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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



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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 JUNE 30, 2002
|           |  |                                                                                                                                     
|[ ]        |  | 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)                                                     
|                                                                                                                                    |  |                                                                                             
|1451 F.D. Roosevelt Avenue,
San Juan, Puerto Rico                                                                                   |  | 00920-2717                                                                                  
|                                                                                                                                    |  |                                                                                             
|(Address of principal executive offices)                                                                                            |  | (Zip Code)                                                                                  
|                                                                                                                                    |  |                                                                                             
|Registrants telephone number,
including area code
Former name, former address
and
Former fiscal year, if changed
since last report |  | (787) 474-6700
1159 F.D. Roosevelt Avenue,
San Juan, Puerto Rico 00920-2717
(Former address)

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
AUGUST 8, 2002: 47,946,034





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TABLE OF CONTENTS



|                                                  |                                                                                               |                                                            |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION            
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                         
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME           
|                                                  |                                                                                               | 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                           
|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                                       
|INDEX TO EXHIBITS                                
|Employment Agreement, Frederick C. Teed          
|Computation of Ratio of Earnings to Fixed Charges
|Computation of Ratio of Earnings to Fixed Charges



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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 June 30, 2002 and December 31, 2001                                                              |  |      | 4 | 
|                                                                                                | Consolidated Statements of Income (Unaudited)  Quarters ended June 30, 2002
and June 30, 2001 and six months ended June 30, 2002 and June 30, 2001               |  |      | 5 | 
|                                                                                                | Consolidated Statements of Changes in Stockholders Equity (Unaudited) -
Six months ended June 30, 2002 and June 30, 2001                                         |  |      | 6 | 
|                                                                                                | Consolidated Statements of Comprehensive Income (Unaudited)  Quarters ended
June 30, 2002 and June 30, 2001 and six months ended June 30, 2002 and June 30, 2001 |  |      | 7 | 
|                                                                                                | Consolidated Statements of Cash Flows (Unaudited)  Six months ended June 30, 2002
and June 30, 2001                                                              |  |      | 8 | 
|                                                                                                | Notes to Consolidated Financial Statements                                                                                                                        |  |      | 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                            |                                                                                                                                                                   |  | 46   |  
|                                                                                               
|PART II   OTHER INFORMATION                                                                    |                                                                                                                                                                   |  |      |  
|Item 1    Legal Proceedings                                                                    |                                                                                                                                                                   |  | 46   |  
|Item 2    Changes in Securities                                                                |                                                                                                                                                                   |  | 46   |  
|Item 3    Defaults Upon Senior Securities                                                      |                                                                                                                                                                   |  | 46   |  
|Item 4   Submission of Matters to a Vote of Security Holders                                   |                                                                                                                                                                   |  | 47   |  
|Item 5   Other Information                                                                     |                                                                                                                                                                   |  | 47   |  
|Item 6   Exhibits and Reports on Form 8-K                                                      |                                                                                                                                                                   |  | 48   |  
|SIGNATURES                                                                                      |                                                                                                                                                                   |  | 49   |  

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

|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |           |           |           | 
|-------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------- | --------- | --------- | --------- | ------------ | --------- | --------- | --------- | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           | JUNE 30,  |           | DECEMBER 31,
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           | 2002      |           | 2001        
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |             
|ASSETS               |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Cash and due from banks                                                                                                                                                                                        |                                                                              | $                                                 | 77,827    |           |           | $            | 45,970    |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Money market investments:                                                                                                                                                                                      |                                                                              |                                                   |           |           |           |              |           |          
|                     |                                                                                                                                                                                                                | Securities purchased under agreements to resell                              |                                                   |           | 160,738   |           |              |           | 54,866    |          
|                     |                                                                                                                                                                                                                | Time deposits with other banks                                               |                                                   |           | 565,219   |           |              |           | 240,146   |          
|                     |                                                                                                                                                                                                                | Other short term investments, at cost                                        |                                                   |           | 416,101   |           |              |           | 253,403   |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total money market investments                    |           |           | 1,142,058 |              |           |           | 548,415   | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Pledged
investment securities that can be re-pledged:                                                                                                                                                          |                                                                              |                                                   |           |           |           |              |           |          
|                     |                                                                                                                                                                                                                | Trading securities, at fair value                                            |                                                   |           | 726,761   |           |              |           | 756,499   |          
|                     |                                                                                                                                                                                                                | Securities available for sale, at fair value                                 |                                                   |           | 980,843   |           |              |           | 702,136   |          
|                     |                                                                                                                                                                                                                | Securities held to maturity, at amortized cost                               |                                                   |           | 758,991   |           |              |           | 762,247   |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total pledged investment securities               |           |           | 2,466,595 |              |           |           | 2,220,882 | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Other
investment securities:                                                                                                                                                                                   |                                                                              |                                                   |           |           |           |              |           |          
|                     |                                                                                                                                                                                                                | Trading securities, at fair value                                            |                                                   |           | 344,081   |           |              |           | 236,829   |          
|                     |                                                                                                                                                                                                                | Securities available for sale, at fair value                                 |                                                   |           | 149,743   |           |              |           | 226,043   |          
|                     |                                                                                                                                                                                                                | Securities held to maturity, at amortized cost                               |                                                   |           | 25,626    |           |              |           | 104,088   |          
|                     |                                                                                                                                                                                                                | Federal Home Loan Bank of NY (FHLB) stock, at cost                           |                                                   |           | 70,526    |           |              |           | 56,095    |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total other investment securities                 |           |           | 589,976   |              |           |           | 623,055   | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total investment securities and other instruments |           |           | 3,056,571 |              |           |           | 2,843,937 | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Loans:                                                                                                                                                                                                         |                                                                              |                                                   |           |           |           |              |           |          
|                     |                                                                                                                                                                                                                | Mortgage loans held for sale, at lower of cost or market, net                |                                                   |           | 2,109,772 |           |              |           | 1,947,494 |          
|                     |                                                                                                                                                                                                                | Loans receivable, net of allowance for loan losses of $6,460 (2001 - $6,000) |                                                   |           | 720,349   |           |              |           | 644,113   |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total loans                                       |           |           | 2,830,121 |              |           |           | 2,591,607 | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Receivables and mortgage servicing advances                                                                                                                                                                    |                                                                              |                                                   | 47,104    |           |           |              | 43,725    |          
|                     | Broker-dealers operations receivable                                                                                                                                                                          |                                                                              |                                                   | 394,782   |           |           |              | 274,422   |          
|                     | Accrued interest receivable                                                                                                                                                                                    |                                                                              |                                                   | 50,914    |           |           |              | 47,039    |          
|                     | Servicing assets, net                                                                                                                                                                                          |                                                                              |                                                   | 158,578   |           |           |              | 154,340   |          
|                     | Premises and equipment, net                                                                                                                                                                                    |                                                                              |                                                   | 112,430   |           |           |              | 99,935    |          
|                     | Real estate held for sale, net                                                                                                                                                                                 |                                                                              |                                                   | 9,465     |           |           |              | 8,414     |          
|                     | Other assets                                                                                                                                                                                                   |                                                                              |                                                   | 41,593    |           |           |              | 36,479    |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total assets                                      |           | $         | 7,921,443 |              |           | $         | 6,694,283 | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|LIABILITIES          |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     | Securities sold under agreements to repurchase                                                                                                                                                                 |                                                                              | $                                                 | 2,901,783 |           |           | $            | 2,573,772 |          
|                     | Loans payable                                                                                                                                                                                                  |                                                                              |                                                   | 197,611   |           |           |              | 161,101   |          
|                     | Deposits                                                                                                                                                                                                       |                                                                              |                                                   | 2,116,108 |           |           |              | 1,669,909 |          
|                     | Notes payable                                                                                                                                                                                                  |                                                                              |                                                   | 557,174   |           |           |              | 459,543   |          
|                     | Advances from FHLB                                                                                                                                                                                             |                                                                              |                                                   | 961,500   |           |           |              | 687,500   |          
|                     | Broker-dealers operations payable                                                                                                                                                                             |                                                                              |                                                   | 103,015   |           |           |              | 245,573   |          
|                     | Accrued expenses and other liabilities                                                                                                                                                                         |                                                                              |                                                   | 142,685   |           |           |              | 134,765   |          
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total liabilities                                 |           |           | 6,979,876 |              |           |           | 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; 47,941,784 and
47,866,334 shares issued in 2002 and 2001, respectively; 47,885,784 and
47,810,334 shares outstanding in 2002 and 2001, respectively |                                                                              |                                                   | 47,942    |           |           |              | 47,866    |          
|                     | Paid-in capital                                                                                                                                                                                                |                                                                              |                                                   | 214,934   |           |           |              | 217,594   |          
|                     | Legal surplus                                                                                                                                                                                                  |                                                                              |                                                   | 8,423     |           |           |              | 8,423     |          
|                     | Retained earnings                                                                                                                                                                                              |                                                                              |                                                   | 454,764   |           |           |              | 375,855   |          
|                     | Accumulated
other comprehensive loss, net of income tax benefit of $2,258
(2001 - $509)                                                                                                                        |                                                                              |                                                   | (12,690   | )         |           |              | (12,312   | )        
|                     | Treasury stock at par value, 56,000 shares held                                                                                                                                                                |                                                                              |                                                   | (56       | )         |           |              | (56       | )        
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total stockholders equity                        |           |           | 941,567   |              |           |           | 762,120   | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          
|                     |                                                                                                                                                                                                                |                                                                              | Total liabilities and stockholders equity        |           | $         | 7,921,443 |              |           | $         | 6,694,283 | 
|                     |                                                                                                                                                                                                                |                                                                              |                                                   |           |           |           |              |          

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

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

|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |   |         |         | 
|------------------------------------------- | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------- | - | ------------- | ------- | ---------------- | - | ------ | ------ | ------ | - | ------- | ------- | ------ | - | ------- | ------- | 
|                                            |          |                                                                                                                                                        |                                                                                    |   | QUARTER ENDED |         | SIX MONTH PERIOD
|                                            |          |                                                                                                                                                        |                                                                                    |   | JUNE 30,      |         | ENDED JUNE 30,  
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                 
|                                            |          |                                                                                                                                                        |                                                                                    |   | 2002          |         | 2001             |   | 2002   |        | 2001  
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |  
|Interest income:                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Loans                                                                                                                                                  |                                                                                    | $ | 49,393        |         |                  | $ | 39,108 |        |        | $ | 96,516  |         |        | $ | 74,932  |        
|                                            |          | Mortgage-backed securities                                                                                                                             |                                                                                    |   | 32,324        |         |                  |   | 23,999 |        |        |   | 60,972  |         |        |   | 44,403  |        
|                                            |          | Investment securities                                                                                                                                  |                                                                                    |   | 19,402        |         |                  |   | 16,819 |        |        |   | 38,221  |         |        |   | 40,067  |        
|                                            |          | Other interest-earning assets                                                                                                                          |                                                                                    |   | 4,211         |         |                  |   | 5,825  |        |        |   | 6,704   |         |        |   | 12,492  |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Total interest income                                                              |   |               | 105,330 |                  |   |        | 85,751 |        |   |         | 202,413 |        |   |         | 171,894 | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|Interest expense:                           |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Loans payable                                                                                                                                          |                                                                                    |   | 1,428         |         |                  |   | 4,220  |        |        |   | 2,758   |         |        |   | 9,823   |        
|                                            |          | Securities sold under agreements to repurchase                                                                                                         |                                                                                    |   | 26,432        |         |                  |   | 30,212 |        |        |   | 51,917  |         |        |   | 63,416  |        
|                                            |          | Deposits                                                                                                                                               |                                                                                    |   | 18,773        |         |                  |   | 17,782 |        |        |   | 35,464  |         |        |   | 35,666  |        
|                                            |          | Other borrowed funds                                                                                                                                   |                                                                                    |   | 21,020        |         |                  |   | 16,911 |        |        |   | 38,711  |         |        |   | 32,644  |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Total interest expense                                                             |   |               | 67,653  |                  |   |        | 69,125 |        |   |         | 128,850 |        |   |         | 141,549 | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Net interest income                                                                |   |               | 37,677  |                  |   |        | 16,626 |        |   |         | 73,563  |        |   |         | 30,345  | 
|Provision for loan losses                   |          |                                                                                                                                                        | 989                                                                                |   |               |         | 981              |   |        |        | 1,737  |   |         |         | 2,067  |  
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Net interest income after provision for loan losses                                |   |               | 36,688  |                  |   |        | 15,645 |        |   |         | 71,826  |        |   |         | 28,278  | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|Non-interest income:                        |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Net gain on mortgage loan sales and fees                                                                                                               |                                                                                    |   | 58,247        |         |                  |   | 45,462 |        |        |   | 104,237 |         |        |   | 91,357  |        
|                                            |          | Trading activities                                                                                                                                     |                                                                                    |   | (6,629        | )       |                  |   | (4,048 | )      |        |   | (11,699 | )       |        |   | (14,870 | )      
|                                            |          | Gain (loss) on sale of investment securities                                                                                                           |                                                                                    |   | 3,198         |         |                  |   | (628   | )      |        |   | 5,990   |         |        |   | 2,215   |        
|                                            |          | Servicing (loss) income, net of amortization of $10,511 - 2002 and $5,258 -
2001 for the quarter, $17,784 - 2002 and $10,010 - 2001 for the six
months |                                                                                    |   | (2,100        | )       |                  |   | 2,251  |        |        |   | (714    | )       |        |   | 4,494   |        
|                                            |          | Commissions, fees and other income                                                                                                                     |                                                                                    |   | 5,043         |         |                  |   | 4,391  |        |        |   | 9,554   |         |        |   | 7,887   |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Total non-interest income                                                          |   |               | 57,759  |                  |   |        | 47,428 |        |   |         | 107,368 |        |   |         | 91,083  | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|Non-interest expense:                       |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Compensation and benefits                                                                                                                              |                                                                                    |   | 13,698        |         |                  |   | 12,506 |        |        |   | 26,549  |         |        |   | 23,608  |        
|                                            |          | Taxes, other than payroll and income taxes                                                                                                             |                                                                                    |   | 1,190         |         |                  |   | 1,121  |        |        |   | 2,239   |         |        |   | 2,217   |        
|                                            |          | Advertising                                                                                                                                            |                                                                                    |   | 2,780         |         |                  |   | 2,653  |        |        |   | 5,211   |         |        |   | 4,458   |        
|                                            |          | Professional services                                                                                                                                  |                                                                                    |   | 1,758         |         |                  |   | 1,457  |        |        |   | 3,471   |         |        |   | 2,830   |        
|                                            |          | Communication and information systems                                                                                                                  |                                                                                    |   | 3,110         |         |                  |   | 2,560  |        |        |   | 5,854   |         |        |   | 4,743   |        
|                                            |          | Occupancy and other office expenses                                                                                                                    |                                                                                    |   | 5,141         |         |                  |   | 4,379  |        |        |   | 9,625   |         |        |   | 8,124   |        
|                                            |          | Depreciation and amortization                                                                                                                          |                                                                                    |   | 2,860         |         |                  |   | 2,552  |        |        |   | 5,429   |         |        |   | 4,744   |        
|                                            |          | Other                                                                                                                                                  |                                                                                    |   | 3,463         |         |                  |   | 1,026  |        |        |   | 6,250   |         |        |   | 1,926   |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Total non-interest expense                                                         |   |               | 34,000  |                  |   |        | 28,254 |        |   |         | 64,628  |        |   |         | 52,650  | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Income before income taxes and cumulative effect of change in
accounting principle |   |               | 60,447  |                  |   |        | 34,819 |        |   |         | 114,566 |        |   |         | 66,711  | 
|Income taxes                                |          |                                                                                                                                                        | 8,460                                                                              |   |               |         | 4,224            |   |        |        | 16,039 |   |         |         | 8,053  |  
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Income before cumulative effect of change in accounting principle                  |   |               | 51,987  |                  |   |        | 30,595 |        |   |         | 98,527  |        |   |         | 58,658  | 
|                                            |          |                                                                                                                                                        | Cumulative effect of change in accounting principle, net of tax                    |   |               |        |                  |   |        |       |        |   |         |        |        |   |         | 5,929   | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          |                                                                                                                                                        | Net income                                                                         |   | $             | 51,987  |                  |   | $      | 30,595 |        |   | $       | 98,527  |        |   | $       | 64,587  | 
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|Net income available to common shareholders |          | $                                                                                                                                                      | 49,073                                                                             |   |               | $       | 28,243           |   |        | $      | 93,261 |   |         | $       | 59,883 |  
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|Earnings per common share:                  |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            | Basic:   |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |   |        
|                                            |          | Income before cumulative effect of change in accounting principle                                                                                      |                                                                                    | $ | 1.03          |         |                  | $ | 0.66   |        |        | $ | 1.95    |         |        | $ | 1.27    |        
|                                            |          | Cumulative effect of change in accounting principle                                                                                                    |                                                                                    |   |              |         |                  |   |       |        |        |   |        |         |        |   | 0.14    |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Net income                                                                                                                                             |                                                                                    | $ | 1.03          |         |                  | $ | 0.66   |        |        | $ | 1.95    |         |        | $ | 1.41    |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            | Diluted: |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |   |        
|                                            |          | Income before cumulative effect of change in accounting principle                                                                                      |                                                                                    | $ | 1.01          |         |                  | $ | 0.65   |        |        | $ | 1.92    |         |        | $ | 1.25    |        
|                                            |          | Cumulative effect of change in accounting principle                                                                                                    |                                                                                    |   |              |         |                  |   |       |        |        |   |        |         |        |   | 0.13    |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  
|                                            |          | Net income                                                                                                                                             |                                                                                    | $ | 1.01          |         |                  | $ | 0.65   |        |        | $ | 1.92    |         |        | $ | 1.38    |        
|                                            |          |                                                                                                                                                        |                                                                                    |   |               |         |                  |   |        |        |        |   |         |         |        |  

