##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___________________ to ___________________
 COMMISSION FILE NUMBER 001-31579
 DORAL FINANCIAL CORPORATION
  Puerto Rico
(State or other jurisdiction of 
incorporation or organization)
    
    66-0312162
(I.R.S. employer
identification number)1451 F.D. Roosevelt Avenue, 
San Juan, Puerto Rico
(Address of principal executive offices)
    
    00920-2717
(Zip Code)
   
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller
reporting company)
    
    smaller reporting company o
 o þ




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##### 



DORAL FINANCIAL CORPORATION
INDEX PAGE
 PAGEPART I  FINANCIAL INFORMATIONItem 1   Financial StatementsConsolidated Statements of Financial Condition (Unaudited) as of March 31, 2011 and December 31, 2010
    
    
    1Consolidated Statements of Operations (Unaudited) Quarters ended March 31, 2011 and March 31, 2010
    
    
    2Consolidated Statements of Changes in Stockholders Equity (Unaudited)  Quarters ended March 31,
2011 and March 31, 2010
    
    
    3Consolidated Statements of Comprehensive Income (Loss) (Unaudited)  Quarters ended March 31,
2011 and March 31, 2010
    
    
    4Consolidated Statements of Cash Flows (Unaudited)  Quarters ended March 31, 2011 and March 31, 2010
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    59Item 3    Quantitative and Qualitative Disclosures about Market Risk
    
    
    104Item 4    Controls and Procedures
    
    
    104PART II  OTHER INFORMATIONItem 1    Legal Proceedings
    
    
    105Item 1A    Risk Factors
    
    
    105Item 2    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    105Item 3    Defaults Upon Senior Securities
    
    
    105Item 4    Removed and Reserved
    
    
    105Item 5    Other Information
    
    
    105Item 6    Exhibits
    
    
    105SIGNATURES
    
    
    110EX-12.1EX-12.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




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DORAL FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  (UNAUDITED)
 March 31,
    
    
    December 31,(Dollars in thousands, except for share data)
    
    2011
    
    
    2010AssetsCash and due from banks
    
    $
    324,074
    
    
    $
    353,177Other interest-earning assets
    
    
    
    
    
    
    30,034Restricted cash and due from banks and other interest-earning assets
    
    
    162,451
    
    
    
    129,215Securities held for trading, at fair value
    
    
    42,560
    
    
    
    45,029Securities available for sale, at fair value (includes $729,405 and $743,843 pledged as collateral at March 31, 2011 and December
31, 2010, respectively, that may be repledged)
    
    
    1,418,832
    
    
    
    1,505,065Federal Home Loan Bank of NY (FHLB) stock, at cost
    
    
    77,412
    
    
    
    78,087Total investment securities
    
    
    1,538,804
    
    
    
    1,628,181Loans:Loans held for sale, at lower of cost or market (includes $119,771 and $121,988 pledged as collateral at
March 31, 2011 and December 31, 2010, respectively, that may be repledged)
    
    
    305,471
    
    
    
    319,269Loans receivable (includes $178,511 and $180,447 pledged as collateral at March 31, 2011 and December 31,
2010, respectively, that may be repledged)
    
    
    5,539,182
    
    
    
    5,588,812Less: Unearned interest
    
    
    (178
    )
    
    
    (241
    )Less: Allowance for loan and lease losses
    
    
    (120,204
    )
    
    
    (123,652
    )Total net loans receivable
    
    
    5,418,800
    
    
    
    5,464,919Total loans, net
    
    
    5,724,271
    
    
    
    5,784,188Accounts receivable
    
    
    31,422
    
    
    
    28,704Mortgage-servicing advances
    
    
    48,127
    
    
    
    51,462Accrued interest receivable
    
    
    38,961
    
    
    
    38,774Servicing assets, net
    
    
    116,299
    
    
    
    114,342Premises and equipment, net
    
    
    104,176
    
    
    
    104,053Real estate held for sale, net
    
    
    103,767
    
    
    
    100,273Deferred tax asset (DTA)
    
    
    103,701
    
    
    
    105,712Other assets
    
    
    168,043
    
    
    
    178,239Total assets
    
    $
    8,464,096
    
    
    $
    8,646,354LiabilitiesDeposits:Non-interest-bearing deposits
    
    $
    265,214
    
    
    $
    258,230Other retail interest-bearing deposits
    
    
    1,983,913
    
    
    
    2,000,991Brokered certificates of deposit
    
    
    2,237,121
    
    
    
    2,359,254Total deposits
    
    
    4,486,248
    
    
    
    4,618,475Securities sold under agreements to repurchase
    
    
    1,176,800
    
    
    
    1,176,800Advances from FHLB
    
    
    865,363
    
    
    
    901,420Loans payable
    
    
    298,598
    
    
    
    304,035Notes payable
    
    
    512,513
    
    
    
    513,958Accrued expenses and other liabilities
    
    
    263,869
    
    
    
    269,471Total liabilities
    
    
    7,603,391
    
    
    
    7,784,159Commitments and contingencies (Refer to Note 25 and 26)Stockholders EquityPreferred stock, $1 par value; 40,000,000 shares authorized; 5,811,391 shares issued and outstanding, at aggregate liquidation
preference value at March 31, 2011 and at December 31, 2010, respectivelyPerpetual noncumulative nonconvertible preferred stock (Series A, B and C)
    
    
    148,700
    
    
    
    148,700Perpetual cumulative convertible preferred stock
    
    
    203,382
    
    
    
    203,382Common stock, $0.01 par value; 300,000,000 shares authorized; 127,293,756 shares issued and outstanding at March 31, 2011 and at
December 31, 2010, respectively
    
    
    1,273
    
    
    
    1,273Additional paid-in capital
    
    
    1,219,940
    
    
    
    1,219,280Legal surplus
    
    
    23,596
    
    
    
    23,596Accumulated deficit
    
    
    (737,290
    )
    
    
    (738,199
    )Accumulated other comprehensive income, net of income tax expense of $649 and $1,332 at March 31, 2011 and December 31, 2010,
respectively
    
    
    1,104
    
    
    
    4,163Total stockholders equity
    
    
    860,705
    
    
    
    862,195Total liabilities and stockholders equity
    
    $
    8,464,096
    
    
    $
    8,646,354
  1




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DORAL FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)
 Quarters EndedMarch 31,(In thousands, except for per share data)
    
    2011
    
    
    2010Interest income:Loans
    
    $
    80,065
    
    
    $
    81,433Mortgage-backed securities (MBS)
    
    
    11,056
    
    
    
    23,247Interest-only strips (IOs)
    
    
    1,470
    
    
    
    1,543Investment securities
    
    
    99
    
    
    
    865Other interest-earning assets
    
    
    1,301
    
    
    
    2,140Total interest income
    
    
    93,991
    
    
    
    109,228Interest expense:Deposits
    
    
    26,899
    
    
    
    26,700Securities sold under agreements to repurchase
    
    
    9,120
    
    
    
    18,024Advances from FHLB
    
    
    6,608
    
    
    
    13,973Other short-term borrowings
    
    
    
    
    
    
    11Notes payable
    
    
    6,652
    
    
    
    5,110Loans payable
    
    
    1,542
    
    
    
    1,649Total interest expense
    
    
    50,821
    
    
    
    65,467Net interest income
    
    
    43,170
    
    
    
    43,761Provision for loan and lease losses
    
    
    2,590
    
    
    
    13,921Net interest income after provision for loan and lease losses
    
    
    40,580
    
    
    
    29,840Non-interest income:Total other-than-temporary impairment (OTTI) losses
    
    
    
    
    
    
    (40,195
    )Portion of loss recognized in other comprehensive income (before taxes)
    
    
    
    
    
    
    26,936Net credit related OTTI losses
    
    
    
    
    
    
    (13,259
    )Net gain on trading activities
    
    
    1,935
    
    
    
    1,774Net gain on mortgage loan sales and fees
    
    
    2,520
    
    
    
    2,566Servicing income (net of mark-to-market adjustments)
    
    
    8,900
    
    
    
    6,744Net loss on early repayment of debt
    
    
    
    
    
    
    (476
    )Net gain on investment securities
    
    
    2,853
    
    
    
    26,414Retail banking fees
    
    
    7,007
    
    
    
    7,143Insurance agency commissions
    
    
    2,223
    
    
    
    2,380Other income
    
    
    3,186
    
    
    
    3,298Total non-interest income
    
    
    28,624
    
    
    
    36,584Non-interest expenses:Compensation and benefits
    
    
    18,293
    
    
    
    16,435Professional services
    
    
    8,637
    
    
    
    13,792FDIC insurance expense
    
    
    4,356
    
    
    
    5,191Communication expenses
    
    
    4,004
    
    
    
    3,944Occupancy expenses
    
    
    4,340
    
    
    
    3,981EDP expenses
    
    
    3,275
    
    
    
    3,779Depreciation and amortization
    
    
    3,203
    
    
    
    3,147Taxes, other than payroll and income taxes
    
    
    2,876
    
    
    
    2,564Corporate Insurance
    
    
    1,570
    
    
    
    1,262Other
    
    
    6,175
    
    
    
    6,81256,729
    
    
    
    60,907OREO expenses and other reserves:Other real estate owned (OREO) expenses
    
    
    1,963
    
    
    
    4,597Foreclosure expenses
    
    
    1,370
    
    
    
    449Provisions for other credit related expenses
    
    
    722
    
    
    
    1,4454,055
    
    
    
    6,491Total non-interest expenses
    
    
    60,784
    
    
    
    67,398Income (loss) before income taxes
    
    
    8,420
    
    
    
    (974
    )Income tax expense
    
    
    5,096
    
    
    
    2,529Net income (loss)
    
    $
    3,324
    
    
    $
    (3,503
    )Net income attributable to common shareholders(1)
    
    $
    909
    
    
    $
    21,218Net income per common share(1)(2)
    
    $
    0.01
    
    
    $
    0.34
 
 (1)
    
    For the quarter ended March 31, 2010, net income per common share included $26.6
million related to the effect of the preferred stock exchange. Refer to Note 28 for additional
information.(2)
    
    For the quarters ended March 31, 2011 and 2010, net income per common share
represents the basic and diluted income per common share, respectively. Refer to Note 28 for
additional information.  2




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DORAL FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY  (UNAUDITED)
 Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Preferred Stock:Balance at beginning of period
    
    $
    352,082
    
    
    $
    415,428Conversion of preferred stock to common stock at par value:Noncumulative nonconvertible
    
    
    
    
    
    
    (48,687
    )Cumulative convertible
    
    
    
    
    
    
    (14,659
    )Balance at end of period
    
    
    352,082
    
    
    
    352,082Common Stock:Balance at beginning of period
    
    
    1,273
    
    
    
    621Common stock issued/converted:Noncumulative nonconvertible
    
    
    
    
    
    
    40Cumulative convertible
    
    
    
    
    
    
    12Balance at end of period
    
    
    1,273
    
    
    
    673Additional Paid-In Capital:Balance at beginning of period
    
    
    1,219,280
    
    
    
    1,010,661Stock-based compensation recognized
    
    
    660
    
    
    
    17Conversion of preferred stock to common stock at par value:Noncumulative nonconvertible
    
    
    
    
    
    
    17,010Cumulative convertible
    
    
    
    
    
    
    19,699Balance at end of period
    
    
    1,219,940
    
    
    
    1,047,387Legal Surplus
    
    
    23,596
    
    
    
    23,596Accumulated Deficit:Balance at beginning of period
    
    
    (738,199
    )
    
    
    (463,781
    )Net income (loss)
    
    
    3,324
    
    
    
    (3,503
    )Dividends accrued on preferred stock
    
    
    (2,415
    )
    
    
    (1,864
    )Effect of conversion of preferred stock:Noncumulative nonconvertible
    
    
    
    
    
    
    31,637Cumulative convertible
    
    
    
    
    
    
    (5,052
    )Balance at end of period
    
    
    (737,290
    )
    
    
    (442,563
    )Accumulated Other Comprehensive Income (Loss), Net of Tax:Balance at beginning of period
    
    
    4,163
    
    
    
    (111,481
    )Other comprehensive loss, net of deferred tax
    
    
    (3,059
    )
    
    
    (7,343
    )Balance at end of period
    
    
    1,104
    
    
    
    (118,824
    )Total stockholders equity
    
    $
    860,705
    
    
    $
    862,351
  3




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DORAL FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF COMPRENHENSIVE INCOME (LOSS)  (UNAUDITED)
 Quarters EndedMarch 31, 2011(In thousands)
    
    2011
    
    
    2010Net income (loss)
    
    $
    3,324
    
    
    $
    (3,503
    )Other comprehensive loss, before tax:Unrealized (losses) gains on securities arising during the period
    
    
    (2,350
    )
    
    
    24,041Non-credit portion of OTTI losses
    
    
    
    
    
    
    (26,936
    )Reclassification of net realized gains included in net income (loss)
    
    
    (2,124
    )
    
    
    (7,577
    )Other comprehensive loss on investment securities, before tax
    
    
    (4,474
    )
    
    
    (10,472
    )Income tax benefit related to investment securities
    
    
    683
    
    
    
    1,571Other comprehensive loss on investment securities, net of tax
    
    
    (3,791
    )
    
    
    (8,901
    )Other comprehensive income on cash flow hedges(1)
    
    
    732
    
    
    
    1,558Other comprehensive loss
    
    
    (3,059
    )
    
    
    (7,343
    )Comprehensive income (loss)
    
    $
    265
    
    
    $
    (10,846
    )Accumulated other comprehensive income (loss), net of taxOther comprehensive income (loss) on investment securities
    
    $
    6,518
    
    
    $
    (24,146
    )Other comprehensive losses on investment securities on which OTTI has been recognized
    
    
    (2,897
    )
    
    
    (88,612
    )Total other comprehensive income (loss) on investment securities
    
    
    3,621
    
    
    
    (112,758
    )Other comprehensive loss on cash flow hedge(1)
    
    
    (2,517
    )
    
    
    (6,066
    )Total accumulated other comprehensive income (loss), net of tax
    
    $
    1,104
    
    
    $
    (118,824
    )
 
 (1)
    
    For the quarters ended March 31, 2011 and 2010, other comprehensive loss on
cash flow hedges includes $1.5 million and $2.4 million related to a deferred tax asset
valuation allowance.  4




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DORAL FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)
 Quarters Ended March 31,(In thousands)
    
    2011
    
    
    2010Cash flows from operating activities:Net income (loss)
    
    $
    3,324
    
    
    $
    (3,503
    )Adjustments to reconcile net loss to net cash provided by operating activities:Stock-based compensation
    
    
    660
    
    
    
    17Depreciation and amortization
    
    
    3,203
    
    
    
    3,147Mark-to-market adjustment of servicing assets
    
    
    140
    
    
    
    2,004Deferred tax expense
    
    
    2,723
    
    
    
    2,254Provision for loan and lease losses
    
    
    2,590
    
    
    
    13,921Provision for OREO losses
    
    
    768
    
    
    
    3,914Loss (gain) on sale of OREO
    
    
    210
    
    
    
    (17
    )Net premium amortization (discount accretion) on loans, investment securities and debt
    
    
    4,041
    
    
    
    5,357Origination and purchases of loans held for sale
    
    
    (87,005
    )
    
    
    (73,862
    )Principal repayments and sales of loans held for sale
    
    
    31,278
    
    
    
    172Gain on sale of securities
    
    
    (5,836
    )
    
    
    (27,296
    )Net OTTI losses
    
    
    
    
    
    
    13,259Net loss on early repayment of liabilities
    
    
    
    
    
    
    476Unrealized (gain) loss on trading securities
    
    
    (39
    )
    
    
    97Principal repayment and sales of securities held for trading
    
    
    118,821
    
    
    
    78,524Amortization and net loss (gain) in the fair value of IOs
    
    
    2,632
    
    
    
    2,139Unrealized (gain) loss on derivative instruments
    
    
    (714
    )
    
    
    1,070Increase in derivative instruments
    
    
    (127
    )
    
    
    (1,411
    )Increase in accounts receivable
    
    
    (2,718
    )
    
    
    (63,451
    )Decrease (increase) in mortgage servicing advances
    
    
    3,335
    
    
    
    (10,769
    )(Increase) decrease in accrued interest receivable
    
    
    (187
    )
    
    
    263(Increase) decrease in other assets
    
    
    (19,143
    )
    
    
    59,626(Decrease) increase in accrued expenses and other liabilities
    
    
    (3,665
    )
    
    
    78,095Total adjustments
    
    
    50,967
    
    
    
    87,529Net cash provided by operating activities
    
    
    54,291
    
    
    
    84,026Cash flows from investing activities:Purchases of securities available for sale
    
    
    (234,893
    )
    
    
    (823,072
    )Principal repayment and sales of securities available for sale
    
    
    315,270
    
    
    
    921,925Decrease in FHLB stock
    
    
    675
    
    
    
    15,931Originations, purchases and repurchases of loans receivable
    
    
    (269,344
    )
    
    
    (225,294
    )Principal repayment of loans receivable
    
    
    235,810
    
    
    
    154,618Proceeds from sales of servicing assets
    
    
    
    
    
    
    30Purchases of premises and equipment
    
    
    (3,287
    )
    
    
    (1,922
    )Proceeds from sales of real estate held for sale
    
    
    18,625
    
    
    
    6,978Net cash provided by investing activities
    
    
    62,856
    
    
    
    49,194Cash flows from financing activities:Decrease in deposits
    
    
    (132,227
    )
    
    
    (56,812
    )Decrease in securities sold under agreements to repurchase
    
    
    
    
    
    
    (236,737
    )Proceeds from advances from FHLB
    
    
    145,000
    
    
    
    575,000Repayment of advances from FHLB
    
    
    (160,000
    )
    
    
    (709,000
    )Premium on exchange of FHLB advances
    
    
    (22,078
    )
    
    
    Proceeds from other short-term borrowings
    
    
    
    
    
    
    60,000Repayment of other short-term borrowings
    
    
    
    
    
    
    (170,000
    )Repayment of secured borrowings
    
    
    (5,437
    )
    
    
    (7,330
    )Repayment of notes payable
    
    
    (1,542
    )
    
    
    (1,428
    )Net cash used in financing activities
    
    
    (176,284
    )
    
    
    (546,307
    )Net decrease in cash and cash equivalents
    
    $
    (59,137
    )
    
    $
    (413,087
    )Cash and cash equivalents at beginning of period
    
    
    383,211
    
    
    
    725,002Cash and cash equivalents at the end of period
    
    $
    324,074
    
    
    $
    311,915Cash and cash equivalents includes:Cash and due from banks
    
    $
    324,074
    
    
    $
    311,915Other interest-earning assets
    
    
    
    
    
    
    $
    324,074
    
    
    $
    311,915Supplemental schedule of non-cash activities:Loan securitizations
    
    $
    115,838
    
    
    $
    77,641Loans foreclosed
    
    $
    27,025
    
    
    $
    16,332Capitalization of servicing assets
    
    $
    2,097
    
    
    $
    1,777Reclassification of loans held for investment portfolio to the loans held for sale portfolio
    
    $
    13,610
    
    
    $
    210Supplemental information for cash flows:Cash used to pay interest
    
    $
    54,189
    
    
    $
    68,215Cash used to pay income taxes
    
    $
    987
    
    
    $
    1,015
  5




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##### Table of Contents



DORAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Nature of Operations and Basis of Presentation
    
    
    8Note 2  Recent Accounting Pronouncements
    
    
    8Note 3  Cash and Due from Banks
    
    
    9Note 4  Other Interest-Earning Assets
    
    
    9Note 5  Securities Held for Trading
    
    
    9Note 6  Securities Available for Sale
    
    
    11Note 7  Investments in an Unrealized Loss Position
    
    
    13Note 8  Pledged Assets
    
    
    16Note 9  Loans Held for Sale and Loans Receivable
    
    
    16Note 10  Allowance for Loan and Lease Losses and Impaired Loans
    
    
    24Note 11  Related Party Transactions
    
    
    27Note 12  Accounts Receivable and Other Assets
    
    
    28Note 13  Servicing Activities
    
    
    28Note 14  Sale and Securitization of Mortgage Loans
    
    
    30Note 15  Servicing Related Matters
    
    
    31Note 16  Other Real Estate Owned
    
    
    31Note 17  Deposits
    
    
    31Note 18  Securities Sold Under Agreements to Repurchase
    
    
    32Note 19  Advances from the FHLB
    
    
    33Note 20  Other Short-Term Borrowings
    
    
    33Note 21  Loans Payable
    
    
    34Note 22  Notes Payable
    
    
    35Note 23  Income Taxes
    
    
    35Note 24  Guarantees
    
    
    39Note 25  Financial Instruments with Off-Balance Sheet Risk
    
    
    40Note 26  Commitments and Contingencies
    
    
    40Note 27  Stock Options and Other Incentive Plans
    
    
    41Note 28  Earnings per Share
    
    
    42Note 29  Fair Value of Assets and Liabilities
    
    
    43Note 30  Derivatives
    
    
    50Note 31  Variable Interest Entities
    
    
    52Note 32  Segment Information
    
    
    55
  6




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##### Table of Contents



1. Nature of Operations and Basis of Presentation
      
 2. Recent Accounting Pronouncements
 Accounting Standards Update No. 2011-03 Transfers and Servicing (Topic 860)
  substantially the same
    Accounting Standards Update No. 2011-02 Receivables (Topic 310): A Creditors Determination of
Whether a Restructuring Is a Troubled Debt Restructuring Deferral of the Effective Date
of Disclosures about Troubled Debt Restructurings in Update No. 2010-20
  Changes in Accounting Standards Adopted in the Financial Statements
 Accounting Standards Update No. 2010-29 Business Combinations (Topic 805): Disclosures of
Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging
Issues Task Force).
  7




