Doral Financial assessed the
value of its existing goodwill which had a carrying value of $9.1 million and
determined that its goodwill was not impaired. Doral Financial also ceased
amortizing this goodwill. For the nine month period ended September 30, 2001,
amortization of goodwill amounted to approximately $466,000.

Accounting for the Impairment or Disposal of Long-Lived Assets.On
January 1, 2002, Doral Financial adopted SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement supersedes SFAS
No. 121 and APB 30 and develops an accounting model for long-lived assets that
are to be disposed of by sale. Doral Financials adoption of this statement
did not have any effect on its consolidated financial statements.

Accounting for Asset Retirement Obligations.In June 2001, the FASB
issued SFAS No. 143 Accounting for Asset Retirement Obligations. This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. Management believes
that the adoption of this statement will not have a material effect on the
consolidated financial statements of Doral Financial.

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Rescission of FASB Statements No. 4, 44 and 64, Amendment of SFAS No. 13
and Technical Corrections.In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44 and 64, Amendment of SFAS No. 13 and
Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, an amendment of APB Opinion No. 30, which
required all gains and losses from extinguishment of debt to be aggregated and,
if material, classified as extraordinary item, net of related income tax
effect. As a result, the criteria in Opinion No. 30 will now be used to
classify those gains and losses. This amendment became effective on July 1,
2002. Doral Financials adoption of this statement did not have any effect on
its consolidated financial statements.

SFAS No. 145 also amends SFAS No. 13, Accounting for Leases, which
requires that certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. This amendment became effective for transactions
occurring after May 15, 2002. The adoption of this statement did not have a
significant effect on the consolidated financial statements of Doral Financial.

Accounting for Costs Associated with Exit or Disposal Activities.In June
2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. The provisions of this statement are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. Management believes that the adoption of this
statement will not have a significant effect on the consolidated financial
statements of Doral Financial.

Acquisitions
of Certain Financial Institutions. In October 2002, the FASB
issued SFAS No. 147, Acquisitions of Certain Financial
Institutions. SFAS No. 147 removes financial acquisitions of
financial institutions from the scope of both SFAS No. 72,
Accounting for Certain Acquisitions of Banking or Thrift
Institutions, and FASB Interpretation No. 9, Applying APB
Opinions No. 16 and 17, When a Savings and Loan Association or a
Similar Institution is Acquired in a Business Combination Accounted
for by the Purchase Method and requires that those transactions
be accounted for in accordance with FASB Statements No. 141,
Business Combinations, and No. 142, Goodwill and
Other Intangible Assets. In addition, SFAS No. 147 amends FASB
Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term
customer-relationship intangible assets of financial institutions
such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. SFAS No. 147s transition
provisions require affected institutions to reclassify their SFAS No.
72 goodwill as SFAS No. 142 goodwill as of the date the company
initially applied SFAS No. 142 in its entirety. The adoption of SFAS
No. 147 will not have a material impact on the Companys
financial condition or results of operations.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding market risk to which the Company is exposed, see
the information contained under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations  Interest Rate Risk
Management.




ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this Quarterly Report on
Form 10-Q, an evaluation was carried out under the supervision and with the
participation of Doral Financials management, including its Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures were
effective. No significant changes were made in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.




PART II  OTHER INFORMATION




ITEM 1  LEGAL PROCEEDINGS

In the opinion of the Companys management, the pending and threatened
legal proceedings of which management is aware will not have a material adverse
effect on the financial condition of the Company.




ITEM 2  CHANGES IN SECURITIES

Not applicable.




ITEM 3  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

48



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##### Table of Contents






ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.




ITEM 5  OTHER INFORMATION

Three-for-Two Stock Split.On August 9, 2002, Doral Financial announced
that the Companys Board of Directors had declared a three-for-two stock split
on the Companys common stock. The stock split was effected in the form of a
stock dividend of one additional share of common stock issued on September 14,
2002, for every two shares of common stock held of record on August 30, 2002.
Fractional shares were settled in cash on the basis of the average of the high
and low sales price of the common stock on August 30, 2002. The per share data
contained in this Quarterly Report on Form 10-Q for periods prior to the
quarter ended September 30, 2002, has been adjusted to reflect the
three-for-two stock split.