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)

|                                                            |                                                                                               |                          |         |                        |         |      |         |         |         |  
|----------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------ | ------- | ---------------------- | ------- | ---- | ------- | ------- | ------- | -
|                                                            |                                                                                               |                          |         | SIX MONTH PERIOD ENDED
|                                                            |                                                                                               |                          |         | JUNE 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 under stock option plan                                                         |                          |         | 76                     |         |      |         | 329     |        
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                        | 47,942  |      |         |         | 42,778  |  
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|PAID-IN CAPITAL:                                            |                                                                                               |                          |         |                        |         |      |         |        
|                                                            | Balance at beginning of period                                                                |                          |         | 217,594                |         |      |         | 64,319  |        
|                                                            | Issuance cost of preferred stock                                                              |                          |         | (3,485                 | )       |      |         |        |        
|                                                            | Common shares issued under stock option plan                                                  |                          |         | 825                    |         |      |         | 4,341   |        
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                        | 214,934 |      |         |         | 68,660  |  
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|LEGAL SURPLUS:                                              |                                                                                               |                          | 8,423   |                        |         |      | 5,982   |        
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|RETAINED EARNINGS:                                          |                                                                                               |                          |         |                        |         |      |         |        
|                                                            | Balance at beginning of period                                                                |                          |         | 375,855                |         |      |         | 265,396 |        
|                                                            | Net income                                                                                    |                          |         | 98,527                 |         |      |         | 64,587  |        
|                                                            | Cash dividends declared on common stock                                                       |                          |         | (14,352                | )       |      |         | (9,590  | )      
|                                                            | Cash dividends declared on preferred stock                                                    |                          |         | (5,266                 | )       |      |         | (4,704  | )      
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                        | 454,764 |      |         |         | 315,689 |  
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
NET OF TAXES: |                                                                                               |                          |         |                        |         |      |         |        
|                                                            | Balance at beginning of period                                                                |                          |         | (12,312                | )       |      |         | 2,870   |        
|                                                            | Net loss in the fair value of investment securities available for sale, net
of deferred taxes |                          |         | (378                   | )       |      |         | (16,892 | )      
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|                                                            |                                                                                               | Balance at end of period |         |                        | (12,690 | )    |         |         | (14,022 | )
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|TREASURY STOCK AT COST:                                     |                                                                                               |                          | (56     | )                      |         |      | (56     | )      
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        
|Total stockholders equity                                  |                                                                                               | $                        | 941,567 |                        |         | $    | 543,781 |        
|                                                            |                                                                                               |                          |         |                        |         |      |         |         |        

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)

|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |         |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | ------ | -------- | - | ------ | ------- | ------------ |  |  |  |  | - | --------- | ------ | - | - | ------- | ------- | -
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   | SIX MONTH
|                                                                                             |                                                                                                                                                                                                         |   | QUARTER ENDED |        |          |   |        |         | PERIOD ENDED
|                                                                                             |                                                                                                                                                                                                         |   | JUNE 30,      |        | JUNE 30,
|                                                                                             |                                                                                                                                                                                                         |   |               |        |         
|                                                                                             |                                                                                                                                                                                                         |   | 2002          |        | 2001     |   | 2002   |         | 2001        
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |             
|Net income                                                                                   |                                                                                                                                                                                                         | $ | 51,987        |        |          | $ | 30,595 |         |              |  |  |  |  | $ | 98,527    |        |   | $ | 64,587  |        
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|Other comprehensive income (loss), net of tax:                                               |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|                                                                                             | Unrealized net gains (losses) on securities arising during the
period (net of taxes of $4.2 million - 2002 and $233 - 2001
for the quarter, and $433 - 2002 and $387 - 2001 for the six
months)         |   |               | 21,884 |          |   |        | (10,254 | )            |  |  |  |  |   |           | (6,055 | ) |   |         | (17,712 | )
|                                                                                            
|                                                                                             | Amortization of unrealized losses on securities reclassified to
held to maturity (net of taxes of $(94) - 2002 and $(13) -
2001 for the quarter, and $(203) - 2002 and $(43) - 2001 for
the six months) |   |               | 282    |          |   |        | 89      |              |  |  |  |  |   |           | 610    |   |   |         | 300     |  
|                                                                                            
|                                                                                             | Reclassification adjustment for losses (gains) included in net
income (net of taxes of $342 - 2002 and $150 - 2001 for the
quarter, and $3.2 million - 2002 and $154 - 2001 for the six
months)         |   |               | (535   | )        |   |        | 1,045   |              |  |  |  |  |   |           | 5,067  |   |   |         | (1,080  | )
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|Other comprehensive income (loss) before cumulative effect of
change in accounting principle |                                                                                                                                                                                                         |   | 21,631        |        |          |   | (9,120 | )       |              |  |  |  |  |   | (378      | )      |   |   | (18,492 | )      
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|Cumulative effect of change in accounting principle, net of taxes                            |                                                                                                                                                                                                         |   |              |        |          |   |       |         |              |  |  |  |  |   |          |        |   |   | 1,600   |        
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|Other comprehensive income (loss)                                                            |                                                                                                                                                                                                         |   | 21,631        |        |          |   | (9,120 | )       |              |  |  |  |  |   | (378      | )      |   |   | (16,892 | )      
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        
|Comprehensive income, net of taxes                                                           |                                                                                                                                                                                                         | $ | 73,618        |        |          | $ | 21,475 |         |              |  |  |  |  | $ | 98,149    |        |   | $ | 47,695  |        
|                                                                                             |                                                                                                                                                                                                         |   |               |        |          |   |        |         |              |  |  |  |  |   |           |        |   |   |         |        

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)

|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |            |          |          |  
|------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------- | ----------------------------------------- | ---------- | ---------------- | --------- | ------- | ---------- | -------- | -------- | -
|                                      |                                                                               |                                                                                 |                   |                                           |            | SIX MONTH PERIOD
|                                      |                                                                               |                                                                                 |                   |                                           |            | ENDED JUNE 30,  
|                                      |                                                                               |                                                                                 |                   |                                           |            |                 
|                                      |                                                                               |                                                                                 |                   |                                           |            | 2002             |           | 2001   
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |        
|Cash flows from operating activities: |                                                                               |                                                                                 |                   |                                           |            |                  |           |        
|                                      | Net income                                                                    |                                                                                 | $                 | 98,527                                    |            |                  | $         | 64,587  |           
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Adjustments to reconcile net income to net cash used in operating activities: |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Cumulative effect of change in accounting principle                             |                   |                                           |           |                  |           |         | (5,929     | )       
|                                      |                                                                               | Depreciation and amortization                                                   |                   |                                           | 5,429      |                  |           |         | 4,744      |         
|                                      |                                                                               | Amortization of interest-only strips                                            |                   |                                           | 22,975     |                  |           |         | 12,799     |         
|                                      |                                                                               | Amortization of servicing assets                                                |                   |                                           | 17,784     |                  |           |         | 10,010     |         
|                                      |                                                                               | Deferred tax provision                                                          |                   |                                           | 2,369      |                  |           |         | 2,479      |         
|                                      |                                                                               | Provision for loan losses                                                       |                   |                                           | 1,737      |                  |           |         | 2,067      |         
|                                      |                                                                               | Provision for losses on real estate held for sale                               |                   |                                           | 891        |                  |           |         | 270        |         
|                                      |                                                                               | Origination and purchases of mortgage loans held for sale                       |                   |                                           | (2,143,847 | )                |           |         | (1,778,873 | )       
|                                      |                                                                               | Principal repayment and sales of mortgage loans held for sale                   |                   |                                           | 944,114    |                  |           |         | 667,403    |         
|                                      |                                                                               | Purchases of securities held for trading                                        |                   |                                           | (2,489,110 | )                |           |         | (1,720,823 | )       
|                                      |                                                                               | Principal repayments and sales of trading securities                            |                   |                                           | 2,984,658  |                  |           |         | 2,371,406  |         
|                                      |                                                                               | Increase in interest only strips, net                                           |                   |                                           | (101,336   | )                |           |         | (58,039    | )       
|                                      |                                                                               | Increase in servicing assets                                                    |                   |                                           | (22,022    | )                |           |         | (22,898    | )       
|                                      |                                                                               | (Increase) decrease in receivables and mortgage servicing advances              |                   |                                           | (3,379     | )                |           |         | 2,547      |         
|                                      |                                                                               | (Increase) decrease in broker dealers operations receivable                    |                   |                                           | (120,360   | )                |           |         | 15,218     |         
|                                      |                                                                               | (Increase) decrease in accrued interest receivable                              |                   |                                           | (3,875     | )                |           |         | 251        |         
|                                      |                                                                               | Decrease in payable related to short sales                                      |                   |                                           | (20,485    | )                |           |         | (49,363    | )       
|                                      |                                                                               | Increase (decrease) in interest payable                                         |                   |                                           | 4,396      |                  |           |         | (6,094     | )       
|                                      |                                                                               | Decrease in broker dealers operations payable                                  |                   |                                           | (142,558   | )                |           |         | (15,481    | )       
|                                      |                                                                               | (Decrease) increase in accrued expenses and other liabilities                   |                   |                                           | (1,344     | )                |           |         | 10,068     |         
|                                      |                                                                               | Increase in other assets                                                        |                   |                                           | (5,114     | )                |           |         | (4,688     | )       
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               |                                                                                 | Total adjustments |                                           |            | (1,069,077       | )         |         |            | (562,926 | )       
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               |                                                                                 |                   | Net cash used in operating activities     |            |                  | (970,550  | )       |            |          | (498,339 | )
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Cash flows from investing activities:                                         |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Purchase of securities held to maturity                                         |                   |                                           | (41,306    | )                |           |         | (239,637   | )       
|                                      |                                                                               | Principal repayments and maturities of securities held to maturity              |                   |                                           | 123,024    |                  |           |         | 657,057    |         
|                                      |                                                                               | Origination of loans receivable                                                 |                   |                                           | (301,589   | )                |           |         | (189,933   | )       
|                                      |                                                                               | Principal repayments of loans receivable                                        |                   |                                           | 224,329    |                  |           |         | 55,258     |         
|                                      |                                                                               | Purchases of securities available for sale                                      |                   |                                           | (1,984,698 | )                |           |         | (1,450,766 | )       
|                                      |                                                                               | Proceeds from sales of securities available for sale                            |                   |                                           | 2,310,328  |                  |           |         | 1,076,777  |         
|                                      |                                                                               | Principal repayments of securities available for sale                           |                   |                                           | 12,456     |                  |           |         | 304,382    |         
|                                      |                                                                               | Purchase of FHLB stock                                                          |                   |                                           | (14,431    | )                |           |         | (7,545     | )       
|                                      |                                                                               | Purchase of premises and equipment                                              |                   |                                           | (17,924    | )                |           |         | (20,234    | )       
|                                      |                                                                               | Proceeds from sales of real estate held for sale                                |                   |                                           | 1,727      |                  |           |         | 2,061      |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               |                                                                                 |                   | Net cash provided by investing activities |            |                  | 311,916   |         |            |          | 187,420  |  
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Cash flows from financing activities:                                         |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Increase in deposits                                                            |                   |                                           | 446,199    |                  |           |         | 190,421    |         
|                                      |                                                                               | Increase in securities sold under agreements to repurchase                      |                   |                                           | 328,011    |                  |           |         | 225,790    |         
|                                      |                                                                               | Increase (decrease) in loans payable                                            |                   |                                           | 56,995     |                  |           |         | (81,950    | )       
|                                      |                                                                               | Issuance of common stock, net                                                   |                   |                                           | 901        |                  |           |         | 4,670      |         
|                                      |                                                                               | Issuance of preferred stock, net                                                |                   |                                           | 100,015    |                  |           |         |           |         
|                                      |                                                                               | Increase in FHLB advances                                                       |                   |                                           | 274,000    |                  |           |         | 98,500     |         
|                                      |                                                                               | Increase in notes payable                                                       |                   |                                           | 97,631     |                  |           |         | 35,126     |         
|                                      |                                                                               | Dividends declared and paid                                                     |                   |                                           | (19,618    | )                |           |         | (14,294    | )       
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               |                                                                                 |                   | Net cash provided by financing activities |            |                  | 1,284,134 |         |            |          | 458,263  |  
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Net increase in cash and cash equivalents                                     |                                                                                 |                   | 625,500                                   |            |                  |           | 147,344 |           
|                                      | Cash and cash equivalents at beginning of period                              |                                                                                 |                   | 594,385                                   |            |                  |           | 428,319 |           
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Cash and cash equivalents at the end of period                                |                                                                                 | $                 | 1,219,885                                 |            |                  | $         | 575,663 |           
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Cash and cash equivalent includes:                                            |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Cash and due from banks                                                         |                   | $                                         | 77,827     |                  |           | $       | 47,468     |         
|                                      |                                                                               | Money market investments                                                        |                   |                                           | 1,142,058  |                  |           |         | 528,195    |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | $                                                                               | 1,219,885         |                                           |            | $                | 575,663   |        
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Supplemental schedule of non-cash activities:                                 |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Loan securitizations                                                            |                   | $                                         | 1,033,074  |                  |           | $       | 532,602    |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Reclassification of investments held to maturity to available for sale category |                   | $                                         |           |                  |           | $       | 110,000    |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Reclassification of investments held to maturity to trading category            |                   | $                                         |           |                  |           | $       | 130,000    |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      | Supplemental cash flows information:                                          |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Cash used to pay interest                                                       |                   | $                                         | 121,245    |                  |           | $       | 147,643    |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           
|                                      |                                                                               | Cash used to pay income taxes                                                   |                   | $                                         | 13,406     |                  |           | $       | 3,740      |         
|                                      |                                                                               |                                                                                 |                   |                                           |            |                  |           |         |           

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
presentation of results for the interim periods have been reflected.
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|b. |  | The results of operations for the quarter and six month period ended June 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 six month periods ended June 30, 2002 and 2001 were as
follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                                                   |  |               |      |                  |  |      |      |      |  |   |      |  |  |   |      | 
|-------------------------------------------------- |  | ------------- | ---- | ---------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                                   |  | QUARTER ENDED |      | SIX MONTH PERIOD
|                                                   |  | JUNE 30,      |      | ENDED JUNE 30,  
|                                                   |  |               |      |                 
|                                                   |  | 2002          |      | 2001             |  | 2002 |      | 2001
|                                                   |  |               |      |                  |  |      |      |     
|7% Noncumulative Monthly Income Preferred Stock    |  | $             | 0.88 |                  |  | $    | 0.88 |      |  | $ | 1.76 |  |  | $ | 1.76 | 
|8.35% Noncumulative Monthly Income Preferred Stock |  | $             | 0.52 |                  |  | $    | 0.52 |      |  | $ | 1.04 |  |  | $ | 1.04 | 
|7.25% Noncumulative Monthly Income Preferred Stock |  | $             | 0.16 |                  |  |      |     |      |  | $ | 0.16 |  |  |   |     | 
|Common Stock                                       |  | $             | 0.15 |                  |  | $    | 0.13 |      |  | $ | 0.30 |  |  | $ | 0.23 | 

|   |  |                                                                                                                                                                                                                                                                                                                 
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|d. |  | At June 30, 2002, escrow funds include approximately $117.3 million
deposited with Doral Bank PR. These funds are included in the Companys
financial statements. Escrow funds also include approximately $19.6
million deposited with other banks which are excluded from the
Companys assets and liabilities.
|   |  |                                                                                                                                                                                                                                                                                                                 
|e. |  | The reconciliation of the numerator and denominator of the basic and diluted earnings-per-share follows:                                                                                                                                                                                                        

9



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE SIX MONTH PERIOD ENDED JUNE
30, 2002:
(Dollars in thousands, except for per share data)

|                                                            |                                |   |             |       |               |  |            |  |  |   |      |  | 
|----------------------------------------------------------- | ------------------------------ | - | ----------- | ----- | ------------- |  | ---------- |  |  | - | ---- |  | 
|                                                            |                                |   |             |       |               |  | WEIGHTED   |  |  |   |     
|                                                            |                                |   |             |       |               |  | AVERAGE    |  |  |   |     
|                                                            |                                |   | INCOME      |       | SHARES        |  | PER SHARE 
|                                                            |                                |   | (NUMERATOR) |       | (DENOMINATOR) |  | AMOUNT    
|                                                            |                                |   |             |       |               |  |           
|Net income                                                  |                                | $ | 98,527      |       |               |  |            |  |  |   |      | 
|                                                            | Less: Preferred stock dividend |   |             | 5,266 |               |  |            |  |  |   |      |  | 
|                                                            |                                |   |             |       |               |  |            |  |  |   |      | 
|Basic EPS                                                   |                                |   |             |       |               |  |            |  |  |   |      | 
|Net income available to common shareholders                 |                                | $ | 93,261      |       |               |  | 47,836,799 |  |  | $ | 1.95 | 
|                                                            |                                |   |             |       |               |  |            |  |  |   |      | 
|Diluted EPS                                                 |                                |   |             |       |               |  |            |  |  |   |      | 
|Net income available to common shareholders                 |                                | $ | 93,261      |       |               |  | 47,836,799 |  |  |   |      | 
|Effect of dilutive securities                               |                                |   |             |       |               |  |            |  |  |   |      | 
|Incremental shares issuable upon exercise of stock options* |                                |   |             |       |               |  | 736,709    |  |  |   |      | 
|                                                            |                                |   |             |       |               |  |            |  |  |   |      | 
|Net income available to common shareholders                 |                                | $ | 93,261      |       |               |  | 48,573,508 |  |  | $ | 1.92 | 
|                                                            |                                |   |             |       |               |  |            |  |  |   |      | 