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Accounting Standards Update No. 2010-28 Intangibles-Goodwill and Other (Topic 350): When to Perform
Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts
(a consensus of the FASB Emerging Issues Task Force)
  Accounting Standards Update No. 2010-20, Receivables (Topic 310): Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
 
 3. Cash and due from banks
    
 4. Other Interest-Earning Assets
   8




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5. Securities Held for Trading
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Mortgage-backed securities
    
    $
    805
    
    
    $
    766Variable rate IOs
    
    
    41,405
    
    
    
    44,018Fixed rate IOs
    
    
    213
    
    
    
    232Derivatives(1)
    
    
    137
    
    
    
    13Total
    
    $
    42,560
    
    
    $
    45,029
 
 (1)
    
    Doral Financial uses derivatives to manage its exposure to interest rate risk caused
by changes in interest rates. Derivatives include interest rate caps and forward contracts.
Doral Financials general policy is to account for derivatives on a mark-to-market basis with
gains or losses charged to operations as they occur. Derivatives not accounted for as hedges
in a net asset position are recorded as securities held for trading, and derivatives in a net
liability position are reported as liabilities. The gross notional amount of derivatives
recorded as held for trading totaled $265.0 million as of March 31, 2011 and $310.0 million as
of December 31, 2010. Notional amounts indicate the volume of derivatives activity, but do not
represent Doral Financials exposure to market or credit risk.  9




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##### Table of Contents



6. Securities Available for Sale
   As of March 31, 2011
 Weighted-Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Average(Dollars in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAgency MBSDue within one year
    
    $
    20
    
    
    $
    
    
    
    $
    
    
    
    $
    20
    
    
    
    6.62
    %Due from one to five years
    
    
    208
    
    
    
    9
    
    
    
    
    
    
    
    217
    
    
    
    4.84
    %Due from five to ten years
    
    
    385,735
    
    
    
    3,412
    
    
    
    35
    
    
    
    389,112
    
    
    
    2.58
    %Due over ten years
    
    
    710,239
    
    
    
    3,279
    
    
    
    1,298
    
    
    
    712,220
    
    
    
    2.96
    %CMO Government Sponsored AgenciesDue from five to ten years
    
    
    11,281
    
    
    
    67
    
    
    
    175
    
    
    
    11,173
    
    
    
    4.40
    %Due over ten years
    
    
    188,030
    
    
    
    3,954
    
    
    
    448
    
    
    
    191,536
    
    
    
    3.52
    %Non-Agency CMOsDue over ten years
    
    
    11,161
    
    
    
    
    
    
    
    3,408
    
    
    
    7,753
    
    
    
    18.70
    %Obligations U.S. Government Sponsored AgenciesDue within one year
    
    
    94,903
    
    
    
    22
    
    
    
    
    
    
    
    94,925
    
    
    
    0.18
    %OtherDue from one to five years
    
    
    5,002
    
    
    
    10
    
    
    
    
    
    
    
    5,012
    
    
    
    3.45
    %Due over ten years
    
    
    7,983
    
    
    
    
    
    
    
    1,119
    
    
    
    6,864
    
    
    
    4.27
    %$
    1,414,562
    
    
    $
    10,753
    
    
    $
    6,483
    
    
    $
    1,418,832
    
    
    
    2.89
    %
 10




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As of December 31, 2010
 Weighted-Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Average(Dollars in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAgency MBSDue within one year
    
    $
    36
    
    
    $
    1
    
    
    $
    
    
    
    $
    37
    
    
    
    6.67
    %Due from one to five years
    
    
    220
    
    
    
    11
    
    
    
    
    
    
    
    231
    
    
    
    4.87
    %Due from five to ten years
    
    
    416,709
    
    
    
    3,447
    
    
    
    130
    
    
    
    420,026
    
    
    
    2.47
    %Due over ten years
    
    
    718,690
    
    
    
    4,949
    
    
    
    960
    
    
    
    722,679
    
    
    
    2.57
    %CMO Government Sponsored AgenciesDue from five to ten years
    
    
    17,953
    
    
    
    122
    
    
    
    178
    
    
    
    17,897
    
    
    
    4.10
    %Due over ten years
    
    
    288,414
    
    
    
    6,750
    
    
    
    230
    
    
    
    294,934
    
    
    
    3.57
    %Non-Agency CMOsDue over ten years
    
    
    11,108
    
    
    
    
    
    
    
    3,916
    
    
    
    7,192
    
    
    
    19.74
    %Obligations U.S. Government Sponsored
AgenciesDue within one year
    
    
    34,987
    
    
    
    5
    
    
    
    
    
    
    
    34,992
    
    
    
    0.16
    %OtherDue over ten years
    
    
    8,203
    
    
    
    
    
    
    
    1,126
    
    
    
    7,077
    
    
    
    4.25
    %$
    1,496,320
    
    
    $
    15,285
    
    
    $
    6,540
    
    
    $
    1,505,065
    
    
    
    2.83
    %
 11




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7. Investments in an Unrealized Loss Position
  Securities Available for Sale
 As of March 31, 2011Less than 12 months
    
    
    12 months or more
    
    
    TotalNumber
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof
    
    
    
    
    
    
    Unrealized
    
    
    of
    
    
    
    
    
    
    Unrealized
    
    
    of
    
    
    
    
    
    
    Unrealized(Dollars in thousands)
    
    Positions
    
    
    Fair Value
    
    
    Losses
    
    
    Positions
    
    
    Fair Value
    
    
    Losses
    
    
    Positions
    
    
    Fair Value
    
    
    LossesAgency MBS
    
    
    16
    
    
    $
    283,295
    
    
    $
    1,333
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    16
    
    
    $
    283,295
    
    
    $
    1,333CMOs Government Sponsored
Agencies
    
    
    4
    
    
    
    30,695
    
    
    
    477
    
    
    
    1
    
    
    
    1,629
    
    
    
    146
    
    
    
    5
    
    
    
    32,324
    
    
    
    623Non-Agency CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    7,553
    
    
    
    3,408
    
    
    
    3
    
    
    
    7,553
    
    
    
    3,408Other
    
    
    1
    
    
    
    4,922
    
    
    
    61
    
    
    
    1
    
    
    
    1,942
    
    
    
    1,058
    
    
    
    2
    
    
    
    6,864
    
    
    
    1,11921
    
    
    $
    318,912
    
    
    $
    1,871
    
    
    
    5
    
    
    $
    11,124
    
    
    $
    4,612
    
    
    
    26
    
    
    $
    330,036
    
    
    $
    6,483
 Securities Available for Sale
 As of December 31, 2010Less than 12 months
    
    
    12 months or more
    
    
    TotalNumber
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof
    
    
    
    
    
    
    Unrealized
    
    
    of
    
    
    
    
    
    
    Unrealized
    
    
    of
    
    
    
    
    
    
    Unrealized(Dollars in thousands)
    
    Positions
    
    
    Fair Value
    
    
    Losses
    
    
    Positions
    
    
    Fair Value
    
    
    Losses
    
    
    Positions
    
    
    Fair Value
    
    
    LossesAgency MBS
    
    
    13
    
    
    $
    241,675
    
    
    $
    1,090
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    13
    
    
    $
    241,675
    
    
    $
    1,090CMO Government Sponsored
Agencies
    
    
    2
    
    
    
    11,564
    
    
    
    255
    
    
    
    1
    
    
    
    1,704
    
    
    
    153
    
    
    
    3
    
    
    
    13,268
    
    
    
    408Non-Agency CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    7,192
    
    
    
    3,916
    
    
    
    3
    
    
    
    7,192
    
    
    
    3,916Other
    
    
    1
    
    
    
    5,162
    
    
    
    41
    
    
    
    1
    
    
    
    1,915
    
    
    
    1,085
    
    
    
    2
    
    
    
    7,077
    
    
    
    1,12616
    
    
    $
    258,401
    
    
    $
    1,386
    
    
    
    5
    
    
    $
    10,811
    
    
    $
    5,154
    
    
    
    21
    
    
    $
    269,212
    
    
    $
    6,540
   
    
    If the Company intends to sell the investment security and its fair value is less than its
amortized cost.
 
    
    If, based on available evidence, it is more likely than not that the Company will decide or
be required to sell the investment security before the recovery of its amortized cost basis.
 
    
    If the Company does not expect to recover the entire amortized cost basis of the investment
security. This occurs when the present value of cash flows expected to be collected is less
than the amortized cost basis of the security. In determining whether a credit loss exists,
the Company uses its best estimate of the present value of cash flows expected to be collected
from the investment security. Cash flows expected to be collected are estimated based on a
careful assessment of all available information. The amount of estimated credit loss is
determined as the amount by which the amortized cost basis exceeds the present value of
expected cash flows.
 12




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13




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As of
    
    
    Quarter EndedMarch 31, 2011
    
    
    March 31, 2011Amortized Cost
    
    
    Gross(after credit
    
    
    Unrealized
    
    
    
    
    
    
    OTTI Related
    
    
    OTTI Related to
    
    
    Total Impairment(In thousands)
    
    related OTTI)
    
    
    Losses
    
    
    Fair Value
    
    
    to Credit Loss
    
    
    Non-Credit Loss
    
    
    LossesOTTI InvestmentsU.S. Non-Agency CMOs
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    P.R. Non-Agency CMOs
    
    
    11,161
    
    
    
    3,408
    
    
    
    7,753
    
    
    
    
    
    
    
    
    
    
    
    $
    11,161
    
    
    $
    3,408
    
    
    $
    7,753
    
    
    $
    
    
    
    $
    
    
    
    $
    
 As of
    
    
    Quarter EndedMarch 31, 2010
    
    
    March 31, 2010Amortized Cost(after credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totalrelated
    
    
    Gross Unrealized
    
    
    
    
    
    
    OTTI Related to
    
    
    OTTI Related to
    
    
    Impairment(In thousands)
    
    OTTI)
    
    
    Losses
    
    
    Fair Value
    
    
    Credit Loss
    
    
    Non-Credit Loss
    
    
    LossesOTTI InvestmentsU.S. Non-Agency CMOs
    
    $
    305,759
    
    
    $
    100,590
    
    
    $
    205,169
    
    
    $
    13,257
    
    
    $
    26,840
    
    
    $
    40,097P.R. Non-Agency CMOs
    
    
    11,665
    
    
    
    4,077
    
    
    
    7,588
    
    
    
    2
    
    
    
    96
    
    
    
    98$
    317,424
    
    
    $
    104,667
    
    
    $
    212,757
    
    
    $
    13,259
    
    
    $
    26,936
    
    
    $
    40,195
  Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Balance at beginning of period
    
    $
    2,816
    
    
    $
    28,497Additions:Credit losses for which OTTI was not previously recognized
    
    
    
    
    
    
    1,301Additional OTTI credit losses for which an
other-than-temporary charge was previously recognized
    
    
    
    
    
    
    11,958Balance at end of period
    
    $
    2,816
    
    
    $
    41,756
  14




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8. Pledged Assets
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Cash
    
    $
    8,931
    
    
    $
    2,642Other interest-earning assets
    
    
    153,520
    
    
    
    126,573Securities available for sale
    
    
    1,332,264
    
    
    
    1,458,992Loans held for sale
    
    
    119,771
    
    
    
    121,988Loans receivable
    
    
    2,580,097
    
    
    
    2,388,428Total pledged assets
    
    $
    4,194,583
    
    
    $
    4,098,623
 
 9. Loans Held for Sale and Loans Receivable
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Conventional single family residential(1)
    
    $
    111,162
    
    
    $
    119,290FHA/VA
    
    
    167,246
    
    
    
    172,216Commercial loans to financial institutions
    
    
    14,199
    
    
    
    14,608Commercial real estate
    
    
    12,864
    
    
    
    13,155Total loans held for sale (2)(3)
    
    $
    305,471
    
    
    $
    319,269
 
 (1)
    
    At both, March 31, 2011 and December 31, 2010, the loans held for sale portfolio
include $0.1 million related to U.S. subsidiaries loans.(2)
    
    At both, March 31, 2011 and December 31, 2010, the loans held for sale portfolio
include $1.1 million of interest-only loans.(3)
    
    Includes $20.5 million and $21.4 million of balloons loans, as of March 31, 2011 and
December 31, 2010, respectively.     15




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalConsumerResidential mortgage
    
    $
    3,436,709
    
    
    $
    106,499
    
    
    $
    3,543,208
    
    
    $
    3,451,895
    
    
    $
    108,641
    
    
    $
    3,560,536FHA/VA guaranteed residential mortgage
    
    
    161,429
    
    
    
    
    
    
    
    161,429
    
    
    
    187,473
    
    
    
    
    
    
    
    187,473Personal
    
    
    12,837
    
    
    
    
    
    
    
    12,837
    
    
    
    15,003
    
    
    
    
    
    
    
    15,003Revolving lines of credit
    
    
    16,954
    
    
    
    
    
    
    
    16,954
    
    
    
    17,810
    
    
    
    
    
    
    
    17,810Credit cards
    
    
    16,780
    
    
    
    
    
    
    
    16,780
    
    
    
    17,719
    
    
    
    
    
    
    
    17,719Lease financing receivables
    
    
    3,724
    
    
    
    
    
    
    
    3,724
    
    
    
    4,807
    
    
    
    
    
    
    
    4,807Loans on savings deposits
    
    
    2,413
    
    
    
    
    
    
    
    2,413
    
    
    
    2,860
    
    
    
    
    
    
    
    2,860Other consumer
    
    
    960
    
    
    
    3
    
    
    
    963
    
    
    
    962
    
    
    
    26
    
    
    
    988Total consumer
    
    
    3,651,806
    
    
    
    106,502
    
    
    
    3,758,308
    
    
    
    3,698,529
    
    
    
    108,667
    
    
    
    3,807,196CommercialCommercial real estate
    
    
    620,828
    
    
    
    59,754
    
    
    
    680,582
    
    
    
    629,043
    
    
    
    59,903
    
    
    
    688,946Commercial and industrial
    
    
    38,030
    
    
    
    628,322
    
    
    
    666,352
    
    
    
    36,639
    
    
    
    597,056
    
    
    
    633,695Construction and land
    
    
    334,584
    
    
    
    99,178
    
    
    
    433,762
    
    
    
    349,899
    
    
    
    108,835
    
    
    
    458,734Total commercial
    
    
    993,442
    
    
    
    787,254
    
    
    
    1,780,696
    
    
    
    1,015,581
    
    
    
    765,794
    
    
    
    1,781,375Loans receivable, gross(1)(2)
    
    
    4,645,248
    
    
    
    893,756
    
    
    
    5,539,004
    
    
    
    4,714,110
    
    
    
    874,461
    
    
    
    5,588,571Less:Allowance for loan and lease losses
    
    
    (114,768
    )
    
    
    (5,436
    )
    
    
    (120,204
    )
    
    
    (117,821
    )
    
    
    (5,831
    )
    
    
    (123,652
    )Loans receivable, net
    
    $
    4,530,480
    
    
    $
    888,320
    
    
    $
    5,418,800
    
    
    $
    4,596,289
    
    
    $
    868,630
    
    
    $
    5,464,919
 
 (1)
    
    Includes $539.7 million and $565.9 million of balloon loans, as of March 31,
2011 and December 31, 2010, respectively.(2)
    
    Includes $392.6 million and $442.6 million of interest-only loans, as of
March 31, 2011 and December 31, 2010, respectively.   Non-accrual and Past Due Loans and Leases
    16




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March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalConsumerResidential mortgage
    
    $
    251,215
    
    
    $
    1,635
    
    
    $
    252,850
    
    
    $
    276,328
    
    
    $
    2,030
    
    
    $
    278,358Lease financing receivables
    
    
    311
    
    
    
    
    
    
    
    311
    
    
    
    415
    
    
    
    
    
    
    
    415Other consumer (1)
    
    
    240
    
    
    
    
    
    
    
    240
    
    
    
    404
    
    
    
    
    
    
    
    404Total consumer
    
    
    251,766
    
    
    
    1,635
    
    
    
    253,401
    
    
    
    277,147
    
    
    
    2,030
    
    
    
    279,177CommercialCommercial real estate
    
    
    186,970
    
    
    
    
    
    
    
    186,970
    
    
    
    193,348
    
    
    
    
    
    
    
    193,348Construction and land
    
    
    124,580
    
    
    
    1,610
    
    
    
    126,190
    
    
    
    147,127
    
    
    
    1,610
    
    
    
    148,737Commercial and industrial
    
    
    2,789
    
    
    
    
    
    
    
    2,789
    
    
    
    2,522
    
    
    
    
    
    
    
    2,522Total commercial
    
    
    314,339
    
    
    
    1,610
    
    
    
    315,949
    
    
    
    342,997
    
    
    
    1,610
    
    
    
    344,607Total loans receivable on which accrual of interest had been
discontinued(2)(3)
    
    $
    566,105
    
    
    $
    3,245
    
    
    $
    569,350
    
    
    $
    620,144
    
    
    $
    3,640
    
    
    $
    623,784
 
 (1)
    
    Includes personal, revolving lines of credit and other consumer loans.(2)
    
    Excludes $2.2 million and $2.7 million in loans held for sale on which accrual of
interest had been discontinued as of March 31, 2011 and December 31, 2010, respectively.(3)
    
    Excludes $99.4 million and $121.3 million of non-performing FHA/VA guaranteed loans
that due to the nature of their guarantees, present minimal risk to the Company as of March 31,
2011 and December 31, 2010, respectively. 17




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As of March 31, 2011
 30 to 89 Days
    
    
    90 to 179 Days
    
    
    180 to 240 Days
    
    
    Over 240 Days
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recorded InvestmentPast Due(1)
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Total Past Due
    
    
    
    
    
    
    > 90 Days and Still(In thousands)
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    Total Past Due
    
    
    AccruingConsumerResidential mortgage(2)
    
    $
    67,874
    
    
    $
    
    
    
    $
    54,672
    
    
    $
    1,175
    
    
    $
    21,031
    
    
    $
    54
    
    
    $
    171,142
    
    
    $
    407
    
    
    $
    314,719
    
    
    $
    1,636
    
    
    $
    316,355
    
    
    $
    Lease financing receivables
    
    
    297
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    597
    
    
    
    
    
    
    
    597
    
    
    
    Other consumer
    
    
    1,073
    
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    1,313
    
    
    
    
    
    
    
    1,313
    
    
    
    1,592Total consumer
    
    
    69,244
    
    
    
    
    
    
    
    55,208
    
    
    
    1,175
    
    
    
    21,031
    
    
    
    54
    
    
    
    171,146
    
    
    
    407
    
    
    
    316,629
    
    
    
    1,636
    
    
    
    318,265
    
    
    
    1,592CommercialCommercial real estate
    
    
    21,529
    
    
    
    
    
    
    
    71,640
    
    
    
    
    
    
    
    4,929
    
    
    
    
    
    
    
    109,697
    
    
    
    
    
    
    
    207,795
    
    
    
    
    
    
    
    207,795
    
    
    
    Commercial and industrial
    
    
    790
    
    
    
    
    
    
    
    1,069
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    1,657
    
    
    
    
    
    
    
    3,581
    
    
    
    
    
    
    
    3,581
    
    
    
    588Construction and land
    
    
    815
    
    
    
    
    
    
    
    2,959
    
    
    
    
    
    
    
    5,611
    
    
    
    
    
    
    
    115,723
    
    
    
    1,610
    
    
    
    125,108
    
    
    
    1,610
    
    
    
    126,718
    
    
    
    Total commercial
    
    
    23,134
    
    
    
    
    
    
    
    75,668
    
    
    
    
    
    
    
    10,605
    
    
    
    
    
    
    
    227,077
    
    
    
    1,610
    
    
    
    336,484
    
    
    
    1,610
    
    
    
    338,094
    
    
    
    588Total past due loans
    
    $
    92,378
    
    
    $
    
    
    
    $
    130,876
    
    
    $
    1,175
    
    
    $
    31,636
    
    
    $
    54
    
    
    $
    398,223
    
    
    $
    2,017
    
    
    $
    653,113
    
    
    $
    3,246
    
    
    $
    656,359
    
    
    $
    2,180
 
 (1)
    
    In accordance with regulatory guidance, Doral defines 30 days past due as when the
borrower is delinquent two payments. Doral defines 90 days past due based upon the actual
number of days past due.(2)
    
    As of March 31, 2011 excludes $126.5 million of total past due FHA/VA guaranteed
loans that due to the nature of their guarantees present minimal credit risk to the Company. As of December 31, 2010
 30 to 89 Days
    
    
    90 to 179 Days
    
    
    180 to 240 Days
    
    
    Over 240 Days
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recorded InvestmentPast Due(1)
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Total Past Due
    