Declaration of Cash Dividend.On August 9, 2002, the Board of Directors
of Doral Financial also voted to declare a cash dividend of $0.165 per common
share paid on September 6, 2002, to shareholders of record on August 23, 2002.
The dividend represents a 10% increase in the Companys quarterly dividend and
follows a 20% increase in the common stock dividend previously announced on
January 21, 2002. The additional shares issued as part of the stock split were
not be entitled to receive the cash dividend paid on September 6, 2002.
Following the effective date of the stock split, the regular quarterly dividend
on the common stock was adjusted from $0.165 per share to $0.11 per share, to
reflect the additional shares issued as part of the stock split.




ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits                                                                                        
| | --- |  | ------------------------------------------------------------------------------------------------
|
| |     |  | Exhibit 12(a)  Computation of Ratio of Earnings to Fixed Charges.                              
|
| |     |  | Exhibit 12(b)  Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends.

The Company has not filed as exhibits certain instruments defining the
rights of holders of debt of the Company not exceeding 10% of the total assets
of the Company and its consolidated subsidiaries. The Company will furnish
copies of any such instruments to the Securities and Exchange Commission upon
request.



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



| | (i)  |  | Current Report on Form 8-K, dated July 10, 2002,
reporting under Item 5 the issuance of a press release
announcing the unaudited earnings results for the quarter and
six months ended June 30, 2002.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | Current Report on Form 8-K, dated August 14,
2002, reporting under Item 9 the filing of the CEO and CFO
Certifications required by Section 906 of the Sarbanes-Oxley
Act.                            

49



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

|                        |  |                                         
|----------------------- |  | ----------------------------------------
|                        |  | DORAL FINANCIAL CORPORATION
(Registrant)
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|Date:
November 13, 2002 |  | /s/ Salomón Levis                       
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|                        |  | Salomón Levis                           
|                       
|                       
|                       
|                       
|                        |  | Chairman of the Board                   
|                       
|                       
|                       
|                       
|                        |  | and Chief Executive Officer             
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|Date:
November 13, 2002 |  | /s/Richard F. Bonini                    
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|                        |  | Richard F. Bonini                       
|                       
|                       
|                       
|                       
|                        |  | Senior Executive Vice President         
|                       
|                       
|                       
|                       
|                        |  | and Chief Financial Officer             
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|Date:
November 13, 2002 |  | /s/ Ricardo Meléndez                    
|                       
|                       
|                       
|                       
|                        |  |                                         
|                       
|                       
|                       
|                       
|                        |  | Ricardo Meléndez                        
|                       
|                       
|                       
|                       
|                        |  | Executive Vice President                
|                       
|                       
|                       
|                       
|                        |  | Principal Accounting Officer            

50



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##### Table of Contents



I, Salomón Levis, Chairman of the Board and Chief Executive Officer of
Doral Financial Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Doral
Financial Corporation;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a. |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                      
|----------------------- |  | ---------------------
|Date: November 13, 2002 |  | /s/     Salomón Levis
|                       
|                       
|                       
|                       
|                        |  |                      
|                       
|                       
|                       
|                       
|                        |  | Salomón Levis        





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##### Table of Contents



I, Richard F. Bonini, Senior Executive Vice President and Chief Financial
Officer of Doral Financial Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Doral
Financial Corporation;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a. |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                            
|----------------------- |  | ---------------------------
|Date: November 13, 2002 |  |                            
|                       
|                       
|                       
|                       
|                        |  |                            
|                       
|                       
|                       
|                       
|                        |  | /s/       Richard F.
Bonini
|                       
|                       
|                       
|                       
|                        |  | Richard F. Bonini          





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##### Table of Contents



INDEX TO EXHIBITS

|        |  |   |  |                                                                                 
|------- |  | - |  | --------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                 
|Number  |  |   |  | Description                                                                     
|        |  |   |  |                                                                                 
|12(a)   |  | - |  | Computation of Ratio of Earnings to Fixed Charges.                              
|       
|       
|       
|       
|12(b)   |  | - |  | Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.