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2001:
(Dollars in thousands, except for per share data)

|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |   |      |      |      | 
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ---------- | ---------- | ------ | ----------- | ------ | ------------- | ---------- | ---------- | ---------- | - | ---- | ---- | ---- | 
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            | WEIGHTED   |            |   |      |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            | AVERAGE    |            |   |      |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        | INCOME      |        | SHARES        |            | PER SHARE 
|                                                                       |                                                                                                         |                                                                                                         |            |            |        | (NUMERATOR) |        | (DENOMINATOR) |            | AMOUNT    
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |           
|Income before cumulative gain effect of change
in accounting principle |                                                                                                         | $                                                                                                       | 58,658     |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Less: Preferred stock dividend                                                                          |            |            | (4,704 | )           |        |               |            |            |            |   |      |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|Basic EPS                                                              |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Income available to common shareholders before cumulative gain
effect of change in accounting principle |            | $          | 53,954 |             |        |               | 42,604,121 |            |            | $ | 1.27 |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Cumulative gain effect of change in accounting
principle, net of tax                                    |            |            | 5,929  |             |        |               | 42,604,121 |            |            |   | 0.14 |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         |                                                                                                         | Net income |            | $      | 59,883      |        |               |            | 42,604,121 |            |   | $    | 1.41 |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|Diluted EPS                                                            |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       | Income available to common shareholders before cumulative gain
effect of change in accounting principle |                                                                                                         | $          | 53,954     |        |             |        | 42,604,121    |            |            |            |   |     
|Effect of dilutive securities:                                         |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Incremental shares issuable upon exercise of stock options*                                             |            |            |        |             |        |               | 671,908    |            |            |   |      |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Income available to common shareholders before cumulative
gain effect of change in accounting principle |            | $          | 53,954 |             |        |               | 43,276,029 |            |            | $ | 1.25 |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         | Cumulative gain effect of change in accounting
principle, net of tax                                    |            |            | 5,929  |             |        |               | 43,276,029 |            |            |   | 0.13 |     
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  
|                                                                       |                                                                                                         |                                                                                                         |            | Net income |        | $           | 59,883 |               |            |            | 43,276,029 |   |      | $    | 1.38 | 
|                                                                       |                                                                                                         |                                                                                                         |            |            |        |             |        |               |            |            |            |  



---

|* |  | For the six month period ended June 30, 2001, all stock options outstanding
during the period were included in the computation of weighted average
outstanding shares. For the six month period ended June 30, 2002, 785,000
stock options, granted in March 2002, were excluded from the computation of weighted average
outstanding shares because they were antidilutive.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### 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.
|   |                |                                                                                                                                                                                                                                                                                                                   
|   |                | Set forth below is a reconciliation of the application of SFAS No. 91 to employee costs and other expenses:                                                                                                                                                                                                       
|  
|  
|   | (In thousands)



|                                       |                     |   |               |        |                  |   |        |        |      |   |         |        |  |   |         |        | 
|-------------------------------------- | ------------------- | - | ------------- | ------ | ---------------- | - | ------ | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                       |                     |   | QUARTER ENDED |        | SIX MONTH PERIOD
|                                       |                     |   | JUNE 30,      |        | ENDED JUNE 30,  
|                                       |                     |   |               |        |                 
|                                       |                     |   | 2002          |        | 2001             |   | 2002   |        | 2001
|                                       |                     |   |               |        |                  |   |        |        |     
|Employee costs, gross                  |                     | $ | 21,545        |        |                  | $ | 19,593 |        |      | $ | 42,076  |        |  | $ | 36,638  |       
|Deferred costs pursuant to SFAS No. 91 |                     |   | (7,847        | )      |                  |   | (7,087 | )      |      |   | (15,527 | )      |  |   | (13,030 | )     
|                                       |                     |   |               |        |                  |   |        |        |      |   |         |        |  |   |         |       
|                                       | Employee cost, net  |   | $             | 13,698 |                  |   | $      | 12,506 |      |   | $       | 26,549 |  |   | $       | 23,608 | 
|                                       |                     |   |               |        |                  |   |        |        |      |   |         |        |  |   |         |       
|Other expenses, gross                  |                     | $ | 6,043         |        |                  | $ | 3,511  |        |      | $ | 10,759  |        |  | $ | 6,451   |       
|Deferred costs pursuant to SFAS No. 91 |                     |   | (2,580        | )      |                  |   | (2,485 | )      |      |   | (4,509  | )      |  |   | (4,525  | )     
|                                       |                     |   |               |        |                  |   |        |        |      |   |         |        |  |   |         |       
|                                       | Other expenses, net |   | $             | 3,463  |                  |   | $      | 1,026  |      |   | $       | 6,250  |  |   | $       | 1,926  | 
|                                       |                     |   |               |        |                  |   |        |        |      |   |         |        |  |   |         |       

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|g. |  | Segment information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | The Company operates in four reportable segments identified by line of
business: mortgage banking, banking (including thrift operations),
securities broker-dealer operations and insurance sales 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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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)

|                    |  |                             |           |    |  |              |         |        |  |  |          |   |  |   |           | 
|------------------- |  | --------------------------- | --------- | -- |  | ------------ | ------- | ------ |  |  | -------- | - |  | - | --------- | 
|                    |  |                             |           |    |  | Mainland     |         |        |  |  |          |   |  |  
|                    |  | Puerto Rico                 |           | US |  | Eliminations |         | Totals
|                    |  |                             |           |    |  |              |         |       
|                    |  | QUARTER ENDED JUNE 30, 2002
|                    |  |                            
|Net interest income |  | $                           | 34,381    |    |  |              | 3,662   |        |  |  | (366     | ) |  | $ | 37,677    | 
|Non-interest income |  | $                           | 59,659    |    |  |              | 871     |        |  |  | (2,771   | ) |  | $ | 57,759    | 
|Net income          |  | $                           | 53,774    |    |  |              | 1,350   |        |  |  | (3,137   | ) |  | $ | 51,987    | 
|Identifiable assets |  | $                           | 7,650,440 |    |  |              | 401,451 |        |  |  | (130,448 | ) |  | $ | 7,921,443 | 
|                   
|                    |  | QUARTER ENDED JUNE 30, 2001
|                    |  |                            
|Net interest income |  | $                           | 15,381    |    |  |              | 1,427   |        |  |  | (182     | ) |  | $ | 16,626    | 
|Non-interest income |  | $                           | 47,012    |    |  |              | 416     |        |  |  |         |   |  | $ | 47,428    | 
|Net income          |  | $                           | 30,638    |    |  |              | 139     |        |  |  | (182     | ) |  | $ | 30,595    | 
|Identifiable assets |  | $                           | 5,735,986 |    |  |              | 209,902 |        |  |  | (35,974  | ) |  | $ | 5,909,914 | 

| |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 

(In thousands)

| |  |             |  |    |  |              |  |        |  |  |  |  |  |  |  | 
| |  | ----------- |  | -- |  | ------------ |  | ------ |  |  |  |  |  |  |  | 
| |  |             |  |    |  | Mainland     |  |        |  |  |  |  |  | 
| |  | Puerto Rico |  | US |  | Eliminations |  | Totals
| |  |             |  |    |  |              |  |       

|                    |  |                                      |           |  |  |  |         |  |  |  |          |   |  |   |           | 
|------------------- |  | ------------------------------------ | --------- |  |  |  | ------- |  |  |  | -------- | - |  | - | --------- | 
|                    |  | SIX MONTH PERIOD ENDED JUNE 30, 2002
|                    |  |                                     
|Net interest income |  | $                                    | 67,605    |  |  |  | 6,676   |  |  |  | (718     | ) |  | $ | 73,563    | 
|Non-interest income |  | $                                    | 108,918   |  |  |  | 1,221   |  |  |  | (2,771   | ) |  | $ | 107,368   | 
|Net income          |  | $                                    | 99,856    |  |  |  | 2,160   |  |  |  | (3,489   | ) |  | $ | 98,527    | 
|Identifiable assets |  | $                                    | 7,650,440 |  |  |  | 401,451 |  |  |  | (130,448 | ) |  | $ | 7,921,443 | 

|                    |  |                                      |           |  |  |  |         |  |  |  |         |   |  |   |           | 
|------------------- |  | ------------------------------------ | --------- |  |  |  | ------- |  |  |  | ------- | - |  | - | --------- | 
|                    |  | SIX
MONTH PERIOD ENDED JUNE 30, 2001
|                    |  |                                     
|Net interest income |  | $                                    | 27,828    |  |  |  | 2,699   |  |  |  | (182    | ) |  | $ | 30,345    | 
|Non-interest income |  | $                                    | 90,235    |  |  |  | 848     |  |  |  |        |   |  | $ | 91,083    | 
|Net income          |  | $                                    | 64,314    |  |  |  | 455     |  |  |  | (182    | ) |  | $ | 64,587    | 
|Identifiable assets |  | $                                    | 5,735,986 |  |  |  | 209,902 |  |  |  | (35,974 | ) |  | $ | 5,909,914 | 

12



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)

(In thousands)

|                    |  |                             |           |         |  |        |           |        |  |              |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|------------------- |  | --------------------------- | --------- | ------- |  | ------ | --------- | ------ |  | ------------ | ------- | ------ |  |  | ------ |  |  |  | -------- | - |  | - | --------- | 
|                    |  | Mortgage                    |           |         |  |        |           | Broker |  | Insurance    |         |        |  |  |        |  |  | 
|                    |  | Banking                     |           | Banking |  | Dealer |           | Agency |  | Eliminations |         | Totals
|                    |  |                             |           |         |  |        |           |        |  |              |         |       
|                    |  | QUARTER ENDED JUNE 30, 2002
|                    |  |                            
|Net interest income |  | $                           | 12,950    |         |  |        | 23,023    |        |  |              | 592     |        |  |  | 269    |  |  |  | 843      |   |  | $ | 37,677    | 
|Non-interest income |  | $                           | 45,528    |         |  |        | 10,026    |        |  |              | 2,479   |        |  |  | 1,910  |  |  |  | (2,184   | ) |  | $ | 57,759    | 
|Net income          |  | $                           | 34,633    |         |  |        | 15,950    |        |  |              | 1,428   |        |  |  | 1,302  |  |  |  | (1,326   | ) |  | $ | 51,987    | 
|Identifiable assets |  | $                           | 3,066,774 |         |  |        | 4,722,122 |        |  |              | 616,534 |        |  |  | 30,246 |  |  |  | (514,233 | ) |  | $ | 7,921,443 | 

|                    |  |                             |  |  |  |   |           |  |  |  |           |  |  |  |         |  |  |  |       |  |  |  |          |   |  |   |           | 
|------------------- |  | --------------------------- |  |  |  | - | --------- |  |  |  | --------- |  |  |  | ------- |  |  |  | ----- |  |  |  | -------- | - |  | - | --------- | 
|                    |  | QUARTER ENDED JUNE 30, 2001
|                    |  |                            
|Net interest income |  |                             |  |  |  | $ | 4,741     |  |  |  | 11,575    |  |  |  | 615     |  |  |  |      |  |  |  | (305     | ) |  | $ | 16,626    | 
|Non-interest income |  |                             |  |  |  | $ | 38,799    |  |  |  | 6,234     |  |  |  | 2,148   |  |  |  | 1,135 |  |  |  | (888     | ) |  | $ | 47,428    | 
|Net income          |  |                             |  |  |  | $ | 24,949    |  |  |  | 5,980     |  |  |  | 378     |  |  |  | 478   |  |  |  | (1,190   | ) |  | $ | 30,595    | 
|Identifiable assets |  |                             |  |  |  | $ | 2,751,872 |  |  |  | 3,128,694 |  |  |  | 401,027 |  |  |  | 1,587 |  |  |  | (373,266 | ) |  | $ | 5,909,914 | 

(In thousands)

|                    |  |                                      |           |         |  |        |           |        |  |              |         |        |  |  |        |  |  |  |          |   |  |   |           | 
|------------------- |  | ------------------------------------ | --------- | ------- |  | ------ | --------- | ------ |  | ------------ | ------- | ------ |  |  | ------ |  |  |  | -------- | - |  | - | --------- | 
|                    |  | Mortgage                             |           |         |  |        |           | Broker |  | Insurance    |         |        |  |  |        |  |  | 
|                    |  | Banking                              |           | Banking |  | Dealer |           | Agency |  | Eliminations |         | Totals
|                    |  |                                      |           |         |  |        |           |        |  |              |         |       
|                    |  | SIX MONTH PERIOD ENDED JUNE 30, 2002
|                    |  |                                     
|Net interest income |  | $                                    | 25,341    |         |  |        | 46,651    |        |  |              | 1,227   |        |  |  | 579    |  |  |  | (235     | ) |  | $ | 73,563    | 
|Non-interest income |  | $                                    | 85,567    |         |  |        | 18,243    |        |  |              | 3,256   |        |  |  | 3,539  |  |  |  | (3,237   | ) |  | $ | 107,368   | 
|Net income          |  | $                                    | 65,801    |         |  |        | 32,347    |        |  |              | 1,511   |        |  |  | 2,309  |  |  |  | (3,441   | ) |  | $ | 98,527    | 
|Identifiable assets |  | $                                    | 3,066,774 |         |  |        | 4,722,122 |        |  |              | 616,534 |        |  |  | 30,246 |  |  |  | (514,233 | ) |  | $ | 7,921,443 | 

|                    |  |                                      |  |  |  |   |           |  |  |  |           |  |  |  |         |  |  |  |       |  |  |  |          |   |  |   |           | 
|------------------- |  | ------------------------------------ |  |  |  | - | --------- |  |  |  | --------- |  |  |  | ------- |  |  |  | ----- |  |  |  | -------- | - |  | - | --------- | 
|                    |  | SIX MONTH PERIOD ENDED JUNE 30, 2001
|                    |  |                                     
|Net interest income |  |                                      |  |  |  | $ | 5,600     |  |  |  | 23,753    |  |  |  | 1,161   |  |  |  |      |  |  |  | (169     | ) |  | $ | 30,345    | 
|Non-interest income |  |                                      |  |  |  | $ | 71,911    |  |  |  | 14,832    |  |  |  | 4,042   |  |  |  | 1,733 |  |  |  | (1,435   | ) |  | $ | 91,083    | 
|Net income          |  |                                      |  |  |  | $ | 48,718    |  |  |  | 16,014    |  |  |  | 632     |  |  |  | 825   |  |  |  | (1,602   | ) |  | $ | 64,587    | 
|Identifiable assets |  |                                      |  |  |  | $ | 2,751,872 |  |  |  | 3,128,694 |  |  |  | 401,027 |  |  |  | 1,587 |  |  |  | (373,266 | ) |  | $ | 5,909,914 | 

|   |  |                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|h. |  | The fair value of the Companys trading securities and the fair values
and carrying values of its securities classified as available for sale
and held to maturity are shown below by category.

13



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



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

|                                    |       |          |         |              |  |   |         |         | 
|----------------------------------- | ----- | -------- | ------- | ------------ |  | - | ------- | ------- | 
|TRADING SECURITIES                  |       | JUNE 30, |         | DECEMBER 31,
|(IN THOUSANDS)                      |       | 2002     |         | 2001        
|                                    |       |          |         |             
|Mortgage-backed securities          |       | $        | 748,175 |              |  | $ | 740,797 |        
|Interest-only strips                |       |          | 311,246 |              |  |   | 236,468 |        
|Puerto Rico government and agencies |       |          | 4,575   |              |  |   | 4,728   |        
|Derivatives                         |       |          | 397     |              |  |   | 4,739   |        
|Other                               |       |          | 6,449   |              |  |   | 6,596   |        
|                                    |       |          |         |              |  |   |         |        
|                                    | Total |          | $       | 1,070,842    |  |   | $       | 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 June 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 JUNE 30, 2002
(Dollars in thousands)

|                                |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |          |      |  
|------------------------------- | -------------- | -------------------------- | --------- | --------- | ------- | ---------- | ----- | ---------- | ----- | ------ | ------ | ------- | ------ | - | --------- | - | ------- |  | ---- | -------- | ---- | -
|                                |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      | WEIGHTED |      |  
|                                |                |                            |           | AMORTIZED |         | UNREALIZED |       | UNREALIZED |       | MARKET |        | AVERAGE
|                                |                |                            |           | COST      |         | GAINS      |       | LOSSES     |       | VALUE  |        | YIELD  
|                                |                |                            |           |           |         |            |       |            |       |        |        |        
|MORTGAGE-BACKED
SECURITIES
GNMA |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |         
|                                |                | Due over ten years         |           | $         | 276,400 |            |       | $          | 2,434 |        |        | $       | 455    |   |           | $ | 278,379 |  |      |          | 6.03 | %
|                                | FHLMC AND FNMA |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |          |     
|                                |                | Due over ten years         |           |           | 256,172 |            |       |            | 1,410 |        |        |         | 784    |   |           |   | 256,798 |  |      |          | 6.36 | %
|                               
|DEBT SECURITIES                 |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |         
|                                | FHLB NOTES     |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |          |     
|                                |                | Due over ten years         |           |           | 45,000  |            |       |            |      |        |        |         | 169    |   |           |   | 44,831  |  |      |          | 6.75 | %
|                                | US TREASURY    |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |          |     
|                                |                | Due from one to five years |           |           | 62,684  |            |       |            | 1,169 |        |        |         |       |   |           |   | 63,853  |  |      |          | 3.50 | %
|                                |                | Due from five to ten years |           |           | 100,987 |            |       |            | 3     |        |        |         | 490    |   |           |   | 100,500 |  |      |          | 4.88 | %
|                                |                | Due over ten years         |           |           | 397,678 |            |       |            |      |        |        |         | 11,453 |   |           |   | 386,225 |  |      |          | 5.37 | %
|                                |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |         
|                                |                | $                          | 1,138,921 |           |         | $          | 5,016 |            |       | $      | 13,351 |         |        | $ | 1,130,586 |   |         |  | 5.66 | %       
|                                |                |                            |           |           |         |            |       |            |       |        |        |         |        |   |           |   |         |  |      |         