    
    
    
    
    
    > 90 Days and(In thousands)
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    Total Past Due
    
    
    Still AccruingConsumerResidential mortgage(2)
    
    $
    68,361
    
    
    $
    
    
    
    $
    55,947
    
    
    $
    1,624
    
    
    $
    19,379
    
    
    $
    
    
    
    $
    196,181
    
    
    $
    409
    
    
    $
    339,868
    
    
    $
    2,033
    
    
    $
    341,901
    
    
    $
    Lease financing receivables
    
    
    234
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    620
    
    
    
    
    
    
    
    620
    
    
    
    Other consumer
    
    
    1,341
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    1,745
    
    
    
    
    
    
    
    1,745
    
    
    
    1,993Total consumer
    
    
    69,936
    
    
    
    
    
    
    
    56,733
    
    
    
    1,624
    
    
    
    19,379
    
    
    
    
    
    
    
    196,185
    
    
    
    409
    
    
    
    342,233
    
    
    
    2,033
    
    
    
    344,266
    
    
    
    1,993CommercialCommercial real estate
    
    
    35,202
    
    
    
    
    
    
    
    65,484
    
    
    
    
    
    
    
    6,962
    
    
    
    
    
    
    
    120,231
    
    
    
    
    
    
    
    227,879
    
    
    
    
    
    
    
    227,879
    
    
    
    Commercial and industrial
    
    
    3,901
    
    
    
    
    
    
    
    284
    
    
    
    
    
    
    
    325
    
    
    
    
    
    
    
    1,916
    
    
    
    
    
    
    
    6,426
    
    
    
    
    
    
    
    6,426
    
    
    
    560Construction and land
    
    
    2,281
    
    
    
    
    
    
    
    8,135
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    138,144
    
    
    
    1,610
    
    
    
    148,955
    
    
    
    1,610
    
    
    
    150,565
    
    
    
    Total commercial
    
    
    41,384
    
    
    
    
    
    
    
    73,903
    
    
    
    
    
    
    
    7,682
    
    
    
    
    
    
    
    260,291
    
    
    
    1,610
    
    
    
    383,260
    
    
    
    1,610
    
    
    
    384,870
    
    
    
    560Total non-performing loans
    
    $
    111,320
    
    
    $
    
    
    
    $
    130,636
    
    
    $
    1,624
    
    
    $
    27,061
    
    
    $
    
    
    
    $
    456,476
    
    
    $
    2,019
    
    
    $
    725,493
    
    
    $
    3,643
    
    
    $
    729,136
    
    
    $
    2,553
 
 (1)
    
    In accordance with regulatory guidance, Doral defines 30 days past due as when the
borrower is delinquent two payments. Doral defines 90 days past due based upon the actual
number of days past due.(2)
    
    As of December 31, 2010 excludes $160.0 million of total past due FHA/VA guaranteed
loans that due to the nature of their guarantees present minimal credit risk to the Company. 18




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Quarters Ended March 31,(In thousands)
    
    2011
    
    
    2010ConsumerNon FHA/VA guaranteed residential mortgage(1)
    
    $
    5,970
    
    
    $
    9,662Other consumer
    
    
    16
    
    
    
    36Total consumer
    
    
    5,986
    
    
    
    9,698CommercialCommercial real estate
    
    
    2,674
    
    
    
    3,535Commercial and industrial
    
    
    52
    
    
    
    50Construction and land
    
    
    2,695
    
    
    
    4,840Total commercial
    
    
    5,421
    
    
    
    8,425Total interest income
    
    $
    11,407
    
    
    $
    18,123
 
 (1)
    
    Excludes $2.0 million and $0.1 million in additional interest income the
Company would have recognized if FHA/VA non-accrual loans been accounted for on an accrual
status for the quarters ended March 31, 2011 and 2010, respectively. Credit Quality
      19




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20




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As of
March 31, 2011
 30 to 89 Days
    
    
    90 to 179 Days
    
    
    180 to 240 Days
    
    
    Over 240 DaysCurrent
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Total(In thousands)
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    TotalConsumerResidential mortgage
    
    $
    3,430,325
    
    
    $
    104,863
    
    
    $
    76,574
    
    
    $
    
    
    
    $
    65,927
    
    
    $
    1,175
    
    
    $
    29,697
    
    
    $
    54
    
    
    $
    273,888
    
    
    $
    542
    
    
    $
    3,876,411
    
    
    $
    106,634
    
    
    $
    3,983,045Lease financing receivables
    
    
    3,127
    
    
    
    
    
    
    
    297
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,724
    
    
    
    
    
    
    
    3,724Other consumer
    
    
    47,039
    
    
    
    3
    
    
    
    1,073
    
    
    
    
    
    
    
    1,700
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    49,944
    
    
    
    3
    
    
    
    49,947Total consumer
    
    
    3,480,491
    
    
    
    104,866
    
    
    
    77,944
    
    
    
    
    
    
    
    67,927
    
    
    
    1,175
    
    
    
    29,767
    
    
    
    54
    
    
    
    273,950
    
    
    
    542
    
    
    
    3,930,079
    
    
    
    106,637
    
    
    
    4,036,716CommercialCommercial real estate
    
    
    439,992
    
    
    
    59,754
    
    
    
    21,529
    
    
    
    
    
    
    
    71,744
    
    
    
    
    
    
    
    4,929
    
    
    
    
    
    
    
    109,697
    
    
    
    
    
    
    
    647,891
    
    
    
    59,754
    
    
    
    707,645Commercial and industrial
    
    
    33,860
    
    
    
    628,322
    
    
    
    790
    
    
    
    
    
    
    
    1,179
    
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    2,038
    
    
    
    
    
    
    
    38,030
    
    
    
    628,322
    
    
    
    666,352Construction and land
    
    
    209,476
    
    
    
    97,568
    
    
    
    815
    
    
    
    
    
    
    
    2,959
    
    
    
    
    
    
    
    5,611
    
    
    
    
    
    
    
    115,723
    
    
    
    1,610
    
    
    
    334,584
    
    
    
    99,178
    
    
    
    433,762Total commercial
    
    
    683,328
    
    
    
    785,644
    
    
    
    23,134
    
    
    
    
    
    
    
    75,882
    
    
    
    
    
    
    
    10,703
    
    
    
    
    
    
    
    227,458
    
    
    
    1,610
    
    
    
    1,020,505
    
    
    
    787,254
    
    
    
    1,807,759Total
    
    $
    4,163,819
    
    
    $
    890,510
    
    
    $
    101,078
    
    
    $
    
    
    
    $
    143,809
    
    
    $
    1,175
    
    
    $
    40,470
    
    
    $
    54
    
    
    $
    501,408
    
    
    $
    2,152
    
    
    $
    4,950,584
    
    
    $
    893,891
    
    
    $
    5,844,475
 December
31, 2010
 30 to 89 Days
    
    
    90 to 179 Days
    
    
    180 to 240 Days
    
    
    Over 240 DaysCurrent
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    


    Total(In thousands)
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    PR
    
    
    US
    
    
    TotalConsumerResidential mortgage
    
    $
    3,425,774
    
    
    $
    106,608
    
    
    $
    78,545
    
    
    $
    
    
    
    $
    72,097
    
    
    $
    1,624
    
    
    $
    27,651
    
    
    $
    38
    
    
    $
    326,671
    
    
    $
    507
    
    
    $
    3,930,738
    
    
    $
    108,777
    
    
    $
    4,039,515Lease financing receivables
    
    
    4,187
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,807
    
    
    
    
    
    
    
    4,807Other consumer
    
    
    50,616
    
    
    
    26
    
    
    
    1,341
    
    
    
    
    
    
    
    2,225
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    54,354
    
    
    
    26
    
    
    
    54,380Total consumer
    
    
    3,480,577
    
    
    
    106,634
    
    
    
    80,120
    
    
    
    
    
    
    
    74,708
    
    
    
    1,624
    
    
    
    27,762
    
    
    
    38
    
    
    
    326,732
    
    
    
    507
    
    
    
    3,989,899
    
    
    
    108,803
    
    
    
    4,098,702CommercialCommercial real estate
    
    
    428,616
    
    
    
    59,903
    
    
    
    35,307
    
    
    
    
    
    
    
    65,690
    
    
    
    
    
    
    
    6,962
    
    
    
    
    
    
    
    120,231
    
    
    
    
    
    
    
    656,806
    
    
    
    59,903
    
    
    
    716,709Commercial and industrial
    
    
    29,653
    
    
    
    597,056
    
    
    
    3,901
    
    
    
    
    
    
    
    607
    
    
    
    
    
    
    
    360
    
    
    
    
    
    
    
    2,118
    
    
    
    
    
    
    
    36,639
    
    
    
    597,056
    
    
    
    633,695Construction and land
    
    
    200,943
    
    
    
    107,225
    
    
    
    2,281
    
    
    
    
    
    
    
    8,136
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    138,144
    
    
    
    1,610
    
    
    
    349,899
    
    
    
    108,835
    
    
    
    458,734Total commercial
    
    
    659,212
    
    
    
    764,184
    
    
    
    41,489
    
    
    
    
    
    
    
    74,433
    
    
    
    
    
    
    
    7,717
    
    
    
    
    
    
    
    260,493
    
    
    
    1,610
    
    
    
    1,043,344
    
    
    
    765,794
    
    
    
    1,809,138Total
    
    $
    4,139,789
    
    
    $
    870,818
    
    
    $
    121,609
    
    
    $
    
    
    
    $
    149,141
    
    
    $
    1,624
    
    
    $
    35,479
    
    
    $
    38
    
    
    $
    587,225
    
    
    $
    2,117
    
    
    $
    5,033,243
    
    
    $
    874,597
    
    
    $
    5,907,840
 Loan modifications and troubled debt restructurings
   21




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##### Table of Contents



Quarters Ended March 31,2011
    
    
    2010Pre-modification
    
    
    Post-modification
    
    
    
    
    
    
    Pre-modification
    
    
    Post-modificationrecorded
    
    
    recorded
    
    
    
    
    
    
    recorded
    
    
    recorded(In thousands)
    
    # contracts
    
    
    investment
    
    
    investment
    
    
    # contracts
    
    
    investment
    
    
    investmentConsumer modificationsResidential non FHA/VA
    
    
    700
    
    
    $
    83,478
    
    
    $
    82,100
    
    
    
    299
    
    
    $
    32,177
    
    
    $
    32,108Other consumer
    
    
    6
    
    
    
    63
    
    
    
    63
    
    
    
    14
    
    
    
    148
    
    
    
    148Total consumer
    
    
    706
    
    
    
    83,541
    
    
    
    82,163
    
    
    
    313
    
    
    
    32,325
    
    
    
    32,256CommercialCommercial real estate
    
    
    26
    
    
    $
    6,197
    
    
    $
    6,097
    
    
    
    9
    
    
    $
    7,161
    
    
    $
    7,158Commercial and industrial
    
    
    1
    
    
    
    584
    
    
    
    584
    
    
    
    2
    
    
    
    4,263
    
    
    
    4,263Construction and land
    
    
    1
    
    
    
    32
    
    
    
    31
    
    
    
    1
    
    
    
    3,620
    
    
    
    3,374Total commercial
    
    
    28
    
    
    
    6,813
    
    
    
    6,712
    
    
    
    12
    
    
    
    15,044
    
    
    
    14,795Total loan modifications
    
    
    734
    
    
    $
    90,354
    
    
    $
    88,875
    
    
    
    325
    
    
    $
    47,369
    
    
    $
    47,051
  22




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##### Table of Contents



10. Allowance for Loan and Lease Losses and Impaired Loans
     23




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##### Table of Contents



Quarter Ended March 31, 2011Commercial
    
    
    ConstructionNon-FHA/VA
    
    
    Other
    
    
    Total
    
    
    Commercial
    
    
    and
    
    
    and
    
    
    Total(In thousands)
    
    Residential
    
    
    Consumer
    
    
    Consumer
    
    
    Real Estate
    
    
    Industrial
    
    
    Land
    
    
    Commercial
    
    
    TotalBalance at beginning of period
    
    $
    56,487
    
    
    $
    6,274
    
    
    $
    62,761
    
    
    $
    29,712
    
    
    $
    6,153
    
    
    $
    25,026
    
    
    $
    60,891
    
    
    $
    123,652Provision for loan and lease losses
    
    
    755
    
    
    
    494
    
    
    
    1,249
    
    
    
    (5,756
    )
    
    
    (109
    )
    
    
    7,206
    
    
    
    1,341
    
    
    
    2,590Losses charged to the allowance
    
    
    (3,226
    )
    
    
    (1,599
    )
    
    
    (4,825
    )
    
    
    
    
    
    
    (19
    )
    
    
    (1,590
    )
    
    
    (1,609
    )
    
    
    (6,434
    )Recoveries
    
    
    
    
    
    
    396
    
    
    
    396
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    396Balance at end of period
    
    $
    54,016
    
    
    $
    5,565
    
    
    $
    59,581
    
    
    $
    23,956
    
    
    $
    6,025
    
    
    $
    30,642
    
    
    $
    60,623
    
    
    $
    120,204Reported balance of loans(1)
    
    $
    3,543,208
    
    
    $
    51,258
    
    
    $
    3,594,466
    
    
    $
    680,582
    
    
    $
    666,352
    
    
    $
    433,762
    
    
    $
    1,780,696
    
    
    $
    5,375,162ALLL for loans individually evaluated for impairment
    
    $
    27,271
    
    
    $
    
    
    
    $
    27,271
    
    
    $
    17,439
    
    
    $
    623
    
    
    $
    15,471
    
    
    $
    33,533
    
    
    $
    60,804Reported balance of loans individually evaluated for impairment
    
    $
    698,750
    
    
    $
    
    
    
    $
    698,750
    
    
    $
    258,235
    
    
    $
    6,822
    
    
    $
    176,021
    
    
    $
    441,078
    
    
    $
    1,139,828ALLL of loans collectively evaluated for impairment
    
    $
    26,745
    
    
    $
    5,565
    
    
    $
    32,310
    
    
    $
    6,517
    
    
    $
    5,402
    
    
    $
    15,171
    
    
    $
    27,090
    
    
    $
    59,400Reported balance of loans collectively evaluated for impairment
    
    $
    2,844,458
    
    
    $
    51,258
    
    
    $
    2,895,716
    
    
    $
    422,347
    
    
    $
    659,530
    
    
    $
    257,741
    
    
    $
    1,339,618
    
    
    $
    4,235,334
 
 (1)
    
    Excludes reported balance of FHA/VA guaranteed loans and loans on savings deposits. 24




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##### Table of Contents



Quarter Ended March 31, 2010Commercial
    
    
    ConstructionNon-FHA/VA
    
    
    Other
    
    
    Total
    
    
    Commercial
    
    
    and
    
    
    and
    
    
    Total(In thousands)
    
    Residential
    
    
    Consumer
    
    
    Consumer
    
    
    Real Estate
    
    
    Industrial
    
    
    Land
    
    
    Commercial
    
    
    TotalBalance at beginning of period
    
    $
    51,814
    
    
    $
    8,338
    
    
    $
    60,152
    
    
    $
    21,883
    
    
    $
    4,281
    
    
    $
    54,458
    
    
    $
    80,622
    
    
    $
    140,774Provision (recovery) for loan and lease losses
    
    
    6,609
    
    
    
    1,633
    
    
    
    8,242
    
    
    
    3,068
    
    
    
    (74
    )
    
    
    2,685
    
    
    
    5,679
    
    
    
    13,921Losses charged to the allowance
    
    
    (4,715
    )
    
    
    (2,449
    )
    
    
    (7,164
    )
    
    
    (256
    )
    
    
    (198
    )
    
    
    (32
    )
    
    
    (486
    )
    
    
    (7,650
    )Recoveries
    
    
    
    
    
    
    241
    
    
    
    241
    
    
    
    50
    
    
    
    23
    
    
    
    122
    
    
    
    195
    
    
    
    436Balance at end of period
    
    $
    53,708
    
    
    $
    7,763
    
    
    $
    61,471
    
    
    $
    24,745
    
    
    $
    4,032
    
    
    $
    57,233
    
    
    $
    86,010
    
    
    $
    147,481Reported balance of loans(1)
    
    $
    3,640,962
    
    
    $
    76,312
    
    
    $
    3,717,274
    
    
    $
    728,372
    
    
    $
    345,791
    
    
    $
    545,232
    
    
    $
    1,619,395
    
    
    $
    5,336,669ALLL for loans individually evaluated for impairment
    
    $
    16,362
    
    
    $
    
    
    
    $
    16,362
    
    
    $
    11,397
    
    
    $
    249
    
    
    $
    48,119
    
    
    $
    59,765
    
    
    $
    76,127Reported balance of loans individually evaluated for impairment
    
    $
    486,532
    
    
    $
    
    
    
    $
    486,532
    
    
    $
    167,361
    
    
    $
    249
    
    
    $
    327,276
    
    
    $
    494,886
    
    
    $
    981,418ALLL of loans collectively evaluated for impairment
    
    $
    37,346
    
    
    $
    7,763
    
    
    $
    45,109
    
    
    $
    13,348
    
    
    $
    3,783
    
    
    $
    9,114
    
    
    $
    26,245
    
    
    $
    71,354Reported balance of loans collectively evaluated for impairment
    
    $
    3,154,430
    
    
    $
    76,312
    
    
    $
    3,230,742
    
    
    $
    561,011
    
    
    $
    345,542
    
    
    $
    217,956
    
    
    $
    1,124,509
    
    
    $
    4,355,251
 
 (1)
    
    Excludes reported balance of FHA/VA guaranteed loans and loans on savings deposits.  25




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Recorded
    
    
    Related
    
    

    
    

    
    
    
    
    
    
    Recorded
    
    
    Related(In thousands)
    
    UPB
    
    
    Investment
    
    
    Allowance
    
    
    Reserve %(1)
    
    
    UPB
    
    
    Investment
    
    
    Allowance
    
    
    Reserve %(1)With no allowance recorded at the report date:Non-FHA/VA residential
    
    $
    209,993
    
    
    $
    191,267
    
    
    $
    
    
    
    
    
    %
    
    $
    199,840
    
    
    $
    197,251
    
    
    $
    
    
    
    
    
    %Total consumer
    
    
    209,993
    
    
    
    191,267
    
    
    
    
    
    
    
    
    %
    
    
    199,840
    
    
    
    197,251
    
    
    
    
    
    
    
    
    %Commercial real estate
    
    
    150,952
    
    
    
    139,246
    
    
    
    
    
    
    
    
    %
    
    
    145,099
    
    
    
    131,078
    
    
    
    
    
    
    
    
    %Commercial and industrial
    
    
    5,821
    
    
    
    5,752
    
    
    
    
    
    
    
    
    %
    
    
    5,489
    
    
    
    5,435
    
    
    
    
    
    
    
    
    %Construction and land
    
    
    81,589
    
    
    
    70,175
    
    
    
    
    
    
    
    
    %
    
    
    96,357
    
    
    
    85,252
    
    
    
    
    
    
    
    
    %Total commercial
    
    
    238,362
    
    
    
    215,173
    
    
    
    
    
    
    
    
    %
    
    
    246,945
    
    
    
    221,765
    
    
    
    
    
    
    
    
    %With allowance recorded at the report date:Non-FHA/VA residential
    
    
    514,441
    
    
    
    507,483
    
    
    
    27,271
    
    
    
    5.37
    %
    
    
    539,583
    
    
    
    535,063
    
    
    
    27,529
    
    
    
    5.15
    %Total consumer
    
    
    514,441
    
    
    
    507,483
    
    
    
    27,271
    
    
    
    5.37
    %
    
    
    539,583
    
    
    
    535,063
    
    
    
    27,529
    
    
    
    5.15
    %Commercial real estate
    
    
    128,947
    
    
    
    118,989
    
    
    
    17,439
    
    
    
    14.66
    %
    
    
    138,827
    
    
    
    131,941
    
    
    
    22,086
    
    
    
    16.74
    %Commercial and industrial
    
    
    1,145
    
    
    
    1,070
    
    
    
    623
    
    
    
    58.22
    %
    
    
    2,069
    
    
    
    2,070
    
    
    
    1,060
    
    
    
    51.21
    %Construction and land
    
    
    130,871
    
    
    
    105,846
    
    
    
    15,471
    
    
    
    14.62
    %
    
    
    118,966
    
    
    
    105,872
    
    
    
    18,200
    
    
    
    17.19
    %Total commercial
    
    
    260,963
    
    
    
    225,905
    
    
    
    33,533
    
    
    
    14.84
    %
    
    
    259,862
    
    
    
    239,883
    
    
    
    41,346
    
    
    
    17.24
    %TotalNon-FHA/VA residential
    
    
    724,434
    
    
    
    698,750
    
    
    
    27,271
    
    
    
    3.90
    %
    
    
    739,423
    
    
    
    732,314
    
    
    
    27,529
    
    
    
    3.76
    %Total consumer
    
    
    724,434
    
    
    
    698,750
    
    
    
    27,271
    
    
    
    3.90
    %
    
    
    739,423
    
    
    
    732,314
    
    
    
    27,529
    
    
    
    3.76
    %Commercial real estate
    
    
    279,899
    
    
    
    258,235
    
    
    
    17,439
    
    
    
    6.75
    %
    
    
    283,926
    
    
    
    263,019
    
    
    
    22,086
    
    
    
    8.40
    %Commercial and industrial
    
    
    6,966
    
    
    
    6,822
    
    
    
    623
    
    
    
    9.13
    %
    
    
    7,558
    
    
    
    7,505
    
    
    
    1,060
    
    
    
    14.12
    %Construction and land
    
    
    212,460
    
    
    
    176,021
    
    
    
    15,471
    
    
    
    8.79
    %
    
    
    215,323
    
    
    
    191,124
    
    
    
    18,200
    
    
    
    9.52
    %Total commercial
    
    
    499,325
    
    
    
    441,078
    
    
    
    33,533
    
    
    
    7.60
    %
    
    
    506,807
    
    
    
    461,648
    
    
    
    41,346
    
    
    
    8.96
    %Total
    
    $
    1,223,759
    
    
    $
    1,139,828
    
    
    $
    60,804
    
    
    
    5.33
    %
    
    $
    1,246,230
    
    
    $
    1,193,962
    
    
    $
    68,875
    
    
    
    5.77
    %
 
 (1)
    
    Gross reserve percent represents the amount of the allowance to the recorded
investment.  Quarters Ended March 31,2011
    
    
    2010Average Recorded
    
    
    Interest Income
    
    
    Average Recorded
    
    
    Interest Income(In thousands)
    
    Investment
    
    
    Recognized
    
    
    Investment
    
    
    RecognizedConsumerNon-FHA/VA residential
    
    $
    715,532
    
    
    $
    6,248
    
    
    $
    435,679
    
    
    $
    6,559Total consumer
    
    
    715,532
    
    
    
    6,248
    
    
    
    435,679
    
    
    
    6,559CommercialCommercial real estate
    
    
    260,627
    
    
    
    1,089
    
    
    
    164,003
    
    
    
    1,082Commercial and industrial
    
    
    7,163
    
    
    
    70
    
    
    
    253
    
    
    
    5Construction and land
    
    
    183,573
    
    
    
    631
    
    
    
    328,041
    
    
    
    715Total commercial
    
    
    451,363
    
    
    
    1,790
    
    
    
    492,297
    
    
    
    1,802Total
    
    $
    1,166,895
    
    
    $
    8,038
    
    
    $
    927,976
    
    
    $
    8,361
  26




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11. Related Party Transactions
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Balance at beginning of period
    
    $
    1,300
    
    
    $
    2,840New loans
    
    
    
    
    
    
    Repayments
    
    
    (11
    )
    
    
    (96
    )Loans of former officers
    
    
    
    
    
    
    (1,444
    )Balance at end of period(1)
    
    $
    1,289
    
    
    $
    1,300
 
 (1)
    
    At March 31, 2011 and December 31, 2010, none of the loans outstanding to officers,
directors and 5% or more stockholders were delinquent.    
 12. Accounts Receivable and Other Assets
  
 13 Servicing Activities
  27




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##### Table of Contents



Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Balance at beginning of period
    
    $
    114,342
    
    
    $
    118,493Capitalization of servicing assets
    
    
    2,097
    
    
    
    1,777Sales of servicing asset(1)
    
    
    
    
    
    
    (30
    )Servicing release due to repurchase(2)
    
    
    (89
    )
    
    
    (136
    )Change in fair value
    
    
    (51
    )
    
    
    (1,868
    )Balance at end of period(3)
    
    $
    116,299
    
    
    $
    118,236
 
 (1)
    
    Amount represents MSRs sales related to $1.5 million in principal balance of
mortgage loans for the quarter ended March 31, 2010.(2)
    
    Amount represents the adjustment of MSR fair value related to the repurchase of $6.3
million and $10.1 million in principal balance of mortgage loans serviced for others for the
quarters ended March 31, 2011 and 2010.(3)
    
    Outstanding balance of loans serviced for third parties amounted to $8.1 billion and
$8.5 billion as of March 31, 2011 and 2010, respectively, which includes $2.6 million and $3.0
million, respectively, of loans being serviced under sub-servicing arrangements.      (Dollars in thousands)
    
    Servicing Assets
    
    
    Interest-Only StripsCarrying amount of retained interest
    
    $
    116,299
    
    
    $
    41,618Weighted-average expected life (in years)
    
    
    7.2
    
    
    
    5.5Constant prepayment rate (weighted-average annual rate)
    
    
    7.5
    %
    
    
    8.8
    %Decrease in fair value due to 10% adverse change
    
    $
    (3,794
    )
    
    $
    (1,139
    )Decrease in fair value due to 20% adverse change
    
    $
    (7,406
    )
    
    $
    (2,139
    )Residual cash flow discount rate (weighted-average annual rate)
    
    
    11.3
    %
    
    
    13.0
    %Decrease in fair value due to 10% adverse change
    
    $
    (4,821
    )
    
    $
    (1,388
    )Decrease in fair value due to 20% adverse change
    
    $
    (9,281
    )
    
    $
    (2,679
    )
  28




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##### Table of Contents



Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Balance at beginning of period
    
    $
    44,250
    
    
    $
    45,723Amortization
    
    
    (2,181
    )
    
    
    (2,798
    )(Loss) gain on the IO value
    
    
    (451
    )
    
    
    659Balance at end of period
    
    $
    41,618
    
    
    $
    43,584
   (Dollars in thousands)Change in Interest Rates
    
    Constant
    
    
    Weighted-Average
    
    Change in Fair
    
    
    Percentage(Basis Points)
    
    Prepayment Rate
    
    
    Expected Life (Years)
    
    Value of IOs
    
    
    of Change200
    
    
    6.0
    %
    
    6.6
    
    $
    (4,974
    )
    
    
    (12.0)
    %100
    
    
    7.2
    %
    
    6.1
    
    
    (2,642
    )
    
    
    (6.4)
    %50
    
    
    7.9
    %
    
    5.8
    
    
    (1,337
    )
    
    
    (3.3)
    %Base
    
    
    8.8
    %
    
    5.5
    
    
    
    
    
    
    
    %-50
    
    
    9.6
    %
    
    5.2
    
    
    1,466
    
    
    
    3.5
    %-100
    
    
    10.6
    %
    
    5.0
    
    
    2,248
    
    
    
    5.4
    %-200
    
    
    11.3
    %
    
    4.8
    
    
    5,147
    
    
    
    12.3
    %
 29




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##### Table of Contents



14. Sale and Securitization of Mortgage Loans
    
 15. Servicing Related Matters
  
 16. Other Real Estate Owned
   (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Residential
    
    $
    57,572
    
    
    $
    63,794Commercial
    
    
    17,900
    
    
    
    17,599Construction and land
    
    
    28,295
    
    
    
    18,880Balance at end of period
    
    $
    103,767
    
    
    $
    100,273
  Quarters Ended March 31,(In thousands)
    
    2011
    
    
    2010Balance at beginning of period
    
    $
    100,273
    
    
    $
    94,219Additions
    
    
    29,372
    
    
    
    18,289Sales
    
    
    (22,726
    )
    
    
    (5,860
    )Retirements
    
    
    (2,384
    )
    
    
    (2,389
    )Lower of cost or market adjustments
    
    
    (768
    )
    
    
    (3,914
    )Balance at end of period
    
    $
    103,767
    
    
    $
    100,345
 30




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##### Table of Contents



17. Deposits
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Brokered certificates of deposit
    
    $
    2,237,121
    
    
    $
    2,359,254Certificates of deposit
    
    
    669,665
    
    
    
    703,473Money markets accounts
    
    
    490,076
    
    
    
    475,467NOW accounts and other transaction accounts
    
    
    414,744
    
    
    
    411,633Regular savings
    
    
    409,428
    
    
    
    410,418Total interest-bearing
    
    
    4,221,034
    
    
    
    4,360,245Non-interest-bearing deposits
    
    
    265,214
    
    
    
    258,230Total deposits
    
    $
    4,486,248
    
    
    $
    4,618,475
  
 18. Securities Sold Under Agreements to Repurchase
  (Dollars in thousands)
    
    March 31, 2011
    
    
    December 31, 2010Repurchase agreements
with maturities ranging
from March 2012 to June
2015, at various fixed
rates averaging 3.15% at
March 31, 2011 and
December 31, 2010.
    
    $
    1,026,800
    
    
    $
    1,026,800Callable repurchase
agreements with maturity
date from August 2014 to
January 2015, at various
fixed rates averaging
2.33% at March 31, 2011
and December 31, 2011,
with callable dates
between July and August
2012.
    
    
    50,000
    
    
    
    50,000Putable repurchase
agreements with maturity
date of February 17, 2014,
at a rate of 2.98% at
March 31, 2011 and
December 31, 2010, with
callable date of May 2011
(2010 - February 2011).
    
    
    100,000
    
    
    
    100,000$
    1,176,800
    
    
    $
    1,176,800
  31




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19. Advances from FHLB
  (Dollars in thousands)
    
    March 31, 2011
    
    
    December 31, 2010Non-callable advances with maturities
ranging from October 2011 to January 2016
(2010 - January 2011 to May 2013) at
various fixed rates averaging 2.46% and
3.64% at March 31, 2011 and December 31,
2010, respectively.(1)
    
    $
    711,363
    
    
    $
    747,420Non-callable advances with maturities
ranging from September 2011 to November
2012, tied to 1-month LIBOR adjustable
monthly, at various variable rates of
0.27% and 0.28% at March 31, 2011 and
December 31, 2010, respectively.
    
    
    74,000
    
    
    
    74,000Putable structured advances due on March
2012, at a fixed rate of 5.04% at March
31, 2011 and December 31, 2010,
respectively, putable at June 2011 (2010
- March 2011).
    
    
    80,000
    
    
    
    80,000$
    865,363
    
    
    $
    901,420
 
 (1)
    
    Includes one structured advance with an outstanding balance of $50.0 million as of
December 31, 2010.     
 20. Other Short-Term Borrowings
   32




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##### Table of Contents



21. Loans Payable
   (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Secured borrowings
with local financial
institutions, at variable
interest rates tied to
3-month LIBOR, averaging
1.79% and 1.74% at March
31, 2011 and December 31,
2010, respectively,
collateralized by
residential mortgage
loans.
    
    $
    282,914
    
    
    $
    287,511Secured borrowings with
local financial
institutions, at fixed
interest rates averaging
7.40% at March 31, 2011
and December 31, 2010,
collateralized by
residential mortgage
loans.
    
    
    15,684
    
    
    
    16,524$
    298,598
    
    
    $
    304,035
    33




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##### Table of Contents



22. Notes Payable
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010$100.0 million notes, net
of discount, bearing
interest at 7.65%, due on
March 26, 2016, paying
interest monthly.
    
    $
    98,848
    
    
    $
    98,801$30.0 million notes, net of
discount, bearing interest
at 7.00%, due on April 26,
2012, paying interest
monthly.
    
    
    29,898
    
    
    
    29,875$40.0 million notes, net of
discount, bearing interest
at 7.10%, due on April 26,
2017, paying interest
monthly.
    
    
    39,508
    
    
    
    39,492$30.0 million notes, net of
discount, bearing interest
at 7.15%, due on April 26,
2022, paying interest
monthly.
    
    
    29,506
    
    
    
    29,499Bonds payable secured by
mortgage on building at
fixed rates ranging from
6.75% to 6.90%, with
maturities ranging from
June 2011 to December 2029,
paying interest monthly.
    
    
    38,445
    
    
    
    38,445Bonds payable at a fixed
rate of 6.25%, with
maturities ranging from
June 2011 to December 2029,
paying interest monthly.
    
    
    7,400
    
    
    
    7,400Note payable with a local
financial institution,
collateralized by IOs, at a
fixed rate of 7.75%, due on
December 25, 2013, paying
principal and interest
monthly.
    
    
    19,082
    
    
    
    20,624$250.0 million notes, net
of discount, bearing
interest at a variable
interest rate (3-month
LIBOR plus 1.85%), due on
July 21, 2020, paying
interest quarterly
comencing on January 2011.
    
    
    249,826
    
    
    
    249,822$
    512,513
    
    
    $
    513,958
    
 23. Income Taxes
 Background
  34




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##### Table of Contents



Income Tax Expense
  Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Current income tax expense  United States
    
    $
    2,373
    
    
    $
    275Deferred income tax expense:Puerto Rico
    
    
    2,670
    
    
    
    1,787United States
    
    
    53
    
    
    
    467Total deferred income tax expense
    
    
    2,723
    
    
    
    2,254Total income tax expense
    
    $
    5,096
    
    
    $
    2,529
  35




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##### Table of Contents



Deferred Tax Components
      36




---



##### Table of Contents



(In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Deferred income tax asset resulting from:Differential in tax basis of IOs sold
    
    $
    214,481
    
    
    $
    237,912Net operating loss carry-forwards
    
    
    200,270
    
    
    
    193,322Allowance for loan and lease losses
    
    
    47,262
    
    
    
    48,635Capital loss carry-forward
    
    
    26,355
    
    
    
    26,783Reserve for losses on OREO
    
    
    15,499
    
    
    
    17,340Other
    
    
    41,853
    
    
    
    44,445Gross deferred tax asset
    
    
    545,720
    
    
    
    568,437Valuation allowance
    
    
    (442,019
    )
    
    
    (462,725
    )Net deferred tax asset
    
    $
    103,701
    
    
    $
    105,712
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Differential in tax basis of IOs sold
    
    $
    122,402
    
    
    $
    143,550Net operating loss carry-forwards
    
    
    193,646
    
    
    
    186,447Allowance for loan and lease losses
    
    
    44,759
    
    
    
    45,950Capital loss carry-forward
    
    
    26,351
    
    
    
    26,779Reserve for losses on OREO
    
    
    15,453
    
    
    
    17,294Other
    
    
    39,408
    
    
    
    42,705Total valuation allowance
    
    $
    442,019
    
    
    $
    462,725
       Accounting for Uncertainty in Income Taxes
  37




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##### Table of Contents



(In thousands)
    
    December 31, 2010Balance at beginning of period
    
    $
    3,475Additions for tax positions of prior years
    
    
    280Additions for tax positions of current year
    
    
    Release of contingencies
    
    
    (3,755
    )Balance at end of period
    
    $
    
 
 24. Guarantees
     38




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##### Table of Contents



Quarter Ended(In thousands)
    
    March 31, 2011Balance at beginning of period
    
    $
    10,264Net charge-offs / termination
    
    
    (628
    )Provision for recourse liability
    
    
    241Balance at end of period
    
    $
    9,877
 
 25. Financial Instruments with Off-Balance Sheet Risk
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Commitments to extend credit
    
    $
    147,369
    
    
    $
    139,791Commitments to sell loans
    
    
    113,999
    
    
    
    64,751Performance standby letter of credit
    
    
    25
    
    
    
    25Total
    
    $
    261,393
    
    
    $
    204,567
      
 26. Commitments and Contingencies
  (In thousands)2012
    
    $
    6,5392013
    
    
    6,3282014
    
    
    5,4552015
    
    
    5,2152016
    
    
    5,0932017 and thereafter
    
    
    24,101$
    52,731
 39




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##### Table of Contents



27. Stock Option and Other Incentive Plans
       Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Stock-based compensation recognized, net
    
    $
    660
    
    
    $
    17Unrecognized at end of period:Stock options
    
    $
    107
    
    
    $
    232Restricted stock
    
    $
    6,241
    
    
    $
    
 40




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##### Table of Contents



Weighted-average exercise price
    
    $
    13.70Stock option estimated fair value
    
    $
    5.88Expected stock option term (years)
    
    
    6.50Expected volatility
    
    
    39.00
    %Expected dividend yield
    
    
    
    %Risk-free interest rate
    
    
    3.49
    %
   Weighted-AverageGrant Date FairNonvested Restricted Shares
    
    Shares
    
    
    ValueNonvested at December 31, 2010
    
    
    3,000,000
    
    
    $
    2.74Granted
    
    
    125,000
    
    
    
    1.17Nonvested at March 31, 2011
    
    
    3,125,000
    
    
    
    2.68
  41




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##### Table of Contents



28. Earnings Per Share Data
  Quarters EndedMarch 31,(Dollars in thousands, except per share amounts)
    
    2011
    
    2010Net Income (Loss):Net income (loss)
    
    $
    3,324
    
    
    $
    (3,503
    )Convertible preferred stock dividend
    
    
    (2,415
    )
    
    
    (1,864
    )Effect of conversion of preferred stock(1)
    
    
    
    
    
    
    26,585Net income attributable to common shareholders
    
    $
    909
    
    
    $
    21,218Weighted-Average Number of Common Shares Outstanding(2)
    
    
    127,293,756
    
    
    
    62,528,221Earnings per Common Share(3)
    
    $
    0.01
    
    
    $
    0.34
 
 (1)
    
    The carrying value of the noncumulative preferred stock exceeded the fair value of
consideration transferred and, accordingly, the difference between the liquidation preference
of the preferred stock retired and the market value of the common stock issued amounted to
$31.6 million for the quarter ended March 31, 2010 and was credited to retained earnings. In
the case of the cumulative preferred stock, the fair value of stock exchanged for the
preferred stock converted exceeded the fair value of the stock issuable pursuant to the
original conversion terms and, accordingly, this excess or inducement amounted to $5.1 million
for the quarter ended March 31, 2010 was charged to retained earnings. As a result, both
transactions impacted the net income attributable to common shareholders.(2)
    
    Potential common shares consist of common stock issuable under the assumed exercise
of stock options and unvested shares of restricted stock using the treasury stock method. This
method assumes that the potential common shares are issued and the proceeds from exercise in
addition to the amount of compensation cost attributed to future services are used to purchase
common stock at the exercise date. The difference between the number of potential shares
issued and the shares purchased is added as incremental shares to the actual number of shares
outstanding to compute diluted earnings per share. Stock options and unvested shares of
restricted stock that result in lower potential shares issued than shares purchased under the
treasury stock method are not included in the computation of dilutive earnings per share since
their inclusion would have an antidilutive effect in earnings per share. As of March 31, 2011,
there were 60,000 stock options and 3,125,000 shares of restricted stock granted that were
also excluded from this computation for their antidilutive effect.(3)
    
    For the quarters ended March 31, 2011 and 2010, earnings per common share represent
both basic and diluted earnings per common share, respectively, for each of the periods
presented.   
 29. Fair Value of Assets and Liabilities
   42




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##### Table of Contents



Fair Value Hierarchy
   Level 1
    
    Valuation is based upon unadjusted quoted prices for identical
instruments traded in active markets.
  Level 2
    
    Valuation is based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments in markets that are
not active, and model-based valuation techniques for which all significant assumptions
are observable in the market, or are derived principally from or corroborated by
observable market data, by correlation or by other means.
  Level 3
    
    Valuation is generated from model-based techniques that use
significant assumptions not observable in the market. These unobservable assumptions
reflect the Companys estimates of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques include use of option pricing
models, discounted cash flow models and similar techniques.
 Determination of Fair Value
       43




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##### Table of Contents



Securities held for trading: Available for Sale Servicing
assets and interest-only strips, and Derivatives
  Securities available for sale:
 Loans held for sale:
 Loans receivable:
  44




---



##### Table of Contents



Servicing assets and interest-only strips:
 Real estate held for sale:
 Other assets:
 Premises and equipment:Premises and equipment are carried at cost. However, whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable,
the Company recognizes an impairment loss based on the fair value of the property, which is
generally obtained from appraisals. Property impairment losses are recorded as part of
occupancy expenses in the Consolidated Statement of Operations.
 Goodwill:Goodwill is not amortized, but is tested for impairment at least annually or more
frequently if events or circumstances indicate possible impairment. In determining the fair
value of a reporting unit the Company uses discounted cash flow analysis. Goodwill impairment
losses are recorded as part of other expenses in the Consolidated Statement of Operations.
 CB, LLC:Events or changes in circumstances may indicate that the carrying amount of certain
assets may not be recoverable, such as for land and the remaining housing units. Impairment
losses are recorded as part of occupancy expenses in the Consolidated Statement of Operations.
 Derivatives:
   Cash and due from banks and other interest-earning assets:
 Deposits
 45




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##### Table of Contents



Loans payable
 Notes payable, advances from FHLB, other short-term borrowings and securities sold under agreements
to repurchase
 Financial Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Securities Held for TradingMBS
    
    $
    805
    
    
    $
    
    
    
    $
    
    
    
    $
    805
    
    
    $
    766
    
    
    $
    
    
    
    $
    
    
    
    $
    766IOs
    
    
    41,618
    
    
    
    
    
    
    
    
    
    
    
    41,618
    
    
    
    44,250
    
    
    
    
    
    
    
    
    
    
    
    44,250Derivatives
    
    
    137
    
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13
    
    
    
    Total Securities Held for
Trading
    
    
    42,560
    
    
    
    
    
    
    
    137
    
    
    
    42,423
    
    
    
    45,029
    
    
    
    
    
    
    
    13
    
    
    
    45,016Securities Available for SaleAgency MBS
    
    
    1,101,569
    
    
    
    
    
    
    
    1,099,887
    
    
    
    1,682
    
    
    
    1,142,973
    
    
    
    
    
    
    