14



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##### Table of Contents



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 June 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



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SECURITIES HELD TO MATURITY
AS OF JUNE 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 |         | $         | 2,567   |            |        | $          | 79     |        |       | $       |      |   |         | $ | 2,646   |  |      |          | 6.76 | %
|                                |                           | Due over ten years         |         |           | 12,703  |            |        |            | 468    |        |       |         |      |   |         |   | 13,171  |  |      |          | 6.98 | %
|                               
|                                | CMO CERTIFICATES          |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due from one to five years |         |           | 3,255   |            |        |            |       |        |       |         | 8     |   |         |   | 3,247   |  |      |          | 6.12 | %
|                                |                           | Due from five to ten years |         |           | 1,488   |            |        |            |       |        |       |         | 8     |   |         |   | 1,480   |  |      |          | 6.37 | %
|                                |                           | Due over ten years         |         |           | 82,018  |            |        |            | 260    |        |       |         | 1,389 |   |         |   | 80,889  |  |      |          | 5.93 | %
|                               
|DEBT SECURITIES                 |                           |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |         
|                                | FHLB NOTES                |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due from five to ten years |         |           | 5,000   |            |        |            | 50     |        |       |         |      |   |         |   | 5,050   |  |      |          | 7.89 | %
|                                |                           | Due over ten years         |         |           | 232,324 |            |        |            | 3,575  |        |       |         | 1,000 |   |         |   | 234,899 |  |      |          | 6.34 | %
|                                | FHLB ZERO COUPON          |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due over ten years         |         |           | 332,477 |            |        |            | 2,811  |        |       |         |      |   |         |   | 335,288 |  |      |          | 7.16 | %
|                                | FHLMC ZERO COUPON         |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due over ten years         |         |           | 30,003  |            |        |            | 12,860 |        |       |         |      |   |         |   | 42,863  |  |      |          | 8.00 | %
|                                | PR HOUSING BANK           |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due from five to ten years |         |           | 5,000   |            |        |            |       |        |       |         | 37    |   |         |   | 4,963   |  |      |          | 6.00 | %
|                                |                           | Due over ten years         |         |           | 3,305   |            |        |            |       |        |       |         |      |   |         |   | 3,305   |  |      |          | 6.20 | %
|                                | U.S. TREASURY             |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |          |     
|                                |                           | Due over ten years         |         |           | 61,083  |            |        |            | 1,061  |        |       |         | 1,709 |   |         |   | 60,435  |  |      |          | 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   |  |      |          | 3.74 | %
|                                |                           | Due from five to ten years |         |           | 4,189   |            |        |            | 12     |        |       |         |      |   |         |   | 4,201   |  |      |          | 5.52 | %
|                                |                           | Due over ten years         |         |           | 2,000   |            |        |            | 20     |        |       |         |      |   |         |   | 2,020   |  |      |          | 7.00 | %
|                                |                           |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |         
|                                |                           | $                          | 784,617 |           |         | $          | 21,198 |            |        | $      | 4,151 |         |       | $ | 801,664 |   |         |  | 6.63 | %       
|                                |                           |                            |         |           |         |            |        |            |        |        |       |         |       |   |         |   |         |  |      |         

16



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##### 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



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##### 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                  |  |               |           |                   |  |   |           | 
|(In thousands)                                |  | JUNE 30, 2002 |           | DECEMBER 31, 2001
|                                              |  |               |           |                  
|Conventional single family residential loans  |  | $             | 1,747,557 |                   |  | $ | 1,530,601 | 
|FHA/VA loans                                  |  |               | 100,080   |                   |  |   | 98,207    | 
|Mortgage loans on residential multifamily     |  |               | 100,141   |                   |  |   | 178,372   | 
|Construction and commercial real estate loans |  |               | 161,859   |                   |  |   | 140,169   | 
|Consumer loans secured by mortgages           |  |               | 135       |                   |  |   | 145       | 
|                                              |  |               |           |                   |  |   |           | 
|                                              |  | $             | 2,109,772 |                   |  | $ | 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)           |                       | JUNE 30, 2002                                 |         | DECEMBER 31, 2001
|                                 |                       |                                               |         |                  
|                                 |                       |                                               |         | AMOUNT            |         | PERCENT |    | AMOUNT |     | PERCENT
|                                 |                       |                                               |         |                   |         |         |    |        |    
|Construction loans               |                       | $                                             | 413,814 |                   |         |         | 55 | %      |     | $       | 368,961 |         |         |   | 55 | %
|Residential mortgage loans       |                       |                                               | 59,024  |                   |         |         | 8  | %      |     |         | 63,546  |         |         |   | 9  | %
|Commercial real estate           |                       |                                               | 63,716  |                   |         |         | 9  | %      |     |         | 72,397  |         |         |   | 11 | %
|Consumer secured by real estate |                       |                                               | 696     |                   |         |         | 0  | %      |     |         | 870     |         |         |   | 0  | %
|Consumer other                  |                       |                                               | 53,952  |                   |         |         | 7  | %      |     |         | 39,109  |         |         |   | 6  | %
|Commercial non-real estate       |                       |                                               | 77,015  |                   |         |         | 10 | %      |     |         | 67,891  |         |         |   | 10 | %
|Loans on saving deposits         |                       |                                               | 9,076   |                   |         |         | 1  | %      |     |         | 10,523  |         |         |   | 2  | %
|Land secured                     |                       |                                               | 76,789  |                   |         |         | 10 | %      |     |         | 46,602  |         |         |   | 7  | %
|                                 |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  
|                                 |                       | Loans receivable, gross                       |         |                   | 754,082 |         |    |        | 100 | %       |         |         | 669,899 |   |    |   | 100 | %
|                                 |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  
|Less:                            |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  
|                                 |                       | Undisbursed portion of loans
in process       |         |                   | (8,169  | )       |    |        |     |         |         |         | (10,302 | ) |    |   |     |  
|                                 |                       | Unearned
interest and deferred
loan fees, net |         |                   | (19,104 | )       |    |        |     |         |         |         | (9,484  | ) |    |   |     |  
|                                 |                       | Allowance
for loan losses(1)                  |         |                   | (6,460  | )       |    |        |     |         |         |         | (6,000  | ) |    |   |     |  
|                                 |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  
|                                 |                       |                                               | (33,733 | )                 |         |         |    |        |     |         | (25,786 | )       |         |   |    |  
|                                 |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  
|                                 | Loans receivable, net |                                               | $       | 720,349           |         |         |    |        |     |         | $       | 644,113 |         |   |    |   |    
|                                 |                       |                                               |         |                   |         |         |    |        |     |         |         |         |         |   |    |  



---

|(1) |  | Does not include $7.0 million and $6.5 million of allowance for
loan losses allocated to mortgage loans held for sale as of June
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. 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.

18



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



|l. |  | 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. Under the provisions of SFAS No. 133, such a
reclassification does not call into question the Companys intent to
hold current or future debt securities until their maturity.                                                                     
|  
|   |  | At June 30, 2002, December 31, 2001 and June 30, 2001, none of the
Companys derivatives were designated as hedges. Accordingly, such
derivatives are carried at fair values with changes therein reflected
in earnings for the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|m. |  | At June 30, 2002 and December 31, 2001, money market investments include $386.1 million and
$273.5 million, respectively, of pledged money market investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|n. |  | Certain amounts reflected in the 2001 Consolidated Financial Statements have been reclassified to conform to
the presentation for 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|o. |  | Subsequent Event                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | 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 will be
effected in the form of a stock dividend of one additional share of
common stock to be issued on September 14, 2002, for every two
shares of common stock held of record on August 30, 2002.
Fractional shares will be settled in cash on the basis of the average
of the high and low sales price of the common stock on
August 30, 2002. Set forth below are Doral Financials
pro-forma per share data giving retroactive effect to the
three-for-two stock split in the form of a stock dividend announced:

|                                     |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|------------------------------------ | ----------------------------------------------------------------- | - | ------------- | ---------- | ---------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                     |                                                                   |   | QUARTER ENDED |            | SIX MONTH PERIOD
|                                     |                                                                   |   | JUNE 30,      |            | ENDED JUNE 30,  
|                                     |                                                                   |   |               |            |                 
|                                     |                                                                   |   | 2002          |            | 2001             |   | 2002       |            | 2001
|                                     |                                                                   |   |               |            |                  |   |            |            |     
|Earnings per common share:           |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                     | Basic:                                                            |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|                                     | Income before cumulative effect of change in
accounting principle |   | $             | 0.68       |                  |   | $          | 0.44       |      |   | $          | 1.30       |  |   | $          | 0.84       | 
|                                     | Cumulative effect of change in accounting
principle               |   |               |           |                  |   |            |           |      |   |            |           |  |   |            | 0.10       | 
|                                     |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|                                     | Net income                                                        |   | $             | 0.68       |                  |   | $          | 0.44       |      |   | $          | 1.30       |  |   | $          | 0.94       | 
|                                     |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|                                     | Diluted:                                                          |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|                                     | Income before cumulative effect of change
in accounting principle |   | $             | 0.67       |                  |   | $          | 0.43       |      |   | $          | 1.28       |  |   | $          | 0.83       | 
|                                     | Cumulative effect of change in accounting
principle               |   |               |           |                  |   |            |           |      |   |            |           |  |   |            | 0.09       | 
|                                     |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|                                     | Net income                                                        |   | $             | 0.67       |                  |   | $          | 0.43       |      |   | $          | 1.28       |  |   | $          | 0.92       | 
|                                     |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|Book value per common share          |                                                                   | $ | 9.93          |            |                  | $ | 6.54       |            |      | $ | 9.93       |            |  | $ | 6.54       |           
|Weighted average shares outstanding: |                                                                   |   |               |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                     | Basic                                                             |   |               | 71,785,107 |                  |   |            | 64,024,338 |      |   |            | 71,755,199 |  |   |            | 63,906,182 | 
|                                     | Diluted                                                           |   |               | 72,881,694 |                  |   |            | 65,076,249 |      |   |            | 72,860,262 |  |   |            | 64,914,044 | 
|Shares outstanding at end of period  |                                                                   |   | 71,828,676    |            |                  |   | 64,082,901 |            |      |   | 71,828,676 |            |  |   | 64,082,901 |           

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##### 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,
banking (including thrift operations), investment banking and broker-dealer
operations and insurance sales 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. Doral
Financial 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 June 30, 2002 and 2001 was approximately $1.3 billion and $1.1 billion, respectively. For the six month
periods ended June 30, 2002 and 2001, the volume of loans originated and
purchased was approximately $2.4 billion and $2.0 billion, respectively. Doral
Financials mortgage servicing portfolio increased to approximately $10.7
billion as of June 30, 2002, from $9.4 billion as of June 30, 2001. Doral
Financials strategy is to increase the size of its mortgage servicing portfolio
by relying principally on internal loan originations and purchases of mortgage
loans on a servicing released basis.

Doral Financial maintains a substantial portfolio of mortgage-backed
securities. At June 30, 2002, Doral Financial held securities for trading with a
fair market value of $1.1 billion, approximately $696.2 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 are classified as available for sale
or held to maturity. As of June 30, 2002, Doral Financial held approximately
$784.6 million in securities and other investments that are classified as held
to maturity. As of June 30, 2002, Doral Financial also held $1.1 billion 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 June 30, 2002 and 2001, Doral Financials
banking subsidiaries contributed approximately $16.0 million and $6.0 million,
or 31% and 20%, respectively, to the Companys consolidated net income. For the
first half of 2002 and 2001, Doral Financials banking subsidiaries contributed
approximately $32.3 million and $16.0 million or 33% and 25% respectively, to
Doral Financials consolidated net income.

The Companys broker-dealer 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 June 30, 2002 and 2001, Doral Securities had net income of
approximately $1.4 million and $378,000, respectively. For the six month periods
ended June 30, 2002 and 2001, Doral Securities net income was approximately
$1.5 million and $632,000, respectively.

Doral Financial conducts its insurance agency activities in Puerto Rico
through Doral Agency. For the quarters ended June 30, 2002 and 2001, Doral
Agencys net income was approximately $1.3 million and $478,000, respectively.
For the six month periods ended June 30, 2002 and 2001, Doral Agencys net
income was approximately $2.3 million and $825,000, respectively.

20



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##### 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, broker-dealer 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
units, is organized as an operating division within the parent company. As of
June 30, 2002, Doral Financial had assets of $3.1 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 SIX MONTHS ENDED JUNE 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: (i) net interest
income; (ii) net gains on mortgage loan sales and fees; (iii) servicing income;
(iv) trading activities; (v) gain on sale of investment securities; and (vi)
commissions, fees and other income.

NET INCOME

Doral Financials net income for the quarter ended June 30, 2002 was
$52.0 million, an increase of $21.4 million, or 70%, from $30.6 million for the
2001 period. For the first half of 2002 and 2001, the Companys net income
amounted to $98.5 million and $64.6 million respectively, an increase of 52%.
The increase for the first half of 2002 was $39.8 million or 68% when compared
to income before the cumulative gain-effect of a change in accounting principle
of $58.7 million for the first half of 2001. Consolidated results include the
operations of Doral Bank PR and Doral Bank NY, Doral Financials banking units,
which contributed approximately $32.3 million to Doral Financials consolidated
net income for the six months ended June 30, 2002, compared to $16.0 million for
the respective 2001 period. Doral Securities, Doral Financials investment
banking and broker-dealer unit, contributed $1.5 million to consolidated net
income for the six months ended June 30, 2002, compared to approximately
$632,000 for the respective 2001 period. Doral Agency, Doral Financials
insurance agency, contributed $2.3 million to consolidated net income for the
six months ended June 30, 2002 compared to approximately $825,000 for the
respective 2001 period. Diluted earnings per common share for the second quarter
of 2002 were $1.01, an increase of 55% over the $0.65 per diluted share recorded
for the same period a year ago. Diluted earnings per common share for the six
months ended June 30, 2002 were $1.92, an increase of 54% over the $1.25 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 second quarter of 2002 and 2001 was $37.7
million and $16.6 million, respectively, an increase of 127%. For the first half
of 2002 and 2001 net interest income amounted to $73.6 million and $30.3
million, respectively, an increase of 143%. The increase in net interest income
for the second quarter and first half of 2002, compared to the respective 2001
periods, was principally due to the combined effect of an increase in Doral

21



---



##### Table of Contents



Financials 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 banking subsidiaries contributed approximately $23.0
million to the consolidated net interest income for the second quarter of 2002,
compared to $11.6 million for the second quarter of 2001. During the first half
of 2002, the Companys banking subsidiaries contributed approximately $46.7
million to the consolidated net interest income, compared to $23.8 million for
the first half 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 JUNE 30,
|                                           |                                  |                                                      |           |                       
|                                           |                                  |                                                      |           | 2002                   |           | 2001    
|                                           |                                  |                                                      |           |                        |           |         
|                                           |                                  |                                                      |           | AVERAGE                |           |          |        |            |         | AVERAGE |        | AVERAGE  |            |   |           |           |           | AVERAGE
|                                           |                                  |                                                      |           | BALANCE                |           | INTEREST |        | YIELD/RATE |         | BALANCE |        | INTEREST | YIELD/RATE
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |           
|ASSETS:                                    |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Interest-Earning Assets:                   |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|                                           | Total
Loans(1)                   |                                                      | $         | 2,844,485              |           |          | $      | 49,393     |         |         |        | 6.96     | %          |   | $         | 2,095,485 |           |         | $      | 39,108 |        |  |        | 7.47 | %   
|                                           | Mortgage-Backed
Securities(2)    |                                                      |           | 1,843,560              |           |          |        | 32,324     |         |         |        | 7.03     | %          |   |           | 1,557,727 |           |         |        | 23,999 |        |  |        | 6.16 | %   
|                                           | Investment Securities            |                                                      |           | 1,288,251              |           |          |        | 19,402     |         |         |        | 6.04     | %          |   |           | 1,016,919 |           |         |        | 16,819 |        |  |        | 6.62 | %   
|                                           | Other Interest-Earning
Assets(3) |                                                      |           | 1,014,994              |           |          |        | 4,211      |         |         |        | 1.66     | %          |   |           | 571,766   |           |         |        | 5,825  |        |  |        | 4.08 | %   
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|                                           |                                  | Total Interest-Earning Assets/Interest Income        |           |                        | 6,991,290 |          |        | $          | 105,330 |         |        |          | 6.04       | % |           |           | 5,241,897 |         |        | $      | 85,751 |  |        |      | 6.54 | %
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Total Non-Interest-Earning Assets          |                                  |                                                      | 602,753   |                        |           |          |        |            |         |         |        |          |            |   | 583,093   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Total Assets                               |                                  | $                                                    | 7,594,043 |                        |           |          |        |            |         |         |        |          |            | $ | 5,824,990 |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|LIABILITIES AND STOCKHOLDERS EQUITY:      |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Interest-Bearing Liabilities:              |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|                                           | Loans Payable                    |                                                      | $         | 203,037                |           |          | $      | 1,428      |         |         |        | 2.82     | %          |   | $         | 296,774   |           |         | $      | 4,220  |        |  |        | 5.69 | %   
|                                           | Repurchase Agreements            |                                                      |           | 2,835,685              |           |          |        | 26,432     |         |         |        | 3.74     | %          |   |           | 2,426,667 |           |         |        | 30,212 |        |  |        | 4.98 | %   
|                                           | Deposits                         |                                                      |           | 2,055,574              |           |          |        | 18,773     |         |         |        | 3.66     | %          |   |           | 1,404,470 |           |         |        | 17,782 |        |  |        | 5.06 | %   
|                                           | Other Borrowed
Funds(4)          |                                                      |           | 1,420,587              |           |          |        | 21,020     |         |         |        | 5.93     | %          |   |           | 1,021,423 |           |         |        | 16,911 |        |  |        | 6.62 | %   
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|                                           |                                  | Total
Interest-Bearing Liabilities/
Interest Expense |           |                        | 6,514,883 |          |        | $          | 67,653  |         |        |          | 4.17       | % |           |           | 5,149,334 |         |        | $      | 69,125 |  |        |      | 5.37 | %
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Total Non-Interest-Bearing Liabilities     |                                  |                                                      | 241,870   |                        |           |          |        |            |         |         |        |          |            |   | 131,553   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Total Liabilities                          |                                  |                                                      | 6,756,753 |                        |           |          |        |            |         |         |        |          |            |   | 5,280,887 |           |           |         |        |        |        |  |        |     
|Stockholders Equity                       |                                  |                                                      | 837,290   |                        |           |          |        |            |         |         |        |          |            |   | 544,103   |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Total Liabilities and Stockholders Equity |                                  | $                                                    | 7,594,043 |                        |           |          |        |            |         |         |        |          |            | $ | 5,824,990 |           |           |         |        |        |        |  |        |     
|                                           |                                  |                                                      |           |                        |           |          |        |            |         |         |        |          |            |   |           |           |           |         |        |        |        |  |        |     
|Net Interest-Earning Assets                |                                  | $                                                    | 476,407   |                        |           |          |        |            |         |         |        |          |            | $ | 92,563    |           |           |         |        |        |        |  |        |     
|Net Interest Income                        |                                  |                                                      |           |                        |           | $        | 37,677 |            |         |         |        |          |            |   |           |           |           | $       | 16,626 |        |        |  |        |     
|Interest Rate
Spread(5)                    |                                  |                                                      |           |                        |           |          |        |            |         |         | 1.87   | %        |            |   |           |           |           |         |        |        |        |  | 1.17   | %   
|Interest Rate
Margin(5)                    |                                  |                                                      |           |                        |           |          |        |            |         |         | 2.16   | %        |            |   |           |           |           |         |        |        |        |  | 1.27   | %   
|Net Interest-Earning Assets Ratio          |                                  |                                                      |           |                        |           |          |        |            |         |         | 107.31 | %        |            |   |           |           |           |         |        |        |        |  | 101.80 | %   