    1,141,281
    
    
    
    1,692CMO Government Sponsored Agencies
    
    
    202,709
    
    
    
    
    
    
    
    195,373
    
    
    
    7,336
    
    
    
    312,831
    
    
    
    
    
    
    
    305,442
    
    
    
    7,389Non-Agency CMOs
    
    
    7,753
    
    
    
    
    
    
    
    
    
    
    
    7,753
    
    
    
    7,192
    
    
    
    
    
    
    
    
    
    
    
    7,192Obligations U.S. Government Sponsored
Agencies
    
    
    94,925
    
    
    
    
    
    
    
    94,925
    
    
    
    
    
    
    
    34,992
    
    
    
    
    
    
    
    34,992
    
    
    
    Other
    
    
    11,876
    
    
    
    
    
    
    
    
    
    
    
    11,876
    
    
    
    7,077
    
    
    
    
    
    
    
    
    
    
    
    7,077Total Securities Available
for Sale
    
    
    1,418,832
    
    
    
    
    
    
    
    1,390,185
    
    
    
    28,647
    
    
    
    1,505,065
    
    
    
    
    
    
    
    1,481,715
    
    
    
    23,350Servicing Assets
    
    
    116,299
    
    
    
    
    
    
    
    
    
    
    
    116,299
    
    
    
    114,342
    
    
    
    
    
    
    
    
    
    
    
    114,342$
    1,577,691
    
    
    $
    
    
    
    $
    1,390,322
    
    
    $
    187,369
    
    
    $
    1,664,436
    
    
    $
    
    
    
    $
    1,481,728
    
    
    $
    182,708Liabilities:Derivatives(1)
    
    $
    3,970
    
    
    $
    
    
    
    $
    3,970
    
    
    $
    
    
    
    $
    5,418
    
    
    $
    
    
    
    $
    5,418
    
    
    $
    
 
 (1)
    
    Forward contracts and interest rate swaps included as part of accrued expenses and
other liabilities in the Consolidated Statement of Financial Condition. 46




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##### Table of Contents



For the quarter ended March 31, 2011Capitalization
    
    
    
    
    
    
    PrincipalChange in fair
    
    
    of servicing
    
    
    Net gains
    
    
    repaymentsvalue
    
    
    assets
    
    
    included in
    
    
    andincluded in
    
    
    included in
    
    
    other
    
    
    amortizationBalance, beginning
    
    
    the Statement
    
    
    the Statement
    
    
    comprehensive
    
    
    of premium
    
    
    
    
    
    
    Balance, end(In thousands)
    
    of year
    
    
    of Operations
    
    
    of Operations
    
    
    income
    
    
    and discount
    
    
    Purchases
    
    
    of periodSecurities held for tradingMBS
    
    $
    766
    
    
    $
    39
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    805IOs(1)
    
    
    44,250
    
    
    
    (2,632
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,618Total securities held for
trading
    
    
    45,016
    
    
    
    (2,593
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,423Securities available for sale(2)Agency MBS
    
    
    1,692
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    (25
    )
    
    
    
    
    
    
    1,682CMO Government Sponsored Agencies
    
    
    7,389
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    (71
    )
    
    
    
    
    
    
    7,336Non-Agency CMOs
    
    
    7,192
    
    
    
    
    
    
    
    
    
    
    
    509
    
    
    
    52
    
    
    
    
    
    
    
    7,753Other
    
    
    7,077
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    (220
    )
    
    
    5,002
    
    
    
    11,876Total securities available for
sale
    
    
    23,350
    
    
    
    
    
    
    
    
    
    
    
    559
    
    
    
    (264
    )
    
    
    5,002
    
    
    
    28,647Servicing Assets(3)
    
    
    114,342
    
    
    
    (140
    )
    
    
    2,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,299Balance at end of
period
    
    $
    182,708
    
    
    $
    (2,733
    )
    
    $
    2,097
    
    
    $
    559
    
    
    $
    (264
    )
    
    $
    5,002
    
    
    
    187,369
 For the quarter ended March 31, 2010Capitalization
    
    
    
    
    
    
    PrincipalChange in fair
    
    
    of servicing
    
    
    Net gains
    
    
    repaymentsvalue
    
    
    assets
    
    
    included in
    
    
    andincluded in
    
    
    included in
    
    
    other
    
    
    amortizationBalance, beginning
    
    
    the Statement
    
    
    the Statement
    
    
    comprehensive
    
    
    of premium
    
    
    Purchases
    
    
    Balance, end(In thousands)
    
    of year
    
    
    of Operations
    
    
    of Operations
    
    
    income
    
    
    and discount
    
    
    and sales
    
    
    of periodSecurities held for tradingMBS
    
    $
    893
    
    
    $
    (97
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    796IOs(1)
    
    
    45,723
    
    
    
    (2,139
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,584Total securities held for
trading
    
    
    46,616
    
    
    
    (2,236
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,380Securities available for sale(2)Agency MBS
    
    
    1,830
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (99
    )
    
    
    
    
    
    
    1,738CMO Government Sponsored Agencies
    
    
    7,701
    
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    (87
    )
    
    
    
    
    
    
    8,194Non-Agency CMOs
    
    
    270,600
    
    
    
    (13,259
    )
    
    
    
    
    
    
    13,873
    
    
    
    (10,085
    )
    
    
    
    
    
    
    261,129Other
    
    
    1,650
    
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    1,860Total securities available for
sale
    
    
    281,781
    
    
    
    (13,259
    )
    
    
    
    
    
    
    14,670
    
    
    
    (10,271
    )
    
    
    
    
    
    
    272,921Servicing Assets(3)
    
    
    118,493
    
    
    
    (2,004
    )
    
    
    1,777
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    118,236Balance at end of
period
    
    $
    446,890
    
    
    $
    (17,499
    )
    
    $
    1,777
    
    
    $
    14,670
    
    
    $
    (10,271
    )
    
    $
    (30
    )
    
    
    435,537
 
 (1)
    
    Changes in fair value are recognized in net gain on trading activities in
non-interest income and the amortization of the IOs is recognized in interest income on
interest-only strips. As of March 31, 2011, the IO had a loss of $0.4 million for change in
fair value and an amortization of $2.2 million. As of March 31, 2010 the IO had a gain of $0.7
million for change in fair value and an amortization of $2.8 million.(2)
    
    OTTI is recognized as part of non-interest income. Amortization of premium and
discount is recognized as part of interest income as mortgage-backed securities.(3)
    
    Change in fair value of servicing assets is recognized in non-interest income as
servicing income. Capitalization of servicing assets is recognized in non-interest income as
net gain on mortgage loan sales and fees. 47




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##### Table of Contents



Assets Recorded at Fair Value on a Nonrecurring Basis
  (In thousands)
    
    Carrying Value
    
    
    Level 3March 31, 2011Loans receivable (1)
    
    $
    138,844
    
    
    $
    138,844Real estate held for sale(2)
    
    
    27,411
    
    
    
    27,411Total
    
    $
    166,255
    
    
    $
    166,255December 31, 2010Loans receivable(1)
    
    $
    266,093
    
    
    $
    266,093Real estate held for sale(2)
    
    
    70,335
    
    
    
    70,335Other assets(3)
    
    
    2,275
    
    
    
    2,275Total
    
    $
    338,703
    
    
    $
    338,703
 
 (1)
    
    Represents the carrying value of collateral dependent loans for which adjustments
are based on the appraised value of the collateral.(2)
    
    Represents the carrying value of real estate held for sale for which adjustments are
based on the appraised value of the properties.(3)
    
    Represents the carrying value of CB, LLC assets for which adjustments are based on
the appraised value of land and the remaining housing units.  Location of Gain or LossRecognized in the
    
    
    Quarters Ended March 31,(In thousands)
    
    Statement of Operations
    
    
    2011
    
    
    2010Loans receivable
    
    (Recovery) provision for loan and lease losses
    
    $
    (2,622
    )
    
    $
    16,051Real estate held for sale
    
    Other expenses
    
    $
    4,548
    
    
    $
    4,449
 48




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##### Table of Contents



Disclosures about Fair Value of Financial Instruments
  March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    
    
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Cash and due from banks
    
    $
    333,005
    
    
    $
    333,005
    
    
    $
    355,819
    
    
    $
    355,819Other interest-earning assets
    
    
    153,520
    
    
    
    153,520
    
    
    
    156,607
    
    
    
    156,607Securities held for trading(1)
    
    
    42,560
    
    
    
    42,560
    
    
    
    45,029
    
    
    
    45,029Securities available for sale
    
    
    1,418,832
    
    
    
    1,418,832
    
    
    
    1,505,065
    
    
    
    1,505,065Loans held for sale(2)
    
    
    305,471
    
    
    
    312,301
    
    
    
    319,269
    
    
    
    325,655Loans receivable
    
    
    5,418,800
    
    
    
    5,088,598
    
    
    
    5,464,919
    
    
    
    5,179,879Servicing assets
    
    
    116,299
    
    
    
    116,299
    
    
    
    114,342
    
    
    
    114,342Financial liabilities:Deposits
    
    $
    4,486,248
    
    
    $
    4,543,521
    
    
    $
    4,618,475
    
    
    $
    4,685,730Securities sold under agreements to repurchase
    
    
    1,176,800
    
    
    
    1,236,127
    
    
    
    1,176,800
    
    
    
    1,218,280Advances from FHLB
    
    
    865,363
    
    
    
    893,846
    
    
    
    901,420
    
    
    
    923,266Loans payable
    
    
    298,598
    
    
    
    298,598
    
    
    
    304,035
    
    
    
    304,035Notes payable
    
    
    512,513
    
    
    
    485,232
    
    
    
    513,958
    
    
    
    482,441Derivatives(3)
    
    
    3,970
    
    
    
    3,970
    
    
    
    5,418
    
    
    
    5,418
 
 (1)
    
    Includes derivatives of $0.1 million and $13,000 for March 31, 2011 and December 31,
2010, respectively.(2)
    
    Includes $155.6 million and $153.4 million for March 31, 2011 and December 31, 2010,
respectively, related to GNMA defaulted loans for which the Company has an unconditional
buy-back option.(3)
    
    Includes $0.1 million and $0.7 million of derivatives held for trading purposes and
$3.9 million and $4.7 million of derivatives held for purposes other than trading, for March
31, 2011 and December 31, 2010, respectively, as part of accrued expenses and other
liabilities in the Consolidated Statement of Financial Condition. 
 30. Derivatives
   49




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March 31, 2011
    
    
    December 31, 2010Fair Value
    
    
    
    
    
    
    Fair ValueNotional
    
    
    
    
    
    
    
    
    
    Notional(In thousands)
    
    Amount
    
    
    Asset(1)
    
    
    Liability(2)
    
    
    Amount
    
    
    Asset(1)
    
    
    Liability(2)Cash Flow Hedges:Interest rate swaps
    
    $
    74,000
    
    
    $
    
    
    
    $
    (3,946
    )
    
    $
    74,000
    
    
    $
    
    
    
    $
    (4,677
    )Other Derivatives (non hedges):Interest rate caps
    
    
    210,000
    
    
    
    3
    
    
    
    
    
    
    
    210,000
    
    
    
    13
    
    
    
    Forward contracts
    
    
    55,000
    
    
    
    134
    
    
    
    (24
    )
    
    
    100,000
    
    
    
    
    
    
    
    (741
    )Total
    
    $
    339,000
    
    
    $
    137
    
    
    $
    (3,970
    )
    
    $
    384,000
    
    
    $
    13
    
    
    $
    (5,418
    )
 
 (1)
    
    Fair value included as part of Securities held for trading in the Companys
Statement of Financial Condition.(2)
    
    Fair value included as part of Accrued expenses and other liabilities in the
Companys Statement of Financial Condition. Cash Flow Hedges
    Location of Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss ReclassifiedReclassified from
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    from AccumulatedAccumulated Other
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    OtherComprehensive
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    ComprehensiveIncome (Loss) to
    
    
    Notional
    
    
    
    
    
    
    Comprehensive
    
    
    Income (Loss) to(In thousands)
    
    Income
    
    
    Amount
    
    
    Fair Value
    
    
    Income (Loss)
    
    
    IncomeCash flow HedgesMarch 31, 2011Interest rate swaps
    
    Interest expense - Advances from FHLB
    
    $
    74,000
    
    
    $
    (3,946
    )
    
    $
    732
    
    
    $
    (764
    )March 31, 2010Interest rate swaps
    
    Interest expense - Advances from FHLB
    
    $
    305,000
    
    
    $
    (9,114
    )
    
    $
    1,558
    
    
    $
    (1,151
    )
 50




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##### Table of Contents



Trading and Non-Hedging Activities
  Location of Gain (Loss)Recognized in theConsolidated Statement
    
    

March 31, 2011of
    
    
    
    
    
    
    
    
    
    
    Net Loss for the(In thousands)
    
    Operations
    
    
    Notional Amount
    
    
    Fair Value
    
    
    QuarterDerivatives not designated as
cash flow hedges:Interest rate caps
    
    Net gain on trading activities
    
    $
    210,000
    
    
    $
    3
    
    
    $
    (10
    )Forward contracts
    
    Net gain on trading activities
    
    
    55,000
    
    
    
    110
    
    
    
    (626
    )$
    265,000
    
    
    $
    113
    
    
    $
    (636
    )
 Location of (Loss) Gain
    
    
    March 31, 2010Recognized in the Consolidated
    
    
    
    
    
    
    
    
    
    
    Net (Loss) Gain(In thousands)
    
    Statement of Operations
    
    
    Notional Amount
    
    
    Fair Value
    
    
    for the QuarterDerivatives not designated as
cash flow hedges:Interest rate caps
    
    Net gain on trading activities
    
    $
    270,000
    
    
    $
    216
    
    
    $
    (561
    )Forward contracts
    
    Net gain on trading activities
    
    
    125,000
    
    
    
    (669
    )
    
    
    891$
    395,000
    
    
    $
    (453
    )
    
    $
    330
      51




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##### Table of Contents



31. Variable Interest Entities
  
    
    The equity investment at risk is not sufficient for the entity to finance its
activities without additional subordinated financial support.
 
    
    As a group, the holders of equity investment at risk do not possess: (i) the power,
through voting rights or similar rights, to direct the activities that most
significantly impact the entitys economic performance; or (ii) the obligation to
absorb expected losses or the right to receive the expected residual returns of the
entity; or (iii) symmetry between voting rights and economic interests and where
substantially all of the entitys activities either involve or are conducted on behalf
of an investor with disproportionately fewer voting rights (e.g., structures with
nonsubstantive voting rights).
   Servicing Assets:
 Investment Securities:
 Loans:
 Special Purpose Entities (SPE):
 
    
    The Company sold an asset portfolio to a third party on July 29, 2010, consisting of
performing and non-performing late-stage residential construction and development loans and
other real estate assets, with carrying amounts at the transfer date of $33.8 million, $63.4
million and $4.8 million, respectively. As consideration for the transferred assets, the
Company received a $5.1 million cash payment and a $96.9 million note receivable which has a
10-year maturity and a fixed interest rate of 8.0% per annum and permits interest
capitalization for the first 18 months. This financing provided by the Company is secured by a
general pledge of all of the acquiring entitys assets. As of March 31, 2011, the carrying
amount of the note receivable was $96.9 million and is classified in loans receivable in the
Consolidated Statement of Financial Condition.
 Concurrent with this transaction, the Company provided the acquirer with a $28.0 million
construction line of credit which has a 10 year maturity and a fixed interest rate of 8% per
annum. The line of credit will be used by the acquirer of the assets
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to provide construction
advances on the transferred loans or to fund construction on foreclosed properties. As of March
31, 2011, the carrying amount of the line of credit is $2.8 million and is classified as loan
receivable in the Consolidated Statement of Financial Condition.
 The Company has determined that the acquirer is a VIE and that the Company is not its primary
beneficiary. The assets of the acquirer are comprised of the transferred asset portfolio in
addition to $10.2 million of in kind capital contribution provided by a single third party. The
sole equity holder has unconditionally committed to contribute an additional $7.0 million of
capital over the next six years.
 The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in
the VIE which exists when an enterprise has both the power to direct the activities that most
significantly impact the VIEs economic performance and the obligation to absorb losses or the
right to receive benefits of the VIE that could potentially be significant to the VIE. The
rights provided to the Company as creditor are protective in nature. As the Company does not
have the right to manage the loan portfolio, impact foreclosure proceedings, or manage the
construction and sale of the property, the Company does not have power over the activities that
most significantly impact the economic performance of the acquirer. The Companys maximum
exposure to loss from the variable interest entity is limited to the interest and principal
outstanding on the note receivable and the line of credit. Therefore, the Company is not the
primary beneficiary of the variable interest entity.
 The transfer of the portfolio, consisting of construction loans and other real estate assets,
was accounted for as a sale. The note receivable was recognized at its initial fair value of
$96.9 million. The initial fair value measurement of the note receivable was determined using
discount rate adjustment techniques with significant unobservable (Level 3) inputs. Management
based its fair value estimate using cash flows forecasted considering the initial and future
loan advances, when the various construction project units would be complete, current absorption
rates of new housing in Puerto Rico, and a market interest rate that reflects the estimated
credit risk of the acquirer and the nature of the loan collateral. Doral considered the loans to
be construction loans for the purposes of determining a market rate.
 
    
    During the third quarter of 2010, the Company, through one of its subsidiaries, Doral
Money, entered into a CLO arrangement with a third party in which up to $450.0 million of
largely U.S. mainland based commercial loans are pledged to collateralize AAA rated debt of
$250.0 million paying three month LIBOR plus 1.85 percent issued by Doral CLO I, Ltd. Doral
CLO I, Ltd. is a variable interest entity created to hold the commercial loans and issue the
previously noted debt and $200.0 million of subordinated notes to the Company whereby the
Company receives any excess proceeds after payment of the senior debt interest and other fees
and charges specified in the indenture agreement. The Company also serves as collateral
manager of the assets of Doral CLO I, Ltd. Doral CLO I, Ltd. is consolidated with the Company
in these financial statements.
 A CLO is a securitization where a special purpose entity purchases a pool of assets consisting
of loans and issues multiple tranches of equity or notes to investors. Typically, the asset
manager has the power over the significant decisions of the VIE through its discretion to manage
the assets of the CLO.
 Doral CLO I, Ltd. is a VIE because it does not have sufficient equity investment at risk and the
subordinated notes provide additional financial support to the structure. Management has
determined that the Company is the primary beneficiary of Doral CLO I, Ltd. because it has a
variable interest in Doral CLO I, Ltd.through both its collateral manager fee and its obligation
to absorb potentially significant losses and the right to receive potentially significant
benefits of the CLO through the subordinated securities held. The most significant activities of
Doral CLO I, Ltd. are those associated with managing the collateral obligations on a day-to-day
basis and, as collateral manager, the Company controls the significant activities of the VIE.
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(In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Carrying amountCash and other interest-earning assets
    
    $
    41,680
    
    
    $
    51,828Loans receivable
    
    
    411,705
    
    
    
    401,723Allowance for loan and lease losses
    
    
    (1,939
    )
    
    
    (2,388
    )Other assets
    
    
    9,589
    
    
    
    9,795Total assets
    
    
    461,035
    
    
    
    460,958Notes payable (third party liability)
    
    
    249,826
    
    
    
    249,822Other liabilities
    
    
    1,779
    
    
    
    2,934Total liabilities
    
    
    251,605
    
    
    
    252,756Net assets
    
    $
    209,430
    
    
    $
    208,202
  (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Carrying amountServicing assets
    
    $
    15,300
    
    
    $
    15,201Available for sale securities:Non-agency CMO
    
    
    11,161
    
    
    
    11,108Loans receivable:Construction and land
    
    
    412,839
    
    
    
    437,378Maximum exposure to loss(1)Servicing assets
    
    $
    15,300
    
    
    $
    15,201Available for sale securities:Non-agency CMO(2)
    
    
    11,161
    
    
    
    11,108Loans receivable:Construction and land
    
    
    412,839
    
    
    
    437,378
 
 (1)
    
    Maximum exposure to loss is a required disclosure under GAAP and represents
estimated loss that would be incurred under severe, hypothetical circumstances, for which the
possibility of occurrence is remote, such as where the value of our interests and any
associated collateral declines to zero, without any consideration of recovery or offset from
any economic hedges. Accordingly, this required disclosure is not an indication of expected
loss.(2)
    
    Refers to book value of residual interest from two private placements (Refer to Note
6 for additional information). These transactions are structured without recourse, so as
servicers our exposure is limited to standard representations and warranties as seller of the
loans and responsibilities as servicer of the SPEs assets. 
 32. Segment Information
    
    
    Puerto Rico  This segment is the Companys principal market and includes all mortgage and
retail banking activities in Puerto Rico including loans, deposits and insurance activities.
This segment operates a  34 branch network in Puerto Rico  offering a variety of
consumer loan products as well as deposit products and other retail banking services. This
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segments primary lending activities have traditionally focused on the origination of
residential mortgage loans in Puerto Rico.
 
    
    United States  This segment includes retail banking in the United States through its federal
savings bank subsidiary with branches in New York and Florida. This segment also includes the
Companys U.S. commercial lending businesses, including the middle market syndicated lending unit that is engaged in purchasing participations
in senior credit facilities in the U.S. syndicated leverage loan market, which   is the primary
source of growth in the Companys loan portfolio.
 
    
    Liquidating Operations  This segment includes the loan portfolios of product lines for which
the Company has discontinued new lending, primarily  construction and land portfolios (loans and repossessed assets) with
the purpose of maximizing the Companys recovery on these assets. There is no expected new funding
in the portfolios within this segment except as part of a workout function.
 
    
    Treasury  The Companys Treasury function manages the investment portfolio, interest rate
risk and liquidity position of Doral. It also serves as a source of funding for the
Companys other lines of business.
    Quarter Ended March 31, 2011Liquidating
    
    
    
    
    
    
    Intersegment(In thousands)
    
    Puerto Rico
    
    
    United States
    
    
    Treasury
    
    
    Operations
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalNet interest income (loss) from
external customers
    
    $
    44,960
    
    
    $
    11,836
    
    
    $
    (16,794
    )
    
    $
    3,168
    
    
    $
    
    
    
    $
    
    
    
    $
    43,170Intersegment net interest
(loss) income
    
    
    (15,740
    )
    
    
    (948
    )
    
    
    20,818
    
    
    
    (2,093
    )
    
    
    (2,037
    )
    
    
    
    
    
    
    Total net interest income (loss)
    
    
    29,220
    
    
    
    10,888
    
    
    
    4,024
    
    
    
    1,075
    
    
    
    (2,037
    )
    
    
    
    
    
    
    43,170(Recovery) provision for loan
and lease losses
    
    
    (458
    )
    
    
    (396
    )
    
    
    
    
    
    
    3,444
    
    
    
    
    
    
    
    
    
    
    
    2,590Non-interest income (loss)
    
    
    23,514
    
    
    
    1,933
    
    
    
    3,180
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    28,624Depreciation and amortization
    
    
    1,575
    
    
    
    163
    
    
    
    
    
    
    
    1
    
    
    
    1,464
    
    
    
    
    
    
    
    3,203Non-interest expense
    
    
    27,868
    
    
    
    6,341
    
    
    
    4,604
    
    
    
    5,897
    
    
    
    12,871
    
    
    
    
    
    
    
    57,581Net income (loss) before income
taxes and corporate allocations
    
    
    23,749
    
    
    
    6,713
    
    
    
    2,600
    
    
    
    (8,270
    )
    
    
    (16,372
    )
    
    
    
    
    
    
    8,420Allocation of corporate
    
    
    12,698
    
    
    
    2,604
    
    
    
    35
    
    
    
    1,035
    
    
    
    (16,372
    )
    
    
    
    
    
    
    Net income (loss) before income
taxes
    
    
    11,051
    
    
    
    4,109
    
    
    
    2,565
    
    
    
    (9,305
    )
    
    
    
    
    
    
    
    
    
    
    8,420Identifiable assets
    
    
    6,312,526
    
    
    
    1,062,209
    
    
    
    4,134,467
    
    
    
    664,452
    
    
    
    215,975
    
    
    
    (3,925,533
    )
    
    
    8,464,096
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Quarter Ended March 31, 2011Mortgage
    
    
    
    
    
    
    
    
    
    
    Intersegment(In thousands)
    
    Banking
    
    
    Banking
    
    
    Insurance Agency
    
    
    Eliminations(1)
    
    
    TotalNet interest income
    
    $
    742
    
    
    $
    41,320
    
    
    $
    
    
    
    $
    1,108
    
    
    $
    43,170Provision for loan
and lease losses
    
    
    (40
    )
    
    
    2,630
    
    
    
    
    
    
    
    
    
    
    
    2,590Non-interest income
    
    
    6,617
    
    
    
    24,400
    
    
    
    2,223
    
    
    
    (4,616
    )
    
    
    28,624Income (loss)
before income taxes
    
    
    330
    
    
    
    8,253
    
    
    
    1,339
    
    
    
    (1,502
    )
    
    
    8,420Net income
    
    
    (1,795
    )
    
    
    5,827
    
    
    
    794
    
    
    
    (1,502
    )
    
    
    3,324Identifiable assets
    
    
    1,728,361
    
    
    
    7,780,812
    
    
    
    10,815
    
    
    
    (1,055,892
    )
    
    
    8,464,096
 Quarter Ended March 31, 2010Mortgage
    
    
    
    
    
    
    
    
    
    
    Intersegment(In thousands)
    
    Banking
    
    
    Banking
    
    
    Insurance Agency
    
    
    Eliminations(1)
    
    
    TotalNet interest income
    
    $
    3,386
    
    
    $
    38,603
    
    
    $
    
    
    
    $
    1,772
    
    
    $
    43,761Provision for loan
and lease losses
    
    
    2,117
    
    
    
    11,804
    
    
    
    
    
    
    
    
    
    
    
    13,921Non-interest income
    
    
    6,161
    
    
    
    31,624
    
    
    
    2,380
    
    
    
    (3,581
    )
    
    
    36,584(Loss) income
before income taxes
    
    
    (7,356
    )
    
    
    4,346
    
    
    
    1,887
    
    
    
    149
    
    
    
    (974
    )Net (loss) income
    
    
    (7,410
    )
    
    
    2,643
    
    
    
    1,115
    
    
    
    149
    
    
    
    (3,503
    )Identifiable assets
    
    
    1,610,150
    
    
    
    8,948,732
    
    
    
    18,622
    
    
    
    (864,616
    )
    
    
    9,712,888
 
 (1)
    
    The intersegment eliminations in the tables above include servicing fees paid by the
banking subsidiaries to the mortgage banking subsidiary recognized as a reduction of the non
interest income, direct intersegment loan origination costs amortized as yield adjustment or
offset against net gains on mortgage loan sales and fees (mainly related with origination
costs paid by the banking segment to the mortgage banking segment) and other income derived
from intercompany transactions, related principally to rental income paid to Doral Properties,
the Companys subsidiary that owns the corporate headquarters facilities. Assets include
internal funding and investments in subsidiaries accounted for at cost.  Quarter Ended March 31, 2011(In thousands)
    
    Puerto Rico
    
    
    Mainland U.S.
    
    
    Eliminations
    
    
    TotalsNet interest income
    
    $
    35,715
    
    
    $
    7,084
    
    
    $
    371
    
    
    $
    43,170Provision (recovery) for loan and lease losses
    
    
    2,985
    
    
    
    (395
    )
    
    
    
    
    
    
    2,590Non-interest income
    
    
    26,693
    
    
    
    2,299
    
    
    
    (368
    )
    
    
    28,624Income before income taxes
    
    
    4,876
    
    
    
    3,526
    
    
    
    18
    
    
    
    8,420Net Income
    
    
    780
    
    
    
    2,526
    
    
    
    18
    
    
    
    3,324Identifiable assets
    
    
    7,998,470
    
    
    
    1,060,840
    
    
    
    (595,214
    )
    
    
    8,464,096
 Quarter Ended March 31, 2010(In thousands)
    
    Puerto Rico
    
    
    Mainland U.S.
    
    
    Eliminations
    
    
    TotalsNet interest income
    
    $
    40,414
    
    
    $
    3,207
    
    
    $
    140
    
    
    $
    43,761Provision (recovery) for loan and lease losses
    
    
    13,939
    
    
    
    (18
    )
    
    
    
    
    
    
    13,921Non-interest income
    
    
    36,149
    
    
    
    604
    
    
    
    (169
    )
    
    
    36,584(Loss) income before income taxes
    
    
    (1,611
    )
    
    
    637
    
    
    
    
    
    
    
    (974
    )Net (loss) income
    
    
    (3,613
    )
    
    
    110
    
    
    
    
    
    
    
    (3,503
    )Identifiable assets
    
    
    9,617,521
    
    
    
    568,923
    
    
    
    (473,556
    )
    
    
    9,712,888
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FORWARD LOOKING STATEMENTS
     
    
    the continued recessionary conditions of the Puerto Rico economy and any deterioration
in the performance of the United States economy and capital markets leading to, among other
things, (i) a deterioration in the credit quality of our loans and other assets, (ii)
decreased demand for our products and services and lower revenue and earnings, (iii)
reduction in our interest margins, and (iv) decreased availability and increased pricing of
our funding sources, including brokered certificates of deposits;
    
    the weakness of the Puerto Rico and United States real estate markets and of the Puerto
Rico and United States consumer and commercial credit sectors and its impact in the credit
quality of our loans and other assets which have contributed and may continue to contribute
to, among other things, an increase in our non-performing loans, charge-offs and loan loss
provisions;
    
    a decline in the market value and estimated cash flows of our mortgage-backed
securities and other assets may result in the recognition of other-than-temporary
impairment (OTTI) of such assets under generally accepted accounting principles in the
United States of America (GAAP);
    
    our ability to derive sufficient income to realize the benefit of the deferred tax
assets;
    
    uncertainty about the legislative and other measures adopted by the Puerto Rico
government in response to its fiscal situation and the impact of such measures on several
sectors of the Puerto Rico economy;
    
    uncertainty about the recently enacted changes to the Puerto Rico internal revenue code
and other related tax provisions and the impact of such measures on several sectors of the
Puerto Rico economy;
    
    uncertainty about the effectiveness of the various actions undertaken to stimulate the
United States economy and stabilize the United States financial markets, and the impact of
such actions on our business, financial condition and results of operations;
    
    uncertainty about the outcome of regular annual safety and soundness and compliance
examinations by our primary regulators which may contribute to, among other things, an
increase in charge-offs, loan loss provisions, and compliance costs;
    
    changes in interest rates, which may result from changes in the fiscal and monetary
policy of the federal government, and
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the potential impact of such changes in interest rates on our net interest income and the
value of our loans and investments;
    
    the commercial soundness of our various counterparties of financing and other
securities transactions, which could lead to possible losses when the collateral held by us
to secure the obligations of the counterparty is not sufficient or to possible delays or
losses in recovering any excess collateral belonging to us held by the counterparty;
    
    higher credit losses because of federal or state legislation or regulatory action that
either (i) reduces the amount that our borrowers are required to pay us, or (ii) limits our
ability to foreclose on properties or collateral or makes foreclosures less economically
feasible;
    
    developments in the regulatory and legal environment for public companies and financial
services companies in the United States (including Puerto Rico) as a result of, among other
things, the adoption in July 2010 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act and the regulations adopted and to be adopted thereunder by various federal
and state securities and banking regulatory agencies, and the impact of such developments
on our business, business practices, capital requirements and costs of operations;
    
    the exposure of Doral Financial, as originator of residential mortgage loans, sponsor
of residential mortgage loan securitization transactions, or servicer of such loans or such
transactions, or in other capacities, to government sponsored enterprises (GSEs),
investors, mortgage insurers or other third parties as a result of representations and
warranties made in connection with the transfer or securitization of such loans;
    
    the risk or possible failure or circumvention of controls and procedures, and the risk
that our management policies may be inadequate;
    
    the risk that the FDIC may further increase deposit insurance premiums and/or require
special assessments to replenish its insurance fund, causing an additional increase in the
Companys non-interest expense;
    
    changes in our accounting policies or in accounting standards, and changes in how
accounting standards are interpreted or applied;
    
    general competitive factors and industry consolidation;
    
    the strategies adopted by the FDIC and the three acquiring banks in connection with the
resolution of the residential, construction and commercial real estate loans acquired in
connection with the three Puerto Rico banks that failed in April 2010, which may adversely
affect real estate values in Puerto Rico;
    
    to the extent we make any acquisitions, including FDIC-assisted acquisitions of assets
and liabilities of failed banks, risks and difficulties relating to combining the acquired
operations with our existing operations;
    
    potential adverse outcome in the legal or regulatory actions or proceedings described
in Part I, Item 3 Legal Proceedingsin the Companys 2010 Annual Report on Form 10-K, as
updated from time to time in the Companys future reports filed with the SEC; and
    
    the other risks and uncertainties detailed in Part II, Item 1A Risk Factorsin the
Companys 2010 Annual Report on Form 10-K, as updated from time to time in the Companys
future reports filed with the SEC.
 58




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   OVERVIEW OF RESULTS OF OPERATIONS
   
    
    The Company reported net income attributable to common shareholders of $0.9 million and
earnings per common share of $0.01 for the first quarter of 2011 compared to net income
attributable to common shareholders and earnings per common share of $21.2 million and
$0.34, respectively, for the first quarter of 2010.
    
    Net interest income for the first quarter of 2011 was $43.2 million, a decrease of $0.6
million when compared to the first quarter of 2010. Net interest margin increased 36 basis
points to 2.23%, compared to 1.87% for the first quarter of 2010. Improved net interest
margin results from the exchange of $555.4 million of high rate advances from FHLB for a
comparable amount of lower rate advances from FHLB, calling $128.4 million of high cost
callable certificates of deposit, and lowering interest rates on deposits, combined with
increased interest income resulting from lower levels of delinquent loans and loss
mitigation, as well as growth of the U.S. loan portfolio.
    
    Provision for loan and lease losses for the first quarter of 2011 was $2.6 million, a
decrease of $11.3 million over the provision recorded for the first quarter of 2010. The
first quarter 2011 provision for loan and lease losses included $8.3 million net provisions
for construction and land, commercial real estate and commercial and industrial loans
reviewed individually for impairment offset in part by net lower general reserves resulting
from improved collections of delinquent loans and adoption of certain refinements in loss
reserve calculations.
    
    First quarter 2011 non-interest income of $28.6 million decreased $8.0 million compared
to non-interest income of $36.6 million for the first quarter of 2010. Non-interest income
for the first quarter of 2011 included a gain on sale of investment securities of $2.9
million compared to a $26.4 million gain for the first quarter of 2010. The first quarter
2010 gain on securities sales was partially offset by an other-than-temporary-impairment
charge of $13.3 million.
    
    First quarter 2011 non-interest expense of $60.8 million decreased $6.6 million from
expenses for the quarter ended March 31, 2010. Lower expenses in the first quarter of 2011
compared to the first quarter of 2010 were due to: (i) lower provisions and other expenses
for other real estate owned properties of $2.4 million, (ii) lower professional services
expenses of $5.2 million, partially offset by (iii) an increase of $1.9 million in
compensation and benefits expense.
    
    First quarter 2011 income tax expense of $5.1 million increased $2.6 million compared
with income tax expense of $2.5 million in the first quarter of 2010. Income tax expense
reflects $2.4 million resulting from the profitable operations of certain U.S. and Puerto
Rico entities, and $2.7 million resulting from the net effect on Dorals deferred tax asset
of (i) Puerto Rico tax legislation approved in January 2011 lowering the effective tax rate
and (ii) the increased earnings expectations for profitable
Puerto Rican entities, as well as net amortization of existing
deferred taxes.
    
    Dorals first quarter 2011 loan production was $350.1 million, up from $289.1 million
for the first quarter of 2010. The loan production increase of $61.0 million resulted from
the commercial loan production volume increase of $109.6 million, largely due to new
lending by the Companys U.S. middle market syndicated lending unit, partially offset by
 59




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lower Puerto Rico residential mortgage loan production (down $43.3 million) as residential
mortgage loan originations declined on the island.
    
    Doral reported total assets as of March 31, 2011 of $8.5 billion compared to $8.6
billion as of December 31, 2010.
    
    Total deposits of $4.5 billion as of March 31, 2011, decreased $132.2 million, or 2.9%,
from deposits of $4.6 billion as of December 31, 2010. The deposit decrease resulted from a
$122.1 million (5.2%) decrease in brokered deposits.
    
    Advances from FHLB were $865.4 million as of March 31, 2011, down $36.0 million (4.0%)
from advances from FHLB of $901.4 million as of December 31, 2010.
    
    Non-performing loans (NPLs) as of March 31, 2011 were $571.5 million, a decrease of
$54.9 million from December 31, 2010, as Doral continued to emphasize collections and
restructures to optimize performance of the loan portfolio.
    
    The Companys capital ratios continue to exceed the published well-capitalized standards
established by the federal banking agencies with ratios of Tier 1 Leverage of 8.87%, Tier 1
Risk-based Capital of 13.54% and Total Risk-based Capital of 14.80%. The Leverage, Tier 1
and Total Risk-based Capital Ratios exceeded the well-capitalized standards by $325.4
million, $415.3 million and $264.5 million, respectively.
 60




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Table A  Selected Financial Data
 Quarters EndedMarch 31,(In thousands, except for share data)
    
    2011
    
    
    2010Selected Income Statement Data:Interest income
    
    $
    93,991
    
    
    $
    109,228Interest expense
    
    
    50,821
    
    
    
    65,467Net interest income
    
    
    43,170
    
    
    
    43,761Provision for loan and lease losses
    
    
    2,590
    
    
    
    13,921Net interest income after provision for loan and lease losses
    
    
    40,580
    
    
    
    29,840Non-interest income
    
    
    28,624
    
    
    
    36,584Non-interest expenses
    
    
    60,784
    
    
    
    67,398Income (loss) before income taxes
    
    
    8,420
    
    
    
    (974
    )Income tax expense
    
    
    5,096
    
    
    
    2,529Net income (loss)
    
    $
    3,324
    
    
    $
    (3,503
    )Net income attributable to common shareholders(1)
    
    $
    909
    
    
    $
    21,218Net income per common share(2)
    
    $
    0.01
    
    
    $
    0.34Accrued dividends, preferred stock
    
    $
    2,415
    
    
    $
    1,864Preferred stock exchange premium, net
    
    $
    
    
    
    $
    (26,585
    )Book value per common share
    
    $
    4.00
    
    
    $
    7.58Preferred shares outstanding at end of period
    
    
    5,811,391
    
    
    
    5,811,391Weighted average common shares outstanding
    
    
    127,293,756
    
    
    
    62,528,221Common shares outstanding at end of period
    
    
    127,293,756
    
    
    
    67,283,370Selected Balance Sheet Data at Period End:Cash and cash equivalents
    
    $
    486,525
    
    
    $
    360,962Total investment securities(3)
    
    
    1,461,392
    
    
    
    2,143,936Total loans, net(4)
    
    
    5,724,271
    
    
    
    5,693,774Allowance for loan and lease losses (ALLL)
    
    
    120,204
    
    
    
    147,481Servicing assets, net
    
    
    116,299
    
    
    
    118,236Total assets
    
    
    8,464,096
    
    
    
    9,712,888Deposits
    
    
    4,486,248
    
    
    
    4,586,209Total borrowings
    
    
    2,853,274
    
    
    
    3,981,122Total liabilities
    
    
    7,603,391
    
    
    
    8,850,537Preferred equity
    
    
    352,082
    
    
    
    352,082Common equity
    
    
    508,623
    
    
    
    510,269Total stockholders equity
    
    
    860,705
    
    
    
    862,351Selected Average Balance Sheet Data for Period End: (5)Total investment securities
    
    $
    1,588,310
    
    
    $
    2,925,437Total loans(4)
    
    
    5,865,592
    
    
    
    5,839,194Total interest-earning assets
    
    
    7,851,951
    
    
    
    9,503,734Total assets
    
    
    8,530,595
    
    
    
    10,192,660Deposits
    
    
    4,535,820
    
    
    
    4,652,603Total borrowings
    
    
    2,848,369
    
    
    
    4,309,017Total interest-bearing liabilities
    
    
    7,115,169
    
    
    
    8,717,845Preferred equity
    
    
    352,082
    
    
    
    409,797Common equity
    
    
    507,730
    
    
    
    467,237Total stockholders equity
    
    
    859,812
    
    
    
    877,034Operating Data:Loan production
    
    $
    350,091
    
    
    $
    289,055Loan servicing portfolio (6)
    
    
    8,135,127
    
    
    
    8,547,261
 61




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Quarters EndedMarch 31,(In thousands, except for share data)
    
    2011
    
    
    2010Selected Financial Ratios:Performance:Net interest margin
    
    
    2.23
    %
    
    
    1.87
    %Return on average assets
    
    
    0.16
    %
    
    
    (0.14
    )%Return on average common equity
    
    
    0.73
    %
    
    
    (4.66
    )%Capital:Leverage ratio
    
    
    8.87
    %
    
    
    8.43
    %Tier 1 risk-based capital ratio
    
    
    13.54
    %
    
    
    13.83
    %Total risk-based capital ratio
    
    
    14.80
    %
    
    
    15.09
    %Asset quality:Total NPAs as percentage of the loan portfolio, net, and other real estate owned
(OREO) (excluding GNMA defaulted loans)
    
    
    13.71
    %
    
    
    17.84
    %Total NPAs as percentage of consolidated total assets
    
    
    9.19
    %
    
    
    10.34
    %Non-performing loans to total loans (excluding GNMA defaulted loans and FHA/VA
guaranteed loans)
    
    
    10.36
    %
    
    
    15.87
    %ALLL as a percentage of loans receivable outstanding, at end of period
    
    
    2.17
    %
    
    
    2.68
    %ALLL to period-end loans receivable (excluding FHA/VA guaranteed loans and loans
on savings deposits)
    
    
    2.24
    %
    
    
    2.76
    %ALLL plus partial charge-offs and discounts to loans receivable (excluding FHA/VA
guaranteed loans and loans on savings deposits)
    
    
    3.83
    %
    
    
    3.58
    %ALLL to non-performing loans (excluding NPLs held for sale)
    