---

|(1) |  | Average loan balances include the average balance of non-accruing loans, on
which no interest income is recognized.                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes average balance and
interest income of interest-only strips.                                                                                                                                                                                                                                                    
|   
|(3) |  | Consist of money market instruments,
reverse repurchase agreements and deposits in other banks.                                                                                                                                                                                                                          
|   
|(4) |  | Consist 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)

|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |      |      |  
|------------------------------------------ | -------------------------------- | ---------------------------------------------------- | --------- | ------------------------------- | --------- | -------- | ------ | ---------- | ------- | ------- | ------ | -------- | ---- | ---------- | --------- | --------- | --------- | ------- | ------ | ------ | ------- |  | ------ | ---- | ---- | -
|                                           |                                  |                                                      |           | SIX MONTH PERIOD ENDED JUNE 30,
|                                           |                                  |                                                      |           |                                
|                                           |                                  |                                                      |           | 2002                            |           | 2001    
|                                           |                                  |                                                      |           |                                 |           |         
|                                           |                                  |                                                      |           | AVERAGE                         |           |          |        |            |         | AVERAGE |        | AVERAGE  |      |            |           |           |           | AVERAGE
|                                           |                                  |                                                      |           | BALANCE                         |           | INTEREST |        | YIELD/RATE |         | BALANCE |        | INTEREST |      | YIELD/RATE
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |           
|ASSETS:                                    |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Interest-Earning Assets:                   |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|                                           | Total
Loans(1)                   |                                                      | $         | 2,793,557                       |           |          | $      | 96,516     |         |         |        | 6.97     | %    |            | $         | 1,977,725 |           |         | $      | 74,932 |         |  |        | 7.58 | %   
|                                           | Mortgage-Backed Securities(2)    |                                                      |           | 1,721,222                       |           |          |        | 60,972     |         |         |        | 7.14     | %    |            |           | 1,381,918 |           |         |        | 44,403 |         |  |        | 6.43 | %   
|                                           | Investment Securities            |                                                      |           | 1,229,435                       |           |          |        | 38,221     |         |         |        | 6.27     | %    |            |           | 1,185,829 |           |         |        | 40,067 |         |  |        | 6.76 | %   
|                                           | Other
Interest-Earning Assets(3) |                                                      |           | 832,029                         |           |          |        | 6,704      |         |         |        | 1.62     | %    |            |           | 497,898   |           |         |        | 12,492 |         |  |        | 5.02 | %   
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|                                           |                                  | Total Interest-Earning Assets/Interest
Income        |           |                                 | 6,576,243 |          |        | $          | 202,413 |         |        |          | 6.21 | %          |           |           | 5,043,370 |         |        | $      | 171,894 |  |        |      | 6.82 | %
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Total Non-Interest-Earning Assets          |                                  |                                                      | 577,866   |                                 |           |          |        |            |         |         |        |          |      |            | 657,541   |           |           |         |        |        |         |  |        |     
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Total Assets                               |                                  | $                                                    | 7,154,109 |                                 |           |          |        |            |         |         |        |          |      | $          | 5,700,911 |           |           |         |        |        |         |  |        |     
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|LIABILITIES AND STOCKHOLDERS EQUITY:      |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Interest-Bearing Liabilities:              |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|                                           | Loans Payable                    |                                                      | $         | 186,576                         |           |          | $      | 2,758      |         |         |        | 2.98     | %    |            | $         | 301,993   |           |         | $      | 9,823  |         |  |        | 6.51 | %   
|                                           | Repurchase Agreements            |                                                      |           | 2,689,501                       |           |          |        | 51,917     |         |         |        | 3.89     | %    |            |           | 2,315,883 |           |         |        | 63,416 |         |  |        | 5.48 | %   
|                                           | Deposits                         |                                                      |           | 1,914,205                       |           |          |        | 35,464     |         |         |        | 3.74     | %    |            |           | 1,375,154 |           |         |        | 35,666 |         |  |        | 5.18 | %   
|                                           | Other
Borrowed Funds(4)          |                                                      |           | 1,329,607                       |           |          |        | 38,711     |         |         |        | 5.87     | %    |            |           | 983,066   |           |         |        | 32,644 |         |  |        | 6.64 | %   
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|                                           |                                  | Total Interest-Bearing
Liabilities/
Interest Expense |           |                                 | 6,119,889 |          |        | $          | 128,850 |         |        |          | 4.25 | %          |           |           | 4,976,096 |         |        | $      | 141,549 |  |        |      | 5.69 | %
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Total Non-Interest-Bearing Liabilities     |                                  |                                                      | 227,617   |                                 |           |          |        |            |         |         |        |          |      |            | 191,427   |           |           |         |        |        |         |  |        |     
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Total Liabilities                          |                                  |                                                      | 6,347,506 |                                 |           |          |        |            |         |         |        |          |      |            | 5,167,523 |           |           |         |        |        |         |  |        |     
|Stockholders Equity                       |                                  |                                                      | 806,603   |                                 |           |          |        |            |         |         |        |          |      |            | 533,388   |           |           |         |        |        |         |  |        |     
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Total Liabilities and Stockholders Equity |                                  | $                                                    | 7,154,109 |                                 |           |          |        |            |         |         |        |          |      | $          | 5,700,911 |           |           |         |        |        |         |  |        |     
|                                           |                                  |                                                      |           |                                 |           |          |        |            |         |         |        |          |      |            |           |           |           |         |        |        |         |  |        |     
|Net Interest-Earning Assets                |                                  | $                                                    | 456,354   |                                 |           |          |        |            |         |         |        |          |      | $          | 67,274    |           |           |         |        |        |         |  |        |     
|Net Interest Income                        |                                  |                                                      |           |                                 |           | $        | 73,563 |            |         |         |        |          |      |            |           |           |           | $       | 30,345 |        |         |  |        |     
|Interest
Rate Spread(5)                    |                                  |                                                      |           |                                 |           |          |        |            |         |         | 1.96   | %        |      |            |           |           |           |         |        |        |         |  | 1.13   | %   
|Interest Rate
Margin(5)                    |                                  |                                                      |           |                                 |           |          |        |            |         |         | 2.26   | %        |      |            |           |           |           |         |        |        |         |  | 1.20   | %   
|Net Interest-Earning Assets Ratio          |                                  |                                                      |           |                                 |           |          |        |            |         |         | 107.46 | %        |      |            |           |           |           |         |        |        |         |  | 101.35 | %   



---

|(1) |  | Average loan balances include the average balance of non-accruing loans, on
which no interest income is recognized.                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes average balance and
interest income of interest-only strips.                                                                                                                                                                                                                                                    
|   
|(3) |  | Consist of money market instruments,
reverse repurchase agreements and deposits in other banks.                                                                                                                                                                                                                          
|   
|(4) |  | Consist 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 |                               | QUARTER ENDED
|(IN THOUSANDS)                        |                               | JUNE 30,     
|                                      |                               |              
|                                      |                               |               | 2002 COMPARED TO 2001      
|                                      |                               |               | INCREASE (DECREASE) DUE TO:
|                                      |                               |               | VOLUME                      |        | RATE |   | TOTAL  
|                                      |                               |               |                             |        |      |   |        
|INTEREST INCOME VARIANCE              |                               |               |                             |        |      |   |         |        |   |   |        |       
|                                      | TOTAL LOANS                   |               | $                           | 13,988 |      |   | $       | (3,703 | ) |   | $      | 10,285 |  
|                                      | MORTGAGE-BACKED SECURITIES    |               |                             | 4,402  |      |   |         | 3,923  |   |   |        | 8,325  |  
|                                      | INVESTMENT SECURITIES         |               |                             | 4,491  |      |   |         | (1,908 | ) |   |        | 2,583  |  
|                                      | OTHER INTEREST EARNING ASSETS |               |                             | 4,521  |      |   |         | (6,135 | ) |   |        | (1,614 | )
|                                      |                               |               |                             |        |      |   |         |        |   |   |        |       
|TOTAL INTEREST INCOME VARIANCE        |                               |               | 27,402                      |        |      |   | (7,823  | )      |   |   | 19,579 |       
|                                      |                               |               |                             |        |      |   |         |        |   |   |        |       
|INTEREST EXPENSE VARIANCE             |                               |               |                             |        |      |   |         |        |   |   |        |       
|                                      | LOANS PAYABLE                 |               |                             | (1,333 | )    |   |         | (1,459 | ) |   |        | (2,792 | )
|                                      | REPURCHASE AGREEMENTS         |               |                             | 5,092  |      |   |         | (8,872 | ) |   |        | (3,780 | )
|                                      | DEPOSITS                      |               |                             | 8,236  |      |   |         | (7,245 | ) |   |        | 991    |  
|                                      | OTHER BORROWED FUNDS          |               |                             | 6,606  |      |   |         | (2,497 | ) |   |        | 4,109  |  
|                                      |                               |               |                             |        |      |   |         |        |   |   |        |       
|TOTAL INTEREST EXPENSE VARIANCE       |                               |               | 18,601                      |        |      |   | (20,073 | )      |   |   | (1,472 | )     
|                                      |                               |               |                             |        |      |   |         |        |   |   |        |       
|NET INTEREST INCOME VARIANCE          |                               | $             | 8,801                       |        |      | $ | 12,250  |        |   | $ | 21,051 |       
|                                      |                               |               |                             |        |      |   |         |        |   |   |        |       

TABLE D

|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |         |  
|------------------------------------- | ----------------------------- | ---------------------- | --------------------------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|NET INTEREST INCOME VARIANCE ANALYSIS |                               | SIX MONTH PERIOD ENDED
|(IN THOUSANDS)                        |                               | JUNE 30,              
|                                      |                               |                       
|                                      |                               |                        | 2002 COMPARED TO 2001      
|                                      |                               |                        | INCREASE (DECREASE) DUE TO:
|                                      |                               |                        | VOLUME                      |        | RATE |   | TOTAL  
|                                      |                               |                        |                             |        |      |   |        
|INTEREST INCOME VARIANCE              |                               |                        |                             |        |      |   |         |         |   |   |         |        
|                                      | TOTAL LOANS                   |                        | $                           | 30,920 |      |   | $       | (9,336  | ) |   | $       | 21,584  |  
|                                      | MORTGAGE-BACKED SECURITIES    |                        |                             | 10,909 |      |   |         | 5,660   |   |   |         | 16,569  |  
|                                      | INVESTMENT SECURITIES         |                        |                             | 1,474  |      |   |         | (3,320  | ) |   |         | (1,846  | )
|                                      | OTHER INTEREST EARNING ASSETS |                        |                             | 8,387  |      |   |         | (14,175 | ) |   |         | (5,788  | )
|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |        
|TOTAL INTEREST INCOME VARIANCE        |                               |                        | 51,690                      |        |      |   | (21,171 | )       |   |   | 30,519  |        
|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |        
|INTEREST EXPENSE VARIANCE             |                               |                        |                             |        |      |   |         |         |   |   |         |        
|                                      | LOANS PAYABLE                 |                        |                             | (3,757 | )    |   |         | (3,308  | ) |   |         | (7,065  | )
|                                      | REPURCHASE AGREEMENTS         |                        |                             | 10,237 |      |   |         | (21,736 | ) |   |         | (11,499 | )
|                                      | DEPOSITS                      |                        |                             | 13,961 |      |   |         | (14,163 | ) |   |         | (202    | )
|                                      | OTHER BORROWED FUNDS          |                        |                             | 11,505 |      |   |         | (5,438  | ) |   |         | 6,067   |  
|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |        
|TOTAL INTEREST EXPENSE VARIANCE       |                               |                        | 31,946                      |        |      |   | (44,645 | )       |   |   | (12,699 | )      
|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |        
|NET INTEREST INCOME VARIANCE          |                               | $                      | 19,744                      |        |      | $ | 23,474  |         |   | $ | 43,218  |        
|                                      |                               |                        |                             |        |      |   |         |         |   |   |         |        

24



---



##### Table of Contents



INTEREST INCOME

Total interest income increased from approximately $85.8 million during
the second quarter of 2001, to $105.3 million during the second quarter of 2002,
an increase of 23%. For the six months ended June 30, 2002 interest income
increased by approximately $30.5 million to $202.4 million compared to $171.9
million for the first six months of 2001. The increases in interest income
during both periods are primarily related to the increase in Doral Financials
total average interest-earning assets, which increased from $5.0 billion at June
30, 2001 to $6.6 billion at June 30, 2002.

Interest income on loans increased by $10.3 million or 26% during the
second quarter of 2002, compared to the respective 2001 period. For the first
half of 2002, interest income on loans increased by $21.6 million or 29% 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 for the second quarter of
2002 increased by 35% compared to the respective 2001 period. For the quarters
ended June 30, 2002 and 2001, interest income on mortgage-backed securities
amounted to $32.3 million and $24.0 million, respectively. During the first half
of 2002, interest income on mortgage-backed securities was $61.0 million, versus
$44.4 million for the comparable 2001 period. The results for the 2002 periods
reflect increased income received from tax-exempt Puerto Rico GNMA securities
and increased holdings of 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.

Interest income on investment securities increased to $19.4 million
during the second quarter of 2002, from $16.8 million for the respective 2001
period, an increase of 15%. The increase in interest income during the second
quarter of 2002 was due to increases in investment securities held during the
period. The average balance of investment securities was $1.3 billion for the
quarter ended June 30, 2002, compared to $1.0 billion for the quarter ended June
30, 2001. For the first half of 2002, interest income on investment securities
decreased by $1.8 million or 5%, 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 $1.6
million or 28% during the second quarter ended June 30, 2002 as compared to the
same quarter of 2001. Interest income on other interest-earning assets was $6.7
million for the six months ended June 30, 2002, as compared to $12.5 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 experienced during the second half of
2001.

INTEREST EXPENSE

Total interest expense decreased to $67.7 million during the second
quarter of 2002, from $69.1 million for the respective 2001 period, a reduction
of 2%. Total interest expense for the first half of 2002 was $128.9 million,
compared to $141.5 million for the same period of 2001, a decrease of 9%. 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 interest- bearing liabilities
increased to $6.1 billion at an average cost of 4.25% for the six month period
ended June 30, 2002, compared to $5.0 billion at an average cost of 5.69% for
the six month period ended June 30, 2001.

Interest expense related to loans payable decreased by $2.8 million or
66% during the second quarter of 2002 compared to the same period of 2001. For
the first half of 2002 interest expense related to loans payable was $2.8
million, a decrease of 71% compared to $9.8 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 $302.0 million
to $186.6 million for the six month period ended June 30,
2001 and June 30, 2002,
respectively. The

25



---



##### Table of Contents



decrease in loans payable reflects Doral Financials use of alternate 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 5.82% and 5.69% for the second quarters of 2002 and 2001,
respectively, and 2.98% and 6.51% for the six month periods then ended,
respectively.

Interest expense related to securities sold under agreements to
repurchase decreased by $3.8 million or 13% during the second quarter of 2002
compared to the same period of 2001. During the first six months of 2002
interest expense related to securities sold under agreements to repurchase was
$51.9 million versus $63.4 million for the corresponding 2001 period, a decrease
of 18%. The decrease in interest expense on securities sold under agreements to
repurchase during these periods 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 3.74% and 4.98% for the second quarter of 2002
and 2001, respectively, and 3.89% and 5.48% for the six month periods then
ended, respectively.

Interest expense on deposits increased by approximately $991,000, or
6%, for the second 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 banking subsidiaries. The average balance of deposits
increased to $2.1 billion for the quarter ended June 30, 2002, from $1.4 billion
for the second quarter of 2001. For the first half of 2002, interest expense on
deposits was $35.5 million, a decrease of 1% as compared to $35.7 million
recorded for the same period of 2001. This decrease is primarily related to a
decrease in the average cost on deposits which offset the effect of the 39%
increase in the average amount of deposits. The average balance of deposits was
$1.9 billion for the six month period ended June 30, 2002, compared to $1.4
billion for the six month period ended June 30, 2001. The average interest cost
on deposits was 3.66% and 3.74% respectively, for the quarter and six month
period ended June 30, 2002, as compared to 5.06% and 5.18% for the respective
2001 periods.

Interest expense on other borrowed funds was $21.0 million for the
quarter ended June 30, 2002, as compared to $16.9 million for the same period a
year ago, an increase of 24%. For the first six months of 2002, interest expense
on other borrowed funds increased by 19% to $38.7 million from $32.6 million in
2001. The increase in interest expense on other borrowed funds is due to the
increase in FHLB advances of $474.0 million from June 30, 2001 to June 30, 2002
and notes payable of $77.3 million from June 30, 2001 to June 30, 2002. For the
second quarter and first half of 2002, the weighted average interest rate for
other borrowed funds was 5.93% and 5.87%, respectively, compared to 6.62% and
6.64%, 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 approximately $989,000 and $1.7 million
respectively, for the quarter and six months periods ended June 30, 2002, as
compared to approximately $981,000 and $2.1 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 28% during the second quarter of 2002 to $58.2
million, as compared to $45.5 million for the same period of 2001. For the six
month periods ended June 30, 2002 and 2001, mortgage loans sales and fees were
$104.2 million and $91.4 million respectively, an increase of 14%. The increase
for 2002 was mainly the result of a greater volume of loan securitizations and
the ability of the Company to obtain higher profitability through higher loan
fees and the creation of interest-only

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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
June 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 (loss) income, for the
quarters ended June 30, 2002 and 2001 was $(2.1) million and $2.3 million,
respectively, a decrease of 191%. For the six month periods ended June 30, 2002 and
2001, net servicing (loss) income was approximately $(714,000)and $4.5 million,
respectively, a decrease of 116%.

The decrease in the amount of loan servicing income for the second
quarter and first half of 2002 was primarily due to the increase in the
amortization of mortgage servicing assets. Increased amortization offset the
increase in gross servicing fees of 12% and 18% for the second quarter and first
half of 2002, respectively, as 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. Doral Financial records
impairment charges as a direct write down of servicing assets. Total
amortization and impairment charges were $10.5 million and $5.3 million for the
quarters ended June 30, 2002 and 2001, respectively. For the first six months of
2002 and 2001 total amortization and impairment charges were $17.8 million and
$10.0 million, respectively. Doral Financial recognized unscheduled amortization
and impairment of $4.1 million during the second quarter of 2002 and of $5.1
million for the first half of 2002, due to the increase in prepayment estimates
associated with falling interest rates. The mortgage servicing portfolio was
approximately $10.7 billion at June 30, 2002, compared to $9.4 billion as of
June 30, 2001.

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 June 30, 2002 and 2001, resulted in losses of
$6.6 million and $4.0 million, respectively. Trading activities losses were
related primarily to both realized and unrealized losses with respect to trading
securities and derivative instruments. For the quarter ended June 30, 2002, net
realized and unrealized losses on derivative instruments was $27.9 million,
compared to a gain of $4.9 million during the corresponding 2001 period. For the
six months ended June 30, 2002 and 2001 net realized and unrealized losses on
derivative instruments were $30.2 million and $6.8 million, respectively. Higher
losses sustained for the 2002 periods were due to losses on
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 quarters ended June 30, 2002 and 2001, included $7.1
million of unrealized gains and $3.8 million of unrealized losses, respectively,
on the value of its trading securities pursuant to SFAS No. 115. Trading
activities for the six month period ended June 30, 2002, resulted in losses of
$11.7 million compared to $14.9 million in losses during the respective 2001
period. Trading activities for the six month periods ended June 30, 2002 and
2001 included $6.9 million of unrealized gains and $5.7 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:

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TABLE E  COMPONENTS OF TRADING ACTIVITIES

|                                                                         |  |               |         |                  |  |      |        |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------ |  | ------------- | ------- | ---------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                         |  | QUARTER ENDED |         | SIX MONTH PERIOD
|                                                                         |  | JUNE 30,      |         | ENDED JUNE 30   
|                                                                         |  |               |         |                 
|(Dollars in thousands)                                                   |  | 2002          |         | 2001             |  | 2002 |        | 2001
|                                                                         |  |               |         |                  |  |      |        |     
|Net realized gains and (losses) on sales of trading securities           |  | $             | 14,155  |                  |  | $    | (5,185 | )    |  | $ | 11,604  |   |  | $ | (2,400  | )
|Net unrealized gains and (losses) on trading securities                  |  |               | 7,134   |                  |  |      | (3,753 | )    |  |   | 6,881   |   |  |   | (5,655  | )
|Net realized and unrealized (losses) and gains on derivative instruments |  |               | (27,918 | )                |  |      | 4,890  |      |  |   | (30,184 | ) |  |   | (6,815  | )
|                                                                         |  |               |         |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Total                                                                    |  | $             | (6,629  | )                |  | $    | (4,048 | )    |  | $ | (11,699 | ) |  | $ | (14,870 | )
|                                                                         |  |               |         |                  |  |      |        |      |  |   |         |   |  |   |         |  

Gain (loss) on Sale of Investment Securities. Gain (loss) on sale of
investment securities represents the impact on income of transactions involving
the sale of securities classified as available for sale. For the second quarter
and first six months of 2002, sale of investment securities resulted in a gain
of $3.2 million and $6.0 million respectively, compared to losses of
approximately $628,000 and a gain of $2.2 million, respectively, for the
corresponding 2001 periods. Proceeds from sales of securities available for sale
amounted to $2.3 billion for the first half of 2002 compared to $1.1 billion for
the first half of 2001.

Commissions, Fees and Other Income. Other income, commissions and fees
increased 14% during the second quarter of 2002 from $4.4 million for the
quarter ended June 30, 2001 to $5.0 million for the quarter ended June 30, 2002.
For the first half of 2002, commissions, fees and other income increased 21%, as
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
banking and insurance agency subsidiaries, partly offset by a decrease in fees
and commissions earned by Doral Securities. For the second quarter and first
half of 2002, insurance agency activities produced commissions of $1.7 million
and $3.3 million compared to $1.1 million and $1.7 million for the corresponding
2001 periods. Deposit and other retail banking fees increased from $1.0 million
for the second quarter of 2001 to $2.1 million for the second quarter of 2002
and from $2.0 million for the first half of 2001 to $3.6 million for the first
six months of 2002.

NON-INTEREST EXPENSE

Total non-interest expense increased by 20% during the second quarter
ended June 30, 2002, as 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 six months period ended June 30, 2002 total
non-interest expense increased by 23% from the comparable 2001 period.

PUERTO RICO INCOME TAXES

The maximum statutory corporate income tax rate in Puerto Rico is 39%.
For the second quarter and first half of 2002, the effective income
tax rate of Doral Financial was 14%, compared to an effective income
tax rate of 12% for the second quarter and first half of 2001.

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 $29.5 million and $20.5 million for the six month periods ended
June 30, 2002 and 2001, respectively.

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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 interest-only strips (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 amount of the IOs are recorded at the time of 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 unrelated 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 half of 2002 compared to 5.50% during the first half of
2001. While Doral Financial has from time to time sold 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 $52.1 million during the second quarter of 2002, compared to $34.6
million for the second quarter of 2001. For the six month periods ended June 30,
2002 and 2001, the Company recorded IOs in the amount of $90.6 million and $67.1
million, respectively.

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 continued use of the market factor selected to value the
IOs is still appropriate in light of changes in market conditions. It also
attempts to corroborate the value assigned to the IOs through use of valuation
models that incorporate assumptions regarding the direction of interest rates
and prepayment rates. 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 June 30, 2002 and 2001, was approximately
$12.4 million and $7.3 million, respectively. For the first six month periods
ended June 30, 2002 and 2001 amortization of IOs was approximately $23.0 million
and $12.8 million, respectively. The increase in the amortization for 2002
compared to 2001 periods 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 June 30,
2002 and December 31, 2001, the carrying amount
of IOs and other residual interests retained in securitization transactions
recorded on Doral Financials financial statements was
$311.2 million and $236.5 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 third parties
in market transactions for similar mortgage servicing rights. During the first
half 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.

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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 six months
ended June 30, 2002 and 2001, Doral Financial recognized servicing assets of
$18.8 million, and $20.2 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
$559.6 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. Refer to Table F for servicing assets
activities for the periods indicated.

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

TABLE F
MORTGAGE SERVICING ASSETS ACTIVITY
(IN THOUSANDS)

|                               |                            |   |               |        |                  |   |         |        |      |   |         |         |   |   |         |        |  
|------------------------------ | -------------------------- | - | ------------- | ------ | ---------------- | - | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------ | -
|                               |                            |   | QUARTER ENDED |        | SIX MONTH PERIOD
|                               |                            |   | JUNE 30,      |        | ENDED JUNE 30,  
|                               |                            |   |               |        |                 
|                               |                            |   | 2002          |        | 2001             |   | 2002    |        | 2001
|                               |                            |   |               |        |                  |   |         |        |     
|Balance at beginning of period |                            | $ | 158,157       |        |                  | $ | 144,783 |        |      | $ | 154,340 |         |   | $ | 139,795 |       
|Capitalization of rights       |                            |   | 10,932        |        |                  |   | 13,158  |        |      |   | 22,022  |         |   |   | 22,898  |       
|Amortization:                  |                            |   |               |        |                  |   |         |        |      |   |         |         |   |   |         |       
|                               | Scheduled                  |   |               | (6,443 | )                |   |         | (4,590 | )    |   |         | (12,643 | ) |   |         | (9,170 | )
|                               | Unscheduled and impairment |   |               | (4,068 | )                |   |         | (668   | )    |   |         | (5,141  | ) |   |         | (840   | )
|                               |                            |   |               |        |                  |   |         |        |      |   |         |         |   |   |         |       
|Balance at end of period       |                            | $ | 158,578       |        |                  | $ | 152,683 |        |      | $ | 158,578 |         |   | $ | 152,683 |       
|                               |                            |   |               |        |                  |   |         |        |      |   |         |         |   |   |         |       

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.

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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 |           | SIX MONTH PERIOD
|                                                 |                         |   | JUNE 30,      |           | ENDED JUNE 30,  
|                                                 |                         |   |               |           |                 
|                                                 |                         |   | 2002          |           | 2001             |   | 2002    |           | 2001
|                                                 |                         |   |               |           |                  |   |         |           |     
|FHA/VA mortgage loans                            |                         |   |               |           |                  |   |         |           |      |   |         |           |   |   |         |          
|                                                 | Number of loans         |   | 1,564         |           |                  |   | 1,463   |           |      |   | 3,289   |           |   |   | 3,097   |          
|                                                 | Volume of loans         |   | $             | 138,246   |                  |   | $       | 135,620   |      |   | $       | 288,242   |   |   | $       | 283,448   |  
|                                                 | Percent of total volume |   |               | 11        | %                |   |         | 13        | %    |   |         | 12        | % |   |         | 14        | %
|Conventional conforming mortgage loans           |                         |   |               |           |                  |   |         |           |      |   |         |           |   |   |         |          
|                                                 | Number of loans         |   | 3,214         |           |                  |   | 2,843   |           |      |   | 7,036   |           |   |   | 5,481   |          
|                                                 | Volume of loans         |   | $             | 466,498   |                  |   | $       | 309,331   |      |   | $       | 1,000,143 |   |   | $       | 585,111   |  
|                                                 | Percent of total volume |   |               | 37        | %                |   |         | 29        | %    |   |         | 41        | % |   |         | 30        | %
|Conventional
non-conforming mortgage loans(1)(2) |                         |   |               |           |                  |   |         |           |      |   |         |           |   |   |         |          
|                                                 | Number of loans         |   | 5,743         |           |                  |   | 5,014   |           |      |   | 10,513  |           |   |   | 9,358   |          
|                                                 | Volume of loans         |   | $             | 454,998   |                  |   | $       | 464,407   |      |   | $       | 826,980   |   |   | $       | 869,065   |  
|                                                 | Percent of total volume |   |               | 37        | %                |   |         | 44        | %    |   |         | 34        | % |   |         | 44        | %
|Other(3)                                         |                         |   |               |           |                  |   |         |           |      |   |         |           |   |   |         |          
|                                                 | Number of loans         |   | 489           |           |                  |   | 411     |           |      |   | 939     |           |   |   | 823     |          
|                                                 | Volume of loans         |   | $             | 191,760   |                  |   | $       | 141,496   |      |   | $       | 326,402   |   |   | $       | 228,539   |  
|                                                 | Percent of total volume |   |               | 15        | %                |   |         | 14        | %    |   |         | 13        | % |   |         | 12        | %
|Total loans                                      |                         |   |               |           |                  |   |         |           |      |   |         |           |   |   |         |          
|                                                 | Number of loans         |   | 11,010        |           |                  |   | 9,731   |           |      |   | 21,777  |           |   |   | 18,759  |          
|                                                 | Volume of loans         |   | $             | 1,251,502 |                  |   | $       | 1,050,854 |      |   | $       | 2,441,767 |   |   | $       | 1,966,163 |  
|Average initial loan balance                     |                         | $ | 113,670       |           |                  | $ | 107,990 |           |      | $ | 112,126 |           |   | $ | 104,812 |          



---

|(1) |  | Includes $18.0 million and $12.5 million in second mortgages for the
quarters ended June 30, 2002 and 2001, respectively and $29.0 million
and $29.6 million in second mortgages for the six month periods ended
June 30, 2002 and 2001.                                           
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes $19.3 million and $43.0 million in home equity or personal
loans secured by real estate mortgages of up to $40,000 for the
quarters ended June 30, 2002 and 2001, respectively and $39.0 million
and $73.8 million for the six month periods ended June 30, 2002 and
2001.
|   
|(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 six
months ended June 30, 2002 and 2001, refinance loans represented approximately
53% 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 is less sensitive to interest rate

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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

|                         |  |                                 |    |      |  |       |   |             |  |    |    |       |  |  |    |   |  |  |   |   |  |  |    |  
|------------------------ |  | ------------------------------- | -- | ---- |  | ----- | - | ----------- |  | -- | -- | ----- |  |  | -- | - |  |  | - | - |  |  | -- | -
|                         |  | SIX MONTH PERIOD ENDED JUNE 30,
|                         |  |                                
|                         |  | 2002                            |    | 2001
|                         |  |                                 |    |     
|                         |  | Puerto Rico                     |    | US   |  | Total |   | Puerto Rico |  | US |    | Total
|                         |  |                                 |    |      |  |       |   |             |  |    |    |      
|Retail                   |  |                                 | 55 | %    |  |       |  |             |  |    | 55 | %     |  |  | 54 | % |  |  | 1 | % |  |  | 55 | %
|Wholesale(1)             |  |                                 | 30 | %    |  |       | 1 | %           |  |    | 31 | %     |  |  | 31 | % |  |  |  |   |  |  | 31 | %
|New Housing Developments |  |                                 | 10 | %    |  |       |  |             |  |    | 10 | %     |  |  | 8  | % |  |  |  |   |  |  | 8  | %
|Multi-family(2)          |  |                                 |   |      |  |       |  |             |  |    |   |       |  |  |   |   |  |  | 2 | % |  |  | 2  | %
|Other(3)                 |  |                                 | 2  | %    |  |       | 2 | %           |  |    | 4  | %     |  |  | 4  | % |  |  |  |   |  |  | 4  | %



---

|(1) |  | Refers to purchases of mortgage loans from other financial institutions.
Puerto Rico wholesale purchases include U.S. mortgage loans purchased by
Doral Financials Puerto Rico based mortgage units.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Less than one percent for 2002.                                                                                                                                                                      
|   
|(3) |  | Refers to commercial, consumer and land loans originated through the 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 second quarters of 2002 and 2001, Doral
Financial purchased servicing rights to approximately $66.5 million and $106.0
million, respectively, in principal amount of mortgage loans. For the six months
period ended June 30, 2002 and 2001, Doral Financial purchased servicing rights to
approximately $192.2 million and $159.4 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.