    
    21.11
    %
    
    
    16.99
    %ALLL plus partial charge-offs and discounts to non-performing loans (excluding
NPLs held for sale)
    
    
    36.09
    %
    
    
    22.21
    %ALLL to net charge-offs on an annualized basis
    
    
    490.88
    %
    
    
    504.09
    %Provision for loan and lease losses to net charge-offs
    
    
    42.89
    %
    
    
    192.97
    %Net charge-offs to average loan receivable outstanding
    
    
    0.11
    %
    
    
    0.13
    %Recoveries to charge-offs
    
    
    6.15
    %
    
    
    5.70
    %Other ratios:Average common equity to average assets
    
    
    5.95
    %
    
    
    4.58
    %Average total equity to average assets
    
    
    10.08
    %
    
    
    8.60
    %Tier 1 common equity to risk-weighted assets
    
    
    7.15
    %
    
    
    8.16
    %
 
 (1)
    
    For the quarter ended March 31, 2010, includes $26.6 million related to the
net effect of the conversion of preferred stock during the period indicated.(2)
    
    For the quarters ended March 31, 2011 and 2010, net income per common share
represents the basic and diluted income per common share, respectively.(3)
    
    Excludes the FHLB stock, at cost.(4)
    
    Includes loans held for sale.(5)
    
    Average balances are computed on a daily basis.(6)
    
    Represents the total portfolio of loans serviced for third parties. Excludes
$4.3 billion and $4.4 billion of mortgage loans owned by Doral Financial at March 31, 2011 and
2010, respectively. 62




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CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
  RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 2011 AND 2010
 NET INTEREST INCOME
   First Quarter 2011 vs. First Quarter 2010
  63




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64




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Table B  Average Balance Sheet and Summary of Net Interest Income
 Quarters Ended March 31,2011
    
    
    2010Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/RateASSETS:Interest-earning assets:Loans:Consumer:Residential(1)
    
    $
    4,007,381
    
    
    $
    54,232
    
    
    
    5.49
    %
    
    $
    4,099,587
    
    
    $
    60,866
    
    
    
    6.02
    %Lease financing receivables
    
    
    4,296
    
    
    
    75
    
    
    
    7.11
    %
    
    
    11,652
    
    
    
    106
    
    
    
    3.70
    %Consumer
    
    
    52,318
    
    
    
    1,841
    
    
    
    14.27
    %
    
    
    71,550
    
    
    
    1,900
    
    
    
    10.77
    %4,063,995
    
    
    
    56,148
    
    
    
    5.60
    %
    
    
    4,182,789
    
    
    
    62,872
    
    
    
    6.10
    %Commercial:Commercial real estate
    
    
    692,062
    
    
    
    8,268
    
    
    
    4.84
    %
    
    
    772,694
    
    
    
    9,874
    
    
    
    5.18
    %Commercial and industrial
    
    
    650,243
    
    
    
    10,700
    
    
    
    6.67
    %
    
    
    336,481
    
    
    
    4,854
    
    
    
    5.85
    %Construction and land
    
    
    459,292
    
    
    
    4,949
    
    
    
    4.37
    %
    
    
    547,230
    
    
    
    3,833
    
    
    
    2.84
    %1,801,597
    
    
    
    23,917
    
    
    
    5.38
    %
    
    
    1,656,405
    
    
    
    18,561
    
    
    
    4.54
    %Total loans(2)
    
    
    5,865,592
    
    
    
    80,065
    
    
    
    5.54
    %
    
    
    5,839,194
    
    
    
    81,433
    
    
    
    5.66
    %Mortgage-backed securities
    
    
    1,463,807
    
    
    
    11,056
    
    
    
    3.06
    %
    
    
    2,796,484
    
    
    
    23,247
    
    
    
    3.37
    %Interest-only strips (IOs)
    
    
    43,542
    
    
    
    1,470
    
    
    
    13.69
    %
    
    
    45,703
    
    
    
    1,543
    
    
    
    13.69
    %Investment securities
    
    
    80,961
    
    
    
    99
    
    
    
    0.50
    %
    
    
    83,250
    
    
    
    865
    
    
    
    4.21
    %Other interest-earning assets
    
    
    398,049
    
    
    
    1,301
    
    
    
    1.33
    %
    
    
    739,103
    
    
    
    2,140
    
    
    
    1.17
    %Total interest-earning
assets/interest income
    
    
    7,851,951
    
    
    $
    93,991
    
    
    
    4.85
    %
    
    
    9,503,734
    
    
    $
    109,228
    
    
    
    4.66
    %Total non-interest-earning assets
    
    
    678,644
    
    
    
    
    
    
    
    
    
    
    
    688,926Total assets
    
    $
    8,530,595
    
    
    
    
    
    
    
    
    
    
    $
    10,192,660LIABILITIES AND STOCKHOLDERS EQUITY:Interest-bearing liabilities:Deposits:Interest bearing deposits
    
    $
    1,978,639
    
    
    $
    7,868
    
    
    
    1.61
    %
    
    $
    1,624,154
    
    
    $
    7,836
    
    
    
    1.96
    %Brokered CDs
    
    
    2,288,161
    
    
    
    19,031
    
    
    
    3.37
    %
    
    
    2,784,674
    
    
    
    18,864
    
    
    
    2.75
    %4,266,800
    
    
    
    26,899
    
    
    
    2.56
    %
    
    
    4,408,828
    
    
    
    26,700
    
    
    
    2.46
    %Repurchase agreements
    
    
    1,176,800
    
    
    
    9,120
    
    
    
    3.14
    %
    
    
    2,203,245
    
    
    
    18,024
    
    
    
    3.32
    %Advances from FHLB
    
    
    856,538
    
    
    
    6,608
    
    
    
    3.13
    %
    
    
    1,484,587
    
    
    
    13,973
    
    
    
    3.82
    %Other short-term borrowings
    
    
    
    
    
    
    
    
    
    
    
%
    
    
    16,556
    
    
    
    11
    
    
    
    0.27
    %Loans payable
    
    
    301,640
    
    
    
    1,542
    
    
    
    2.07
    %
    
    
    334,317
    
    
    
    1,649
    
    
    
    2.00
    %Notes payable
    
    
    513,391
    
    
    
    6,652
    
    
    
    5.18
    %
    
    
    270,312
    
    
    
    5,110
    
    
    
    7.67
    %Total interest-bearing
liabilities/interest expense
    
    
    7,115,169
    
    
    $
    50,821
    
    
    
    2.90
    %
    
    
    8,717,845
    
    
    $
    65,467
    
    
    
    3.05
    %Non-interest bearing deposits
    
    
    269,020
    
    
    
    
    
    
    
    
    
    
    
    243,775Other non-interest bearing liabilities
    
    
    286,594
    
    
    
    
    
    
    
    
    
    
    
    354,006Total non-interest-bearing liabilities
    
    
    555,614
    
    
    
    
    
    
    
    
    
    
    
    597,781Total liabilities
    
    
    7,670,783
    
    
    
    
    
    
    
    
    
    
    
    9,315,626Stockholders equity
    
    
    859,812
    
    
    
    
    
    
    
    
    
    
    
    877,034Total liabilities and stockholders equity
    
    $
    8,530,595
    
    
    
    
    
    
    
    
    
    
    $
    10,192,660Net interest-earning assets
    
    $
    736,782
    
    
    
    
    
    
    
    
    
    
    $
    785,889Net interest income on a non-taxable equivalent basis
    
    
    
    
    
    $
    43,170
    
    
    
    
    
    
    
    
    
    
    $
    43,761Interest rate spread(3)
    
    
    
    
    
    
    
    
    
    
    1.95
    %
    
    
    
    
    
    
    
    
    
    
    1.61
    %Interest rate margin(4)
    
    
    
    
    
    
    
    
    
    
    2.23
    %
    
    
    
    
    
    
    
    
    
    
    1.87
    %Net interest-earning assets ratio(5)
    
    
    
    
    
    
    
    
    
    
    110.36
    %
    
    
    
    
    
    
    
    
    
    
    109.01
    %
 
 (1)
    
    Average loan balances include the average balance of non-accruing loans, on which
interest income is recognized when collected. Also, includes the average balance of GNMA
defaulted loans for which the Company has an unconditional buy-back option.(2)
    
    Interest income on loans includes $56,000 and $0.2 million for the quarters ended
March 31, 2011 and 2010, respectively, of income from prepayment penalties related to the
Companys loan portfolio.(3)
    
    Interest rate spread represents the difference between Doral Financials
weighted-average yield on interest-earning assets and the weighted-average yield on interest
bearing liabilities.(4)
    
    Interest rate margin represents net interest income on an annualized basis as a
percentage of average interest-earning assets.(5)
    
    Net interest-earning assets ratio represents average interest-earning assets as a
percentage of average interest-bearing liabilities. 65




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Table C  Net Interest Income Variance Analysis
 Quarter Ended March 31,2011 Compared to 2010Increase (Decrease) Due To:(In thousands)
    
    Volume
    
    
    Rate
    
    
    TotalInterest Income VarianceLoans
    
    $
    100
    
    
    $
    (1,468
    )
    
    $
    (1,368
    )Mortgage-backed securities
    
    
    (17,648
    )
    
    
    5,457
    
    
    
    (12,191
    )Interest-only strips
    
    
    (73
    )
    
    
    
    
    
    
    (73
    )Investment securities
    
    
    (40
    )
    
    
    (726
    )
    
    
    (766
    )Other interest-earning assets
    
    
    (1,894
    )
    
    
    1,055
    
    
    
    (839
    )Total Interest Income Variance
    
    $
    (19,555
    )
    
    $
    4,318
    
    
    $
    (15,237
    )Interest Expense VarianceDeposits
    
    $
    (919
    )
    
    $
    1,118
    
    
    $
    199Repurchase agreements
    
    
    (8,402
    )
    
    
    (502
    )
    
    
    (8,904
    )Advances from FHLB
    
    
    (5,437
    )
    
    
    (1,928
    )
    
    
    (7,365
    )Other short-term borrowings
    
    
    (6
    )
    
    
    (5
    )
    
    
    (11
    )Loans payable
    
    
    (173
    )
    
    
    66
    
    
    
    (107
    )Notes payable
    
    
    3,381
    
    
    
    (1,839
    )
    
    
    1,542Total Interest Expense Variance
    
    $
    (11,556
    )
    
    $
    (3,090
    )
    
    $
    (14,646
    )Net Interest Income Variance
    
    $
    (7,999
    )
    
    $
    7,408
    
    
    $
    (591
    )
 PROVISION FOR LOAN AND LEASE LOSSES
   66




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67




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NON-INTEREST INCOME
 Table D
 Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010
    
    
    VarianceNet other-than-temporary impairment losses
    
    $
    
    
    
    $
    (13,259
    )
    
    $
    13,259Net gain on mortgage loan sales and fees
    
    
    2,520
    
    
    
    2,566
    
    
    
    (46
    )Net gain on securities held for trading
    
    
    3,022
    
    
    
    785
    
    
    
    2,237(Loss) gain on IO valuation
    
    
    (451
    )
    
    
    659
    
    
    
    (1,110
    )(Loss) gain on MSR economic hedge
    
    
    (523
    )
    
    
    1,828
    
    
    
    (2,351
    )Loss on derivatives
    
    
    (113
    )
    
    
    (1,498
    )
    
    
    1,385Net gain on trading activities
    
    
    1,935
    
    
    
    1,774
    
    
    
    161Net gain on investment securities
    
    
    2,853
    
    
    
    26,414
    
    
    
    (23,561
    )Loss on early repayment of debt
    
    
    
    
    
    
    (476
    )
    
    
    476Servicing income:Servicing fees
    
    
    7,019
    
    
    
    7,110
    
    
    
    (91
    )Late charges
    
    
    1,767
    
    
    
    2,095
    
    
    
    (328
    )Prepayment penalties
    
    
    644
    
    
    
    (9
    )
    
    
    653Other servicing fees
    
    
    159
    
    
    
    234
    
    
    
    (75
    )Interest loss on serial notes and others
    
    
    (549
    )
    
    
    (682
    )
    
    
    133Mark-to-market adjustment of servicing assets
    
    
    (140
    )
    
    
    (2,004
    )
    
    
    1,864Total servicing income
    
    
    8,900
    
    
    
    6,744
    
    
    
    2,156Commissions, fees and other income:Retail banking fees
    
    
    7,007
    
    
    
    7,143
    
    
    
    (136
    )Insurance agency commissions
    
    
    2,223
    
    
    
    2,380
    
    
    
    (157
    )Other income
    
    
    3,186
    
    
    
    3,298
    
    
    
    (112
    )Total commissions, fees and other income
    
    
    12,416
    
    
    
    12,821
    
    
    
    (405
    )Total non-interest income
    
    $
    28,624
    
    
    $
    36,584
    
    
    $
    (7,960
    )
 First Quarter 2011 vs. First Quarter 2010
 
    
    An improvement of $13.3 million due to the recognition of an OTTI loss in the first
quarter of 2010, while there was no impairment recognized in 2011.
    
    Gain on sale of investment securities reflected a reduction of $23.6 million as the
first quarter of 2010 included a gain of $26.4 million related to the sale of $1.2 billion
of MBS and other debt securities while the first quarter of 2011 reflected a gain on
security sales of $2.9 million.
    
    Servicing income increased by $2.2 million due primarily to an improvement in the mark to market
adjustment of the MSR of $1.9 million.
 68




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NON-INTEREST EXPENSE
 Table E
 Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010
    
    
    VarianceCompensation and employee benefits
    
    $
    18,293
    
    
    $
    16,435
    
    
    $
    1,858Professional services
    
    
    8,637
    
    
    
    13,792
    
    
    
    (5,155
    )FDIC insurance expense
    
    
    4,356
    
    
    
    5,191
    
    
    
    (835
    )Communication expenses
    
    
    4,004
    
    
    
    3,944
    
    
    
    60Occupancy expenses
    
    
    4,340
    
    
    
    3,981
    
    
    
    359EDP expenses
    
    
    3,275
    
    
    
    3,779
    
    
    
    (504
    )Depreciation and amortization
    
    
    3,203
    
    
    
    3,147
    
    
    
    56Taxes, other than payroll and income taxes
    
    
    2,876
    
    
    
    2,564
    
    
    
    312Corporate insurance
    
    
    1,570
    
    
    
    1,262
    
    
    
    308Advertising
    
    
    998
    
    
    
    1,498
    
    
    
    (500
    )Office expenses
    
    
    990
    
    
    
    1,285
    
    
    
    (295
    )Other
    
    
    4,187
    
    
    
    4,029
    
    
    
    15856,729
    
    
    
    60,907
    
    
    
    (4,178
    )OREO expenses and other reserves:Foreclosure expenses
    
    
    1,370
    
    
    
    449
    
    
    
    921Provision for interest advances
    
    
    253
    
    
    
    271
    
    
    
    (18
    )Recourse provision
    
    
    241
    
    
    
    367
    
    
    
    (126
    )Provision for escrow advances
    
    
    228
    
    
    
    807
    
    
    
    (579
    )OREO lower of cost or market adjustments
    
    
    768
    
    
    
    3,914
    
    
    
    (3,146
    )Loss (gain) on sales of OREO
    
    
    210
    
    
    
    (17
    )
    
    
    227OREO other related expenses
    
    
    985
    
    
    
    700
    
    
    
    2854,055
    
    
    
    6,491
    
    
    
    (2,436
    )Total non-interest expense
    
    $
    60,784
    
    
    $
    67,398
    
    
    $
    (6,614
    )
 First Quarter 2011 vs. First Quarter 2010
 
    
    Higher compensation and benefits of $1.9 million comprised of higher severance costs of
$0.8 million, higher payroll tax and fringe benefits of $0.4 million and higher incentive
and stock compensation of $0.7 million.
    
    Lower professional services of $5.2 million due to a
reduction in legal fees of $3.8 million and
lower other professional services of $1.2 million due to costs incurred in 2010 to
facilitate the Companys preferred stock exchanges and the Companys unsuccessful effort to
acquire failed banks in an FDIC assisted transaction,.
    
    Lower FDIC insurance expense of $0.8 million.
    
    OREO expenses and other reserves declined $2.4 million primarily driven by a decrease of $3.1
million in OREO lower of cost or market adjustments resulting from a new disposition
strategy during 2010.
 INCOME TAXES
  69




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##### Table of Contents



Quarters EndedMarch 31,(In thousands)
    
    2011
    
    
    2010Current income tax expense  United States
    
    $
    2,373
    
    
    $
    275Deferred income tax expense:Puerto Rico
    
    
    2,670
    
    
    
    1,787United States
    
    
    53
    
    
    
    467Total deferred income tax expense
    
    
    2,723
    
    
    
    2,254Total income tax expense
    
    $
    5,096
    
    
    $
    2,529
    BALANCE SHEET AND OPERATING DATA ANALYSIS
 LOAN PRODUCTION
  70




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##### Table of Contents



Table F  Loan Production
 Quarters Ended March 31,2011
    
    
    2010(Dollars in thousands, except for average initial loanbalance)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalFHA/VA mortgage loansNumber of loans
    
    
    384
    
    
    
    
    
    
    
    384
    
    
    
    382
    
    
    
    
    
    
    
    382Volume of loans
    
    $
    49,422
    
    
    $
    
    
    
    $
    49,422
    
    
    $
    51,487
    
    
    $
    
    
    
    $
    51,487Percent of total volume
    
    
    14
    %
    
    
    
    %
    
    
    14
    %
    
    
    18
    %
    
    
    
    %
    
    
    18
    %Average initial loan balance
    
    $
    128,703
    
    
    $
    
    
    
    $
    128,703
    
    
    $
    134,783
    
    
    $
    
    
    
    $
    134,783Conventional conforming mortgage loansNumber of loans
    
    
    312
    
    
    
    
    
    
    
    312
    
    
    
    198
    
    
    
    
    
    
    
    198Volume of loans
    
    $
    37,583
    
    
    $
    
    
    
    $
    37,583
    
    
    $
    22,375
    
    
    $
    
    
    
    $
    22,375Percent of total volume
    
    
    11
    %
    
    
    
    %
    
    
    11
    %
    
    
    8
    %
    
    
    
    %
    
    
    8
    %Average initial loan balance
    
    $
    120,458
    
    
    $
    
    
    
    $
    120,458
    
    
    $
    113,005
    
    
    $
    
    
    
    $
    113,005Conventional non-conforming mortgage loans(1)Number of loans
    
    
    227
    
    
    
    
    
    
    
    227
    
    
    
    551
    
    
    
    
    
    
    
    551Volume of loans
    
    $
    37,397
    
    
    $
    
    
    
    $
    37,397
    
    
    $
    93,847
    
    
    $
    
    
    
    $
    93,847Percent of total volume
    
    
    11
    %
    
    
    
    %
    
    
    11
    %
    
    
    32
    %
    
    
    
    %
    
    
    32
    %Average initial loan balance
    
    $
    164,744
    
    
    $
    
    
    
    $
    164,744
    
    
    $
    170,321
    
    
    $
    
    
    
    $
    170,321Construction development loansNumber of loans
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Volume of loans
    
    $
    
    
    
    $
    3,600
    
    
    $
    3,600
    
    
    $
    
    
    
    $
    
    
    
    $
    Percent of total volume
    
    
    
    %
    
    
    1
    %
    
    
    1
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Average initial loan balance
    
    $
    
    
    
    $
    3,600,000
    
    
    $
    3,600,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Disbursement under existing construction development loansVolume of loans
    
    $
    508
    
    
    $
    1,538
    
    
    $
    2,046
    
    
    $
    2,618
    
    
    $
    273
    
    
    $
    2,891Percent of total volume
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    1
    %
    
    
    
    %
    
    
    1
    %Commercial loans(2)Number of loans
    
    
    8
    
    
    
    52
    
    
    
    60
    
    
    
    9
    
    
    
    71
    
    
    
    80Volume of loans
    
    $
    1,705
    
    
    $
    215,207
    
    
    $
    216,912
    
    
    $
    2,808
    
    
    $
    104,536
    
    
    $
    107,344Percent of total volume
    
    
    1
    %
    
    
    61
    %
    
    
    62
    %
    
    
    1
    %
    
    
    36
    %
    
    
    37
    %Average initial loan balance
    
    $
    213,125
    
    
    $
    4,138,596
    
    
    $
    3,615,200
    
    
    $
    312,000
    
    
    $
    1,472,338
    
    
    $
    1,341,800Consumer loans(2)(3)Number of loans
    
    
    140
    
    
    
    
    
    
    
    140
    
    
    
    97
    
    
    
    
    
    
    
    97Volume of loans
    
    $
    783
    
    
    $
    
    
    
    $
    783
    
    
    $
    661
    
    
    $
    
    
    
    $
    661Percent of total volume
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Average initial loan balance
    
    $
    5,593
    
    
    $
    
    
    
    $
    5,593
    
    
    $
    6,814
    
    
    $
    
    
    
    $
    6,814Other(4)Number of loans
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    4Volume of loans
    
    $
    2,348
    
    
    $
    
    
    
    $
    2,348
    
    
    $
    
    
    
    $
    10,450
    
    
    $
    10,450Percent of total volume
    
    
    1
    %
    
    
    