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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 JUNE 30,
|                                                                  |                               |   |               
|                                                                  |                               |   | 2002           |           | 2001
|                                                                  |                               |   |                |           |     
|COMPOSITION OF SERVICING PORTFOLIO AT PERIOD END:                 |                               |   |                |           |      |   |           |          
|GNMA                                                              |                               | $ | 3,231,397      |           |      | $ | 3,260,505 |          
|FHLMC/FNMA                                                        |                               |   | 2,759,615      |           |      |   | 2,466,048 |          
|Doral Financial grantor trusts                                    |                               |   | 56,938         |           |      |   | 76,646    |          
|Other
conventional mortgage loans(1)                              |                               |   | 4,626,450      |           |      |   | 3,597,671 |          
|                                                                  |                               |   |                |           |      |   |           |          
|Total servicing portfolio                                         |                               | $ | 10,674,400     |           |      | $ | 9,400,870 |          
|                                                                  |                               |   |                |           |      |   |           |          
|SELECTED DATA REGARDING MORTGAGE LOANS SERVICED:                  |                               |   |                |           |      |   |           |          
|Number of loans                                                   |                               |   | 138,870        |           |      |   | 132,072   |          
|Weighted average interest rate                                    |                               |   | 7.32           | %         |      |   | 7.65      | %        
|Weighted average remaining maturity (months)                      |                               |   | 250            |           |      |   | 251       |          
|Weighted average servicing fee rate                               |                               |   | .3434          | %         |      |   | .3254     | %        
|Average servicing portfolio                                       |                               | $ | 10,453,126     |           |      | $ | 9,111,044 |          
|Principal prepayments                                             |                               | $ | 761,951        |           |      | $ | 612,675   |          
|Prepayments to average portfolio (annualized)                     |                               |   | 15             | %         |      |   | 13        | %        
|Average size of loans prepaid                                     |                               | $ | 75,605         |           |      | $ | 67,856    |          
|DELINQUENT MORTGAGE LOANS AND PENDING
FORECLOSURES AT PERIOD END: |                               |   |                |           |      |   |           |          
|60-89 days past due                                               |                               |   | 1.22           | %         |      |   | 1.37      | %        
|90 days or more past due                                          |                               |   | 2.06           | %         |      |   | 1.99      | %        
|                                                                  |                               |   |                |           |      |   |           |          
|Total delinquencies excluding foreclosures                        |                               |   | 3.28           | %         |      |   | 3.36      | %        
|                                                                  |                               |   |                |           |      |   |           |          
|Foreclosures pending                                              |                               |   | 1.54           | %         |      |   | 1.34      | %        
|                                                                  |                               |   |                |           |      |   |           |          
|SERVICING PORTFOLIO ACTIVITY:                                     |                               |   |                |           |      |   |           |          
|Beginning servicing portfolio                                     |                               | $ | 10,006,380     |           |      | $ | 8,804,706 |          
|Add:                                                              |                               |   |                |           |      |   |           |          
|                                                                  | Loans
funded and purchased(2) |   |                | 1,418,321 |      |   |           | 1,244,235 | 
|                                                                  | Bulk servicing acquired       |   |                | 192,176   |      |   |           | 159,391   | 
|Less:                                                             |                               |   |                |           |      |   |           |          
|                                                                  | Servicing sales transferred   |   |                | 59,219    |      |   |           | 138,548   | 
|                                                                  | Run-off(3)                    |   |                | 883,258   |      |   |           | 668,914   | 
|                                                                  |                               |   |                |           |      |   |           |          
|Ending servicing portfolio                                        |                               | $ | 10,674,400     |           |      | $ | 9,400,870 |          
|                                                                  |                               |   |                |           |      |   |           |          



---

|(1) |  | Includes $1.8 billion and $1.1 billion of loans owned by Doral Financial at June 30, 2002 and 2001, respectively, which
represented 17% and 12% of the total servicing portfolio as of such dates.                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excludes approximately $1.0 billion and $721.9 million of
commercial, consumer, construction and other loans not
included in Doral Financials mortgage servicing portfolio as
of June 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 June 30, 2002 and 2001, approximately 4% and
6%, respectively, of Doral Financials mortgage servicing portfolio was related
to mortgages secured by real property located outside Puerto Rico.

The amount of principal prepayments on mortgage loans serviced by Doral
Financial was $762.0 million and $612.7 million for the six months ended June
30, 2002 and 2001, respectively. This represents approximately 15% and 13%,
respectively, on an annualized basis of the average principal amount of mortgage
loans serviced. Doral Financial reduces the sensitivity of its servicing income
to increases in prepayment rates through a strong retail origination network

33



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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 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 June 30, 2002, the outstanding principal balance of loans sold subject to
full recourse, partial recourse or put-back arrangements 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 or if investors exercised
their put back options was $1.3 billion. As of June 30, 2002, Doral Financial
maintained a reserve of $2.6 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 June 30, 2002, approximately 55% or $413.8 million
of Doral Financials gross loans receivable portfolio totaling $754.1 million
consisted of construction loans.

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, 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, 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 in non-accrual, its accrued interest 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. 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

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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
are generally 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 June 30, 2002 and 2001, Doral
Financial would have recognized $5.0 million and $1.2 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 June 30, 2002 and December 31, 2001 amounted to $1.2
million and $2.1 million , respectively. Doral Financial determined that, given
the fair value of the loans collateral, no impairment allowance was necessary
at June 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.

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TABLE J
NON-PERFORMING ASSETS
(DOLLARS IN THOUSANDS)

|                                                       |                                                                                                  |  |                               |        |                |        |                    |        |   |       | 
|------------------------------------------------------ | ------------------------------------------------------------------------------------------------ |  | ----------------------------- | ------ | -------------- | ------ | ------------------ | ------ | - | ----- | 
|                                                       |                                                                                                  |  |                               |        | AS OF JUNE 30, |        | AS OF DECEMBER 31,
|                                                       |                                                                                                  |  |                               |        | 2002           |        | 2001              
|                                                       |                                                                                                  |  |                               |        |                |        |                   
|Mortgage banking business:                             |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Non-accrual loans:                                                                               |  |                               |        |                |        |                    |        |  
|                                                       |                                                                                                  |  | Construction loans            |        | $              | 1,201  |                    |        | $ | 705   | 
|                                                       |                                                                                                  |  | Residential mortgage loans(1) |        |                | 12,375 |                    |        |   | 3,742 | 
|                                                       | Construction loans past due 90 days and still accruing                                           |  |                               | 2,315  |                |        |                    |       |  
|                                                       | Loans held-for-sale past due 90 days and still
accruing(2)                                       |  |                               | 54,819 |                |        |                    | 55,966 |  
|                                                       | OREO                                                                                             |  |                               | 8,693  |                |        |                    | 7,924  |  
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Total NPAs of mortgage banking business                                                          |  |                               | 79,403 |                |        |                    | 68,337 |  
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|Other
lending activities through banking subsidiaries: |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Non-accrual loans:                                                                               |  |                               |        |                |        |                    |        |  
|                                                       |                                                                                                  |  | Construction                  |        |                | 630    |                    |        |   | 1,184 | 
|                                                       |                                                                                                  |  | Residential mortgage loans    |        |                | 8,412  |                    |        |   | 5,276 | 
|                                                       |                                                                                                  |  | Commercial real estate        |        |                | 2,968  |                    |        |   | 1,359 | 
|                                                       |                                                                                                  |  | Consumer                      |        |                | 704    |                    |        |   | 463   | 
|                                                       |                                                                                                  |  | Commercial non-real estate    |        |                | 4,130  |                    |        |   | 710   | 
|                                                       |                                                                                                  |  | Land loans                    |        |                |       |                    |        |   | 70    | 
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Total non-accrual loans                                                                          |  |                               | 16,844 |                |        |                    | 9,062  |  
|                                                       |                                                                                                  |  |                               |        |                |       
|                                                       | Residential mortgage loans past due 90 days and still accruing                                   |  |                               | 892    |                |        |                    |       |  
|                                                       |                                                                                                  |  |                               |        |                |       
|                                                       | Consumer loans past due 90 days and still accruing                                               |  |                               | 15     |                |        |                    |       |  
|                                                       |                                                                                                  |  |                               |        |                |       
|                                                       | OREO                                                                                             |  |                               | 772    |                |        |                    | 490    |  
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Total NPAs of banking subsidiaries                                                               |  |                               | 18,523 |                |        |                    | 9,552  |  
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Total NPAs of Doral Financial (consolidated)                                                     |  | $                             | 97,926 |                |        | $                  | 77,889 |  
|                                                       |                                                                                                  |  |                               |        |                |        |                    |       
|                                                       | Total NPAs of banking subsidiaries as a percentage
of their loans receivable, net, and OREO      |  |                               | 2.79   | %              |        |                    | 1.58   | %
|                                                       | Total NPAs of Doral Financial as a percentage of
consolidated total assets                       |  |                               | 1.24   | %              |        |                    | 1.16   | %
|                                                       | Ratio of allowance for loan losses to total
non-performing loans at end of period (consolidated) |  |                               | 15.30  | %              |        |                    | 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 $14.6 million and $12.7 million of 90 days past due FHA/VA loans as of June 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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 |      | SIX MONTH PERIOD
|                                                                                          |             |                              |        | JUNE 30,      |      | ENDED JUNE 30,  
|                                                                                          |             |                              |        |               |      |                 
|                                                                                          |             |                              |        | 2002          |      | 2001             |        | 2002 |      | 2001
|                                                                                          |             |                              |        |               |      |                  |        |      |      |     
|OREO:                                                                                     |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Balance at beginning of period                                                            |             | $                            | 1,671  |               |      | $                | 1,566  |      |      | $    | 1,365  |   |      | $ | 1,530  |  
|Provision for losses                                                                      |             |                              | 651    |               |      |                  | 135    |      |      |      | 891    |   |      |   | 270    |  
|Net gains, charge-offs and others                                                         |             |                              | (42    | )             |      |                  | (113   | )    |      |      | 24     |   |      |   | (212   | )
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Balance at end of period                                                                  |             | $                            | 2,280  |               |      | $                | 1,588  |      |      | $    | 2,280  |   |      | $ | 1,588  |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Allowance for Loan Losses:                                                                |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Balance at beginning of period                                                            |             | $                            | 13,071 |               |      | $                | 10,221 |      |      | $    | 12,472 |   |      | $ | 9,387  |  
|Provision for loan losses                                                                 |             |                              | 989    |               |      |                  | 981    |      |      |      | 1,737  |   |      |   | 2,067  |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Charge-offs:                                                                              |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|                                                                                          |             | Mortgage loans held-for-sale |        |               | (52  | )                |        |      | (104 | )    |        |   | (90  | ) |        |   | (234 | )
|                                                                                          |             | Construction                 |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Residential mortgage loans   |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Commercial real estate       |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Consumer                     |        |               | (393 | )                |        |      | (235 | )    |        |   | (526 | ) |        |   | (388 | )
|                                                                                          |             | Commercial non-real estate   |        |               | (5   | )                |        |      | (5   | )    |        |   | (20  | ) |        |   | (10  | )
|                                                                                          |             | Other                        |        |               | (85  | )                |        |      |     |      |        |   | (97  | ) |        |   |     |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Total Charge-offs                                                                         |             |                              | (535   | )             |      |                  | (344   | )    |      |      | (733   | ) |      |   | (632   | )
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|                                                                                          | Recoveries: |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |   |     
|                                                                                          |             | Mortgage loans held-for-sale |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Construction                 |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Residential mortgage loans   |        |               |     |                  |        |      |     |      |        |   | 14   |   |        |   |     |  
|                                                                                          |             | Commercial real estate       |        |               |     |                  |        |      |     |      |        |   |     |   |        |   |     |  
|                                                                                          |             | Consumer                     |        |               | 18   |                  |        |      | 20   |      |        |   | 51   |   |        |   | 52   |  
|                                                                                          |             | Commercial non-real estate   |        |               | 1    |                  |        |      | 29   |      |        |   | 3    |   |        |   | 33   |  
|                                                                                          |             | Other                        |        |               | 11   |                  |        |      |     |      |        |   | 11   |   |        |   |     |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Total recoveries                                                                          |             |                              | 30     |               |      |                  | 49     |      |      |      | 79     |   |      |   | 85     |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Net charge-offs                                                                           |             |                              | (505   | )             |      |                  | (295   | )    |      |      | (654   | ) |      |   | (547   | )
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Other Adjustments                                                                         |             |                              | (24    | )             |      |                  |       |      |      |      | (24    | ) |      |   |       |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Balance at end of
period(1)                                                               |             | $                            | 13,531 |               |      | $                | 10,907 |      |      | $    | 13,531 |   |      | $ | 10,907 |  
|                                                                                          |             |                              |        |               |      |                  |        |      |      |      |        |   |      |   |        |  
|Allowance for loan losses as a percentage
of total loans outstanding at
the end of period |             |                              | 0.48   | %             |      |                  | 0.50   | %    |      |      | 0.48   | % |      |   | 0.50   | %
|Net charge-offs to average loans
outstanding                                              |             |                              | 0.02   | %             |      |                  | 0.02   | %    |      |      | 0.02   | % |      |   | 0.03   | %



---

|(1) |  | Includes the allowance of mortgage loans held-for-sale of $7.0 million for
2002 and $5.3 million for 2001 and the allowance for loans receivable held for
investment of $6.5 million for 2002 and $5.6 million for 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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The allowance for loan losses relating to loans held by Doral Financial was
$13.5 million at June 30, 2002, compared to $10.9 million as of June 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, 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
six month period ended June 30, 2002, the monthly average amount of funds
advanced by Doral Financial under such servicing agreements was approximately
$7.1 million, compared to $10.3 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 $100,015,000.

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

TABLE L
SOURCES OF BORROWINGS
(DOLLARS IN THOUSANDS)

|                      |  |                     |           |                         |  |             |      |         |  |   |           |  |  |  |      |  
|--------------------- |  | ------------------- | --------- | ----------------------- |  | ----------- | ---- | ------- |  | - | --------- |  |  |  | ---- | -
|                      |  | AS OF JUNE 30, 2002 |           | AS OF DECEMBER 31, 2001
|                      |  |                     |           |                        
|                      |  | AMOUNT              |           | AVERAGE                 |  | AMOUNT      |      | AVERAGE
|                      |  | OUTSTANDING         |           | RATE                    |  | OUTSTANDING |      | RATE   
|                      |  |                     |           |                         |  |             |      |        
|Repurchase Agreements |  | $                   | 2,901,783 |                         |  |             | 3.51 | %       |  | $ | 2,573,772 |  |  |  | 4.00 | %
|Loans Payable         |  |                     | 197,611   |                         |  |             | 3.10 | %       |  |   | 161,101   |  |  |  | 3.67 | %
|Deposits              |  |                     | 2,116,108 |                         |  |             | 3.27 | %       |  |   | 1,669,909 |  |  |  | 3.65 | %
|Notes Payable         |  |                     | 557,174   |                         |  |             | 7.82 | %       |  |   | 459,543   |  |  |  | 7.98 | %
|Advances from FHLB    |  |                     | 961,500   |                         |  |             | 4.29 | %       |  |   | 687,500   |  |  |  | 4.80 | %

Doral Financial had warehousing, gestation and repurchase agreements
lines of credit totaling $7.0 billion as of June 30, 2002, of which $3.1 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 $2.2 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 repayment of all amounts
previously advanced and to stop making any further advances to Doral Financial.
As of June 30, 2002, Doral Financial was in compliance with all such financial
covenants and ratios. Doral Financial has one credit facility

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with an aggregate credit availability of $433.0 million, of which approximately
$102.6 million was outstanding as of June 30, 2002, that permit the lender to
require Doral Financial to repay all outstanding advances and refuse to make
further credit advances if Doral Financials senior unsecured debt is rated
below Ba2 by Moodys Investors Service (Moodys) or below BB by Standard &
Poors Rating Services, a division of The McGraw-Hill Companies (S&P). Doral
Financials senior unsecured debt obligations are currently rated Baa2 by
Moodys and BBB- by S&P.

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)

|                         |                |                        |           |                   |         |  |         |      |         |   |         |           |  |  |      |      |  
|------------------------ | -------------- | ---------------------- | --------- | ----------------- | ------- |  | ------- | ---- | ------- | - | ------- | --------- |  |  | ---- | ---- | -
|                         |                | SIX MONTH PERIOD ENDED |           | YEAR ENDED       
|                         |                | JUNE 30, 2002          |           | DECEMBER 31, 2001
|                         |                |                        |           |                   |        
|                         |                |                        | AVERAGE   |                   | AVERAGE |  | AVERAGE |      | AVERAGE
|                         |                |                        | BALANCE   |                   | RATE    |  | BALANCE |      | RATE   
|                         |                |                        |           |                   |         |  |         |      |         |   |         |           |  |  |      |     
|Certificates of deposit  |                | $                      | 1,098,209 |                   |         |  | 4.14    | %    |         | $ | 904,910 |           |  |  | 4.87 | %   
|Regular passbook savings |                |                        | 171,377   |                   |         |  | 3.92    | %    |         |   | 101,038 |           |  |  | 4.33 | %   
|Now accounts             |                |                        | 388,816   |                   |         |  | 3.05    | %    |         |   | 299,486 |           |  |  | 2.80 | %   
|Non-interest bearing     |                |                        | 255,803   |                   |         |  |        |      |         |   | 177,862 |           |  |  |     |     
|                         |                |                        |           |                   |         |  |         |      |         |   |         |           |  |  |      |     
|                         | Total deposits |                        | $         | 1,914,205         |         |  |         | 3.74 | %       |   | $       | 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 June 30, 2002.

TABLE N
DEPOSIT MATURITIES
(IN THOUSANDS)

|                                 |                                |  |        |         | 
|-------------------------------- | ------------------------------ |  | ------ | ------- | 
|                                 |                                |  | AMOUNT
|                                 |                                |  |       
|Certificates of deposit maturing |                                |  |        |        
|                                 | Three months or less           |  | $      | 137,700 | 
|                                 | Over three through six months  |  |        | 73,404  | 
|                                 | Over six through twelve months |  |        | 234,828 | 
|                                 | Over twelve months             |  |        | 479,836 | 
|                                 |                                |  |        |        
|                                 | Total                          |  | $      | 925,768 | 
|                                 |                                |  |        |        

As of June 30, 2002 and December 31, 2001, Doral Financials banking
subsidiaries had approximately $667.1 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 June 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 June 30, 2002,
based on existing Federal Reserve, FDIC and OTS guidelines, respectively.

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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) |  |           | 17.2 | %       |  |            | 11.6 | % |  |  | 26.4 | %
|Total Capital (total capital to risk weighted assets)         |  |           | 17.5 | %       |  |            | 11.9 | % |  |  | 26.6 | %
|Leverage
Ratio(2)                                             |  |           | 12.5 | %       |  |            | 6.3  | % |  |  | 10.7 | %



---

|(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 June 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 June 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 June 30, 2002 assuming full implementation of the new rules as of such
date.

|                     |  |                 |      |  
|-------------------- |  | --------------- | ---- | -
|                     |  | DORAL FINANCIAL
|                     |  |                
|Tier 1 Capital Ratio |  |                 | 13.6 | %
|Total Capital Ratio  |  |                 | 13.8 | %
|Leverage Ratio       |  |                 | 11.6 | %

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Doral Financial expects that it will continue to have adequate
liquidity, financing arrangements and capital resources to finance its
operations. Doral Financial 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 June 30, 2002, Doral Financials total assets were $7.9 billion
compared to $6.7 billion at December 31, 2001. The increase in assets was due
primarily to a net increase in the loans portfolio of approximately $238.5
million and a net increase in money market investments of approximately $593.6
million. Total liabilities were $7.0 billion at June 30, 2002, compared to $5.9
billion at December 31, 2001. The increase in liabilities was largely the result
of an increase in repurchase agreements, deposit accounts, notes payable and
advances from FHLB which were offset in part by a decrease of $142.6 million in
broker dealers operations payable. At June 30, 2002, deposit accounts totaled
$2.1 billion, compared to $1.7 billion at December 31, 2001. As of June 30,
2002, Doral Financials banking subsidiaries had $4.7 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 June 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 |  | $                     | 3,099,394 |        |  | $         | 1,662,386 |           |  | $     | 350,130   |  |  | $ | 200,000 |         |  | $ | 886,878   | 
|Deposits                                   |  |                       | 2,116,108 |        |  |           | 1,574,058 |           |  |       | 395,932   |  |  |   | 144,856 |         |  |   | 1,262     | 
|Other Borrowed Funds                       |  |                       | 1,518,674 |        |  |           | 161,685   |           |  |       | 477,492   |  |  |   | 263,374 |         |  |   | 616,123   | 
|Non-cancellable Leases                     |  |                       | 51,923    |        |  |           | 4,621     |           |  |       | 8,169     |  |  |   | 7,777   |         |  |   | 31,356    | 
|                                           |  |                       |           |        |  |           |           |           |  |       |           |  |  |   |         |         |  |   |           | 
|Total Contractual Cash Obligations         |  | $                     | 6,786,099 |        |  | $         | 3,402,750 |           |  | $     | 1,231,723 |  |  | $ | 616,007 |         |  | $ | 1,535,619 | 
|                                           |  |                       |           |        |  |           |           |           |  |       |           |  |  |   |         |         |  |   |           | 

TABLE Q
OTHER COMMERCIAL COMMITMENTS

|                                          |  |                                            |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |   |         | 
|----------------------------------------- |  | ------------------------------------------ | --------- | --------- |  | --------- | ------- | --------- |  | ----- | ------- |  |  | ------- | ------ |  |  | - | ------- | 
|(DOLLARS IN THOUSANDS)                    |  | AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
|                                          |  |                                           
|                                          |  | TOTAL                                      |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |  
|                                          |  | AMOUNTS                                    |           | LESS THAN |  |           |         |           |  |       |         |  |  | AFTER 5
|OTHER COMMERCIAL COMMITMENTS              |  | COMMITTED                                  |           | 1 YEAR    |  | 1-3 YEARS |         | 3-5 YEARS |  | YEARS
|                                          |  |                                            |           |           |  |           |         |           |  |      
|Standby Repurchase (Recourse) Obligations |  | $                                          | 1,287,736 |           |  | $         | 275,728 |           |  | $     | 307,622 |  |  | $       | 23,474 |  |  | $ | 680,912 | 
|Put-back options                          |  |                                            | 4,002     |           |  |           | 4,002   |           |  |       |        |  |  |         |       |  |  |   |        | 
|                                          |  |                                            |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |   |         | 
|Total Commercial Commitments              |  | $                                          | 1,291,738 |           |  | $         | 279,730 |           |  | $     | 307,622 |  |  | $       | 23,474 |  |  | $ | 680,912 | 
|                                          |  |                                            |           |           |  |           |         |           |  |       |         |  |  |         |        |  |  |   |         | 

INTEREST RATE RISK MANAGEMENT

General. Interest rate fluctuations 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

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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 June 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 JUNE 30, 2002                       |                                            | OR LESS |            | YEARS     |        | YEARS |            | YEARS     |        | BEARING |            | TOTAL  
|                                          |                                            |         |            |           |        |       |            |           |        |         |            |        
|ASSETS                                    |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                          | Cash and Money Market                      |         | $          | 1,219,885 |        |       | $          |          |        |         | $          |        |  |   | $         |          |  |  | $        |          |  |  | $ | 1,219,885 | 
|                                          | Total Loans                                |         |            | 431,177   |        |       |            | 231,740   |        |         |            | 160,446 |  |   |           | 2,006,758 |  |  |          |          |  |  |   | 2,830,121 | 
|                                          | Securities Held-for-Trading                |         |            | 269,879   |        |       |            | 2,103     |        |         |            | 11,839  |  |   |           | 787,021   |  |  |          |          |  |  |   | 1,070,842 | 
|                                          | Securities Available for Sale              |         |            |          |        |       |            |          |        |         |            | 63,853  |  |   |           | 1,066,733 |  |  |          |          |  |  |   | 1,130,586 | 
|                                          | Securities Held-to-Maturity                |         |            | 2,000     |        |       |            | 5,087     |        |         |            | 3,373   |  |   |           | 774,157   |  |  |          |          |  |  |   | 784,617   | 
|                                          | FHLB Stock                                 |         |            |          |        |       |            |          |        |         |            |        |  |   |           | 70,526    |  |  |          |          |  |  |   | 70,526    | 
|                                          | Other Assets                               |         |            |          |        |       |            |          |        |         |            |        |  |   |           |          |  |  |          | 814,866   |  |  |   | 814,866   | 
|                                          |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                          | Total Assets                               |         | $          | 1,922,941 |        |       | $          | 238,930   |        |         | $          | 239,511 |  |   | $         | 4,705,195 |  |  | $        | 814,866   |  |  | $ | 7,921,443 | 
|                                          |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|LIABILITIES
AND
STOCKHOLDERS EQUITY      |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                          | Loans Payable                              |         | $          | 197,611   |        |       | $          |          |        |         | $          |        |  |   | $         |          |  |  | $        |          |  |  | $ | 197,611   | 
|                                          | Repurchase Agreements                      |         |            | 1,464,775 |        |       |            | 350,130   |        |         |            | 200,000 |  |   |           | 886,878   |  |  |          |          |  |  |   | 2,901,783 | 
|                                          | Deposits                                   |         |            | 1,346,871 |        |       |            | 395,932   |        |         |            | 144,856 |  |   |           | 1,262     |  |  |          | 227,187   |  |  |   | 2,116,108 | 
|                                          | Other Borrowed Funds                       |         |            | 161,685   |        |       |            | 477,492   |        |         |            | 263,374 |  |   |           | 616,123   |  |  |          |          |  |  |   | 1,518,674 | 
|                                          | Other Liabilities                          |         |            |          |        |       |            |          |        |         |            |        |  |   |           |          |  |  |          | 245,700   |  |  |   | 245,700   | 
|                                          | Stockholders Equity                       |         |            |          |        |       |            |          |        |         |            |        |  |   |           |          |  |  |          | 941,567   |  |  |   | 941,567   | 
|                                          |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|                                          | Total
Liabilities and
Stockholders Equity |         | $          | 3,170,942 |        |       | $          | 1,223,554 |        |         | $          | 608,230 |  |   | $         | 1,504,263 |  |  | $        | 1,414,454 |  |  | $ | 7,921,443 | 
|                                          |                                            |         |            |           |        |       |            |           |        |         |            |         |  |   |           |           |  |  |          |           |  |  |   |          
|Interest Rate Sensitivity Gap             |                                            | $       | (1,248,001 | )         |        | $     | (984,624   | )         |        | $       | (368,719   | )       |  | $ | 3,200,932 |           |  |  |          |           |  |  |   |          
|Cumulative Interest Rate Sensitivity Gap  |                                            |         | (1,248,001 | )         |        |       | (2,232,625 | )         |        |         | (2,601,344 | )       |  |   | 599,588   |           |  |  | (599,588 | )         |  |  |   |          
|Cumulative Gap to Interest-Earning Assets |                                            |         | (17.56     | %)        |        |       | (31.42     | %)        |        |         | (36.60     | %)      |  |   | 8.44      | %         |  |  |          |           |  |  |   |          

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 interest
rate risk. Derivatives include interest rate swaps, 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 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 June 30, 2002 was $2,120,000.
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 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 June 30, 2002 was $4,259,000.
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.

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 six months ended June 30, 2002
average assets and liabilities related to derivatives were $13.7 million and
$9.2 million, respectively. The notional amounts of assets and liabilities
related to these derivatives totaled $33.6 billion and $27.0 billion,
respectively, as of June 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, other than interest rate swaps, as well the source of the fair
values, for the six month period ended June 30, 2002.

TABLE S
FAIR VALUE RECONCILIATION

(DOLLARS IN
THOUSANDS)


|                                                                   |  |   |         |  
|------------------------------------------------------------------ |  | - | ------- | -
|Fair value of contracts outstanding at the beginning of the period |  | $ | 4,739   |  
|Contracts realized or otherwise settled during the period          |  |   | (32,340 | )
|Fair value of new contracts entered into during the period         |  |   | 27,998  |  
|                                                                   |  |   |         |  
|Fair value of contracts outstanding at the end of the period       |  | $ | 397     |  
|                                                                   |  |   |         |  

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TABLE T
SOURCE OF FAIR VALUE

(DOLLARS IN
THOUSANDS)


|                                          |  |                       |        |           |  |           |    |            |  |       |       |          |  |       |   |  |  |   |        |  
|----------------------------------------- |  | --------------------- | ------ | --------- |  | --------- | -- | ---------- |  | ----- | ----- | -------- |  | ----- | - |  |  | - | ------ | -
|                                          |  | PAYMENT DUE BY PERIOD
|                                          |  |                      
|                                          |  | MATURITY              |        |           |  |           |    |            |  |       |       | MATURITY |  | TOTAL
|SOURCE OF FAIR VALUE                      |  | LESS THAN             |        | MATURITY  |  | MATURITY  |    | IN EXCESS  |  | FAIR 
|                                          |  | 1 YEAR                |        | 1-3 YEARS |  | 3-5 YEARS |    | OF 5 YEARS |  | VALUE
|                                          |  |                       |        |           |  |           |    |            |  |      
|Prices actively quoted                    |  | $                     | (6,013 | )         |  | $         | 31 |            |  | $     |      |          |  | $     |  |  |  | $ | (5,982 | )
|Prices provided by other external sources |  |                       |       |           |  |           |   |            |  |       | 6,379 |          |  |       |  |  |  |   | 6,379  |  
|                                          |  |                       |        |           |  |           |    |            |  |       |       |          |  |       |   |  |  |   |        |  
|                                          |  | $                     | (6,013 | )         |  | $         | 31 |            |  | $     | 6,379 |          |  | $     |  |  |  | $ | 397    |  
|                                          |  |                       |        |           |  |           |    |            |  |       |       |          |  |       |   |  |  |   |        |  

Doral Financial's
interest rate swaps had a negative fair value of $2.0 million as of
June 30, 2002.

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 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

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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 six month period ended June 30, 2001,
amortization of goodwill amounted to approximately $310,000.

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.

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.

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.




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.




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

On May 31, 2002 and June 28, 2002, Doral Financial issued 3,600,000
shares and 540,000 shares, respectively, of its 7.25% Noncumulative Monthly
Income Preferred Stock, Series C (the Series C Preferred Stock) having a
liquidation preference of $25 per share. The Series C Preferred Stock ranks on
parity with Doral Financials 7% Noncumulative Monthly Income Preferred Stock,
Series A, and 8.35% Noncumulative Monthly Income Preferred Stock, Series B, with
respect to dividend rights and rights on liquidation. The terms of the Series C
Preferred Stock do not permit Doral Financial to declare or pay any dividends on
the Common Stock (1) unless all accrued and unpaid dividends on Series C
Preferred Stock for the 12 dividend periods preceding the dividend payment have
been paid and the full dividend on the Series C Preferred Stock for the current
monthly dividend period is contemporaneously declared and paid or set aside for
payment or (2) if Doral Financial has defaulted in the payment of the redemption
price of any shares of Series C Preferred Stock called for redemption. The terms
of the Series C Preferred Stock provide that if Doral Financial is unable to pay
in full dividends on the Series C Preferred Stock and other shares of stock of
equal rank as to the payment of dividends, all dividends declared upon the
Series C Preferred Stock and such other shares of stock be declared pro rata.




Item 3  Defaults Upon Senior Securities

Not Applicable.

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Item 4  Submission of Matters to a Vote of Security Holders

The matters submitted to the annual meeting of shareholders of Doral
Financial held on April 17, 2002, and the results of the voting thereon, were
reported under Item 4 of Doral Financials Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002, and are incorporated herein by reference.




Item 5  Other Information

Sale of Senior
Notes. On April 10, 2002, Doral Financial closed the
sale of $30,000,000 of its 7.00% Senior Notes due 2012, $40,000,000 of its 7.10%
Senior Notes due 2017 and $30,000,000 of its 7.15% Senior Notes due 2022. The
notes were sold at a price to the public of 97.976% of the principal amount
thereof, resulting in proceeds to Doral Financial, after selling commissions but
before expenses of approximately $97,726,260.

Sale of Preferred Stock. On May 31, 2002 and June 28, 2002, the Company
closed the sale of 3,600,000 shares and 540,000 shares, respectively, of its
7.25% Noncumulative Monthly Income Preferred Stock, Series C, resulting in
proceeds before expenses to Doral Financial of $100,239,750.

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 will be effected in
the form of a stock dividend of one additional share of common stock to be
issued on September 14, 2002, for every two shares of common stock held of
record on August 30, 2002. Fractional shares will be settled in cash on the
basis of the average of the high and low sales price of the common stock on
August 30, 2002. See note o to the accompanying
consolidated financial statements, which sets forth Doral Financials pro-forma per share data
giving retroactive effect to the three-for-two stock split.

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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 payable on September 6, 2002, to share holders 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 will
not be entitled to receive the cash dividend payable on September 6, 2002.
The Board of Directors also announced that following the effective date of the stock split, the regular quarterly dividend
on the common stock will be 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 1.1  Underwriting Agreement, dated May 28, 2002,
between Doral Financial Corporation and UBS PaineWebber
Incorporated of Puerto Rico, as Representative of the several
underwriters named in schedule 1 to the Underwriting
Agreement. (Incorporated by reference to the corresponding
exhibit to the current report on Form 8-K of the Company dated
May 28, 2002 and filed on May 30, 2002.)
| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |     |  | Exhibit 3.1  Certificate of Designation designating the terms
of the Series C Preferred Stock. (Incorporated by reference to
Exhibit 3.3 to Form 8-A of the Company filed on May 30, 2002.)                                                                                                                                                                                                           
| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |     |  | Exhibit 4.1  Form of Series C Preferred Stock Certificate.
(Incorporated by reference to Exhibit 4.1 to Form 8-A of the
Company filed on May 30, 2002.)                                                                                                                                                                                                                                               
| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |     |  | Exhibit 10.110
 Employment Agreement, dated as of April 1, 2002, between
Doral Financial Corporation and Frederick C. Teed.                                                                                                                                                                                                                                                                           
| |  |     | 
| |  |     |  | 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 April 10, 2002,
reporting under Item 5 the closing of the issuance
and sale of $100,000,000 of Doral Financials Senior
Notes.                                                                                                                                                                     
| |  |       |  |                                                                                                                                                                                                                                                                                                                                      
| |  | (ii)  |  | Current Report on Form 8-K, dated April 15, 2002,
reporting under Item 5 the issuance of a press
release announcing the unaudited earnings results for
the quarter ended March 31, 2002.                                                                                                                                             
| |  |       |  |                                                                                                                                                                                                                                                                                                                                      
| |  | (iii) |  | Current Report on Form 8-K, dated May 28, 2002, as
amended by Current Report on Form 8-K/A, dated May
28, 2002, reporting under Item 5 the Companys
agreement to sell 3,600,000 shares of its 7.25%
Noncumulative Monthly Income Preferred Stock, Series
C (together with an over-allotment option for an
additional 540,000 shares)
| |  |       |  |                                                                                                                                                                                                                                                                                                                                      
| |  | (iv)  |  | 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.                                                                                                                                

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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: August 14, 2002 |  | /s/ Salomon Levis                                                            
|                      |  |                                                                              
|                      |  | Salomon Levis
Chairman of the Board
and Chief Executive Officer              
|                      |  |                                                                              
|Date: August 14, 2002 |  | /s/ Richard F. Bonini                                                        
|                      |  |                                                                              
|                      |  | Richard F. Bonini
Senior Executive Vice President
and Chief Financial Officer
|                      |  |                                                                              
|Date: August 14, 2002 |  | /s/ Ricardo Melendez                                                         
|                      |  |                                                                              
|                      |  | Ricardo Melendez
Executive Vice President
Principal Accounting Officer       

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|                 
|-----------------
|INDEX TO EXHIBITS

|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|1.1     |  | - |  | Underwriting Agreement, dated May 28, 2002, between Doral Financial Corporation and
UBS PaineWebber Incorporated of Puerto Rico, as Representative of the several
underwriters named in schedule 1 to the Underwriting Agreement. (Incorporated by
reference to the corresponding exhibit to the current report on Form 8-K of the Company
dated May 28, 2002 and filed on May 30, 2002.)
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|3.1     |  | - |  | Certificate of Designation designating the terms of the Series C Preferred Stock.
(Incorporated by reference to Exhibit 3.3 to Form 8-A of the Company filed on May 30,
2002.)                                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|4.1     |  | - |  | Form of Series C Preferred Stock Certificate. (Incorporated by reference to Exhibit 4.1 to
Form 8-A of the Company filed on May 30, 2002.)                                                                                                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|10.110  |  | - |  | Employment
Agreement, dated as of April 1, 2002, between Doral Financial
Corporation and Frederick C. Teed.                                                                                                                                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|12(a)   |  | - |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                          
|12(b)   |  | - |  | Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.                                                                                                                                                                                                                                                                                                         

50