    %
    
    
    1
    %
    
    
    
    %
    
    
    4
    %
    
    
    4
    %Average initial loan balance
    
    $
    2,348,000
    
    
    $
    
    
    
    $
    2,348,000
    
    
    $
    
    
    
    $
    2,612,500
    
    
    $
    2,612,500Total loansNumber of loans
    
    
    1,072
    
    
    
    53
    
    
    
    1,125
    
    
    
    1,237
    
    
    
    75
    
    
    
    1,312Volume of loans
    
    $
    129,746
    
    
    $
    220,345
    
    
    $
    350,091
    
    
    $
    173,796
    
    
    $
    115,259
    
    
    $
    289,055
 
 (1)
    
    Includes $0.4 million in second mortgages for the quarter ended March 31, 2010.(2)
    
    Commercial and consumer lines of credit are included in the loan production
according to the credit limit approved.(3)
    
    Includes commercial real estate and commercial and industrial loans.(4)
    
    Consists of multifamily loans. 71




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##### Table of Contents



Table G  Loan Origination Sources
 Quarters Ended March 31,2011
    
    
    2010Puerto Rico
    
    
    US
    
    
    Total
    
    
    Puerto Rico
    
    
    US
    
    
    TotalResidential
    
    
    32
    %
    
    
    
    %
    
    
    32
    %
    
    
    51
    %
    
    
    
    %
    
    
    51
    %Wholesale(1)
    
    
    4
    %
    
    
    
    %
    
    
    4
    %
    
    
    7
    %
    
    
    
    %
    
    
    7
    %Housing Developments(2)
    
    
    
    %
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %
    
    
    
    %
    
    
    1
    %Commercial and Industrial
    
    
    
    %
    
    
    62
    %
    
    
    62
    %
    
    
    
    %
    
    
    36
    %
    
    
    36
    %Other(3)
    
    
    1
    %
    
    
    
    %
    
    
    1
    %
    
    
    1
    %
    
    
    4
    %
    
    
    5
    %Total
    
    
    37
    %
    
    
    63
    %
    
    
    100
    %
    
    
    60
    %
    
    
    40
    %
    
    
    100
    %
 
 (1)
    
    Refers to purchases of mortgage loans from other financial institutions and mortgage
lenders.(2)
    
    Includes new construction development loans and the disbursement of existing
construction development loans.(3)
    
    Refers to commercial real estate, consumer and multifamily loans originated through
the banking subsidiaries. MORTGAGE LOAN SERVICING
  72




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##### Table of Contents



Table H  Loans Serviced For Third Parties
 As of March 31,(Dollars in Thousands, Except for Average Size of Loans Serviced)
    
    2011
    
    
    2010Composition of Portfolio Serviced for Third Parties at Period End:GNMA
    
    $
    2,410,088
    
    
    $
    2,313,848FHLMC/FNMA
    
    
    2,801,813
    
    
    
    3,011,320Other conventional mortgage loans(1)(2)
    
    
    2,923,226
    
    
    
    3,222,093Total portfolio serviced for third parties
    
    $
    8,135,127
    
    
    $
    8,547,261Activity of Portfolio Serviced for Third Parties:Beginning servicing portfolio
    
    $
    8,208,060
    
    
    $
    8,655,613Additions to servicing portfolio
    
    
    120,744
    
    
    
    87,854Servicing released due to repurchases
    
    
    (6,258
    )
    
    
    (10,100
    )MSRs sales
    
    
    
    
    
    
    (1,545
    )Run-off(3)
    
    
    (187,419
    )
    
    
    (184,561
    )Ending servicing portfolio
    
    $
    8,135,127
    
    
    $
    8,547,261Selected Data Regarding Mortgage Loans Serviced for Third Parties:Number of loans
    
    
    97,727
    
    
    
    102,207Weighted-average interest rate
    
    
    6.16
    %
    
    
    6.29
    %Weighted-average remaining maturity (months)
    
    
    238
    
    
    
    241Weighted-average gross servicing fee rate
    
    
    0.41
    %
    
    
    0.40
    %Average servicing portfolio(4)
    
    $
    8,171,594
    
    
    $
    8,601,437Principal prepayments
    
    $
    99,961
    
    
    $
    118,357Constant prepayment rate
    
    
    4.66
    %
    
    
    5.22
    %Average size of loans
    
    $
    83,243
    
    
    $
    83,627Servicing assets, net
    
    $
    116,299
    
    
    $
    118,236Mortgage-servicing advances(5)
    
    $
    48,127
    
    
    $
    30,361Delinquent Mortgage Loans and Pending Foreclosures at Period End:60-89 days past due
    
    
    2.57
    %
    
    
    2.64
    %90 days or more past due
    
    
    5.73
    %
    
    
    5.48
    %Total delinquencies excluding foreclosures
    
    
    8.30
    %
    
    
    8.12
    %Foreclosures pending
    
    
    3.33
    %
    
    
    3.36
    %
 
 (1)
    
    Excludes $4.3 billion and $4.4 billion of mortgage loans owned by Doral Financial at
March 31, 2011 and 2010, respectively.(2)
    
    Includes portfolios of $135.8 million and $151.3 million at March 31, 2011 and 2010,
respectively, of delinquent FHA/VA and conventional mortgage loans sold to third parties.(3)
    
    Run-off refers to regular amortization of loans, prepayments and foreclosures.(4)
    
    Excludes the average balance of mortgage loans owned by Doral
Financial of $4.5
billion and $4.4 billion at March 31, 2011 and 2010, respectively.(5)
    
    Includes reserves for possible losses on P&I advances of $9.0 million at both March
31, 2011 and 2010.  73




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Liquidity of the Holding Company
     74




---



##### Table of Contents




    
    changes in short-term borrowings and deposits in the normal course of business;
    
    repayment of certain long-term callable certificate of deposits;
 
    
    sales of securities
    
    early repayment of debt;
    
    adoption of an initiative to lengthen the brokered certificates term to structurally
reduce interest rate sensitivity;
    
    capital contributions to Doral Bank;
    
    suspension of payment of dividends on outstanding preferred stock;
    
    prepayment of FDIC insurance assessments for the years 2010-2012;
    
    repurchase of GNMA defaulted loans in 2010;
    
    inducement on preferred stock conversions;
    
    capital raise of $171.0 million in the second quarter of 2010;
    
    efforts to increase retail deposits in the wake of failed Puerto Rico banks; and
    
    On July 8, 2010, the Company entered into a collateralized loan arrangement in which
$450.0 million of U.S. based commercial loans are funded by a $250.0 million from a third
party paying 3-month LIBOR plus 1.85%, and $200.0 million by Doral. The entity holding the
commercial loans and funding is consolidated by Doral and the third party financing is
reported as a note payable. The third party funding provides an additional source of
liquidity for the Company.
  Liquidity of the Banking Subsidiaries
  Cash Sources and Uses
    75




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##### Table of Contents



Primary Sources of Cash
  Table I  Sources of Borrowings
 As of March 31, 2011
    
    
    As of December 31, 2010Amount
    
    
    Average
    
    
    Amount
    
    
    Average(Dollars in thousands)
    
    Outstanding
    
    
    Rate
    
    
    Outstanding
    
    
    RateDeposits
    
    $
    4,486,248
    
    
    
    1.96
    %
    
    $
    4,618,475
    
    
    
    2.18
    %Repurchase Agreements
    
    
    1,176,800
    
    
    
    3.10
    %
    
    
    1,176,800
    
    
    
    3.10
    %Advances from FHLB
    
    
    865,363
    
    
    
    2.51
    %
    
    
    901,420
    
    
    
    3.49
    %Loans Payable
    
    
    298,598
    
    
    
    6.36
    %
    
    
    304,035
    
    
    
    6.46
    %Notes Payable
    
    
    512,513
    
    
    
    4.90
    %
    
    
    513,958
    
    
    
    4.91
    %
     Table J  Average Deposit Balance
 Quarters EndedMarch 31, 2011Average
    
    
    Average(Dollars in thousands)
    
    Balance
    
    
    RateBrokered certificates of deposits
    
    $
    2,288,161
    
    
    
    3.37
    %Certificates of deposits
    
    
    691,588
    
    
    
    2.18
    %Regular passbook savings
    
    
    405,782
    
    
    
    1.17
    %NOW accounts and other transaction accounts
    
    
    400,932
    
    
    
    1.04
    %Money market accounts
    
    
    480,337
    
    
    
    1.65
    %Total interest-bearing
    
    
    4,266,800
    
    
    
    2.56
    %Non-interest bearing
    
    
    269,020
    
    
    
    
    %Total deposits
    
    $
    4,535,820
    
    
    
    2.41
    %
  Table K  Certificates of Deposit Maturities
 (In thousands)
    
    March 31, 2011Certificates of deposit maturing:Three months or less
    
    $
    336,726Over three through six months
    
    
    242,525Over six through twelve months
    
    
    506,708Over twelve months
    
    
    1,549,224Total
    
    $
    2,635,183
 76




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Other Uses of Cash
    77




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##### Table of Contents



ASSETS AND LIABILITIES
    CAPITAL
  Regulatory Capital Ratios
   Table L  Regulatory Capital Ratios
 As of March 31, 2011Doral
    
    
    Doral
    
    
    DoralFinancial
    
    
    Bank PR
    
    
    Bank USTotal Capital Ratio (Total capital to risk-weighted assets)
    
    
    14.8
    %
    
    
    15.9
    %
    
    
    10.9
    %Tier 1 Capital Ratio (Tier 1 capital to risk-weighted assets)
    
    
    13.5
    %
    
    
    14.6
    %
    
    
    10.6
    %Leverage Ratio(1)
    
    
    8.9
    %
    
    
    8.3
    %
    
    
    6.5
    %
 
 (1)
    
    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 US. 78




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As of December 31, 2010Doral
    
    
    Doral
    
    
    DoralFinancial
    
    
    Bank PR
    
    
    Bank USTotal Capital Ratio (Total capital to risk-weighted assets)
    
    
    14.5
    %
    
    
    15.6
    %
    
    
    11.0
    %Tier 1 Capital Ratio (Tier 1 capital to risk-weighted assets)
    
    
    13.3
    %
    
    
    14.4
    %
    
    
    10.7
    %Leverage Ratio(1)
    
    
    8.6
    %
    
    
    8.0
    %
    
    
    6.5
    %
 
 (1)
    
    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 US.   Legal Proceedings
  Housing and Urban Development Requirements
   FAIR VALUE MEASUREMENTS
   Fair Value Hierarchy
  
    
    Level 1 Valuation is based upon unadjusted quoted prices for identical
instruments traded in active markets.
 79




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##### Table of Contents




    Level 2
    Valuation is based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments in markets that are
not active, and model-based valuation techniques for which all significant assumptions
are observable in the market, or are derived principally from or corroborated by
observable market data, by correlation or by other means.
    Level 3
    Valuation is generated from model-based techniques that use
significant assumptions not observable in the market. These unobservable assumptions
reflect the Companys estimates of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques include use of option pricing
models, discounted cash flow models and similar techniques.
 Determination of Fair Value
     OFF-BALANCE SHEET ACTIVITIES
    80




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Quarter Ended(In thousands)
    
    March 31, 2011Balance at beginning of period
    
    $
    10,264Net charge-offs / termination
    
    
    (628
    )Provision for recourse liability
    
    
    241Balance at end of period
    
    $
    9,877
 CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
  Table M  Contractual Obligations
 Payment Due By PeriodLess Than
    
    
    
    
    
    
    
    After(In thousands)
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsDeposits
    
    $
    4,486,248
    
    
    $
    2,902,861
    
    
    $
    983,399
    
    
    $
    489,181
    
    
    $
    110,807Repurchase agreements(1)(2)
    
    
    1,176,800
    
    
    
    155,000
    
    
    
    962,300
    
    
    
    59,500
    
    
    
    Advances from FHLB(1)
    
    
    865,363
    
    
    
    189,000
    
    
    
    447,982
    
    
    
    228,381
    
    
    
    Loans payable(3)
    
    
    298,598
    
    
    
    31,837
    
    
    
    60,910
    
    
    
    50,750
    
    
    
    155,101Notes payable
    
    
    512,513
    
    
    
    7,715
    
    
    
    45,206
    
    
    
    102,072
    
    
    
    357,520Other liabilities
    
    
    111,209
    
    
    
    111,209
    
    
    
    
    
    
    
    
    
    
    
    Non-cancelable operating leases
    
    
    52,731
    
    
    
    6,539
    
    
    
    11,783
    
    
    
    10,308
    
    
    
    24,101Total Contractual Cash Obligations
    
    $
    7,503,462
    
    
    $
    3,404,161
    
    
    $
    2,511,580
    
    
    $
    940,192
    
    
    $
    647,529
 
 (1)
    
    Amounts included in the table above do not include interest.(2)
    
    Includes $100.0 million of a repurchase agreement with a fixed rate of 2.98% and which the lender
has the right to call before its contractual maturity. The repurchase agreement is included in the less-than-one year category in the above table but has an
actual contractual maturity of February 2014. Was included on
the first call date basis because increases in interest rates over the average rate of the
Companys borrowings may induce the lender to exercise its right.(3)
    
    Consist of secured borrowings with local financial institutions, collateralized by
residential mortgage loans at variable interest rates tied to 3-month LIBOR. These loans are
not subject to scheduled payments, but are required to be repaid according to the regular
amortization and prepayments of the underlying mortgage loans. For purposes of the table
above, the Company used a CPR of 8.8% to estimate the repayments.  81




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Table N  Other Commercial Commitments (1)
 Amount of Commitment Expiration Per PeriodTotalAmount
    
    
    Less Than
    
    
    
    
    
    
    
    
    
    
    After(In thousands)
    
    Committed
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsCommitments to extend credit
    
    $
    147,369
    
    
    $
    94,717
    
    
    $
    23,598
    
    
    $
    3,870
    
    
    $
    25,184Commitments to sell loans
    
    
    113,999
    
    
    
    113,999
    
    
    
    
    
    
    
    
    
    
    
    Performance standby letters of credit
    
    
    25
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    Maximum contractual recourse exposure
    
    
    670,899
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    670,899Total
    
    $
    932,292
    
    
    $
    208,741
    
    
    $
    23,598
    
    
    $
    3,870
    
    
    $
    696,083
 
 (1)
    
    Refer to Off-Balance Sheet Activities above for additional information regarding
other commercial commitments of the Company. RISK MANAGEMENT
  Interest Rate and Market Risk Management
   82




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##### Table of Contents




    
    developing the Companys asset/liability management and liquidity strategy;
    
    establishing and monitoring of interest rate, pricing and liquidity risk limits to
ensure compliance with the Companys policies;
    
    overseeing product pricing and volume objectives for banking and treasury activities;
and
    
    overseeing the maintenance of management information systems that supply relevant
information for the ALCO to fulfill its responsibilities as it relates to asset/liability
management.
 Risk Identification Measurement and Control
   
    
    Net Interest Income Sensitivity.Refers to the relationship between market interest
rates and net interest income due to the maturity mismatches and repricing characteristics
of Doral Financials interest-earning assets, interest-bearing liabilities and off-balance
sheet positions. To measure net interest income exposure to changes in market interest
rates, the Company uses earnings simulation techniques. These simulation techniques allow
for the forecasting of net interest income and expense under various rate scenarios for the
measurement of interest rate risk exposures of Doral Financial. Primary scenarios include
instantaneous parallel and non-parallel rate shocks. Net interest income sensitivity is
measured for time horizons ranging from twelve to sixty months and as such, serves as a
measure of short to medium term earnings risk. The basic underlying assumptions used in net
interest income simulations are: (i) the Company maintains a static balance sheet; (ii)
full reinvestment of funds in similar product/instruments with similar maturity and
repricing characteristics; (iii) spread assumed constant; (iv) prepayment rates on
mortgages and mortgage related securities are modeled using multi-factor prepayment model;
(v) non-maturity deposit decay and price elasticity assumptions are incorporated, and (vi)
evaluation of embedded options is also taken into consideration. To complement and broaden
the analysis of earnings at risk the Company also performs earning simulations for longer
time horizons.
    
    Market Value of Equity Sensitivity.Used to capture and measure the risks associated
with longer-term maturity and re-pricing mismatches. Doral Financial uses value simulation
techniques for all financial components of the Statement of Financial Condition. Valuation
techniques include static cash flows analyses, stochastic models to qualify value of
embedded options and prepayment modeling. To complement and broaden the risk analysis, the
Company uses duration and convexity analysis to measure the sensitivity of the market value
of equity to changes in interest rates. Duration measures the linear change in market value
of equity caused by changes in interest rates, while, convexity measures the asymmetric
changes in market value of equity caused by changes in interest rates due to the presence
of options. The
 83




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analysis of duration and convexity combined provide a better understanding of the sensitivity
of the market value of equity to changes in interest rates.
 
    
    Effective Duration of Equity.The effective duration of equity is a broad measure of
the impact of interest rate changes on Doral Financials economic capital. The measure
summarizes the net sensitivity of assets and liabilities, adjusted for off-balance sheet
positions.
 Interest Rate Risk Management Strategy
  Net Interest Income Risk.
 Market Value of Equity
 Duration Risk
 Convexity Risk
 Hedging related to Mortgage Banking Activities
  
    
    The valuation of MSRs are recorded in earnings immediately within the accounting period
in which the changes in value occur, whereas the impact of changes in interest rates are
reflected in originations with a time lag and effects on servicing fee income occurs over
time. Thus, even when mortgage activities could be protected from adverse changes in
interest rates over a period of time (on a cumulative basis) they may display large
variations in income from period to period.
    
    The degree to which the natural hedge associated to mortgage banking (i.e.
originating and servicing) offsets changes in servicing asset valuations may be imperfect,
as it may vary over time.
 84




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##### Table of Contents




    
    Origination volumes, the valuation of servicing assets, economic hedging activities and
other related costs are impacted by multiple factors, which include, changes in the mix of
new business, changes in the term structure of interest rates, changes in mortgage spreads
(mortgage basis) to other rate benchmarks, and rate volatility, among others. Interrelation
of all these factors is hard to predict and, as such, the ability to perfectly hedge their
effects is limited.
 Doral Financials Risk Profile
      As of March 31, 2011
    
    Market Value of Equity Risk
    
    
    Net Interest Income Risk (1)+ 100 BPS
    
    
    (8.9)
    %
    
    
    (3.5)
    %- 100 BPS
    
    
    4.1
    %
    
    
    0.8
    %
 As of December 31, 2010
    
    Market Value of Equity Risk
    
    
    Net Interest Income Risk(1)+ 100 BPS
    
    
    (8.5)
    %
    
    
    (0.9)
    %- 100 BPS
    
    
    4.7
    %
    
    
    (0.1)
    %
 
 (1)
    
    Based on 12-month forward change in net interest income.   85




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March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    Change in Fair
    
    
    Change in FairChange in Interest
    
    Value of Available
    
    
    Value of AvailableRates (Basis Points)
    
    For Sale Securities
    
    
    For Sale Securities+200
    
    $
    (106,306
    )
    
    $
    (180,474
    )+100
    
    
    (48,536
    )
    
    
    (47,474
    )Base
    
    
    
    
    
    
    +100
    
    
    18,288
    
    
    
    21,917+200
    
    
    35,905
    
    
    
    34,416
 Derivatives
  Table O  Interest Rate Caps
 (Dollars in thousands)Notional
    
    Maturity
    
    
    
    
    
    
    
    FairAmount
    
    Date
    
    Entitled Payment Conditions
    
    Premium Paid
    
    Value$
    15,000
    
    September, 2011
    
    1-month LIBOR over 5.50%
    
    $
    134
    
    
    $
    15,000
    
    September, 2012
    
    1-month LIBOR over 6.00%
    
    
    143
    
    
    
    15,000
    
    October, 2011
    
    1-month LIBOR over 5.00%
    
    
    172
    
    
    
    15,000
    
    October, 2012
    
    1-month LIBOR over 5.50%
    
    
    182
    
    
    
    50,000
    
    November, 2012
    
    1-month LIBOR over 6.50%
    
    
    228
    
    
    
    150,000
    
    November, 2012
    
    1-month LIBOR over 5.50%
    
    
    545
    
    
    
    150,000
    
    November, 2012
    
    1-month LIBOR over 6.00%
    
    
    350
    
    
    
    1$
    210,000
    
    
    
    
    
    $
    1,754
    
    
    $
    3
  86




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Table P  Interest Rate Swaps
 (Dollars in thousands)Notional
    
    Maturity
    
    
    
    
    
    
    
    
    
    FairAmount
    
    Date
    
    Pay Fixed Rate
    
    
    Receive Floating Rate
    
    
    ValueCash Flow Hedge$
    3,000
    
    September, 2011
    
    
    4.69
    %
    
    1-month LIBOR plus 0.02%
    
    
    $
    (68
    )6,000
    
    October, 2011
    
    
    4.51
    %
    
    1-month LIBOR plus 0.05%
    

    
    (150
    )5,000
    
    October, 2012
    
    
    4.62
    %
    
    1-month LIBOR plus 0.05%
    
    
    
    (315
    )15,000
    
    November, 2011
    
    
    4.55
    %
    
    1-month LIBOR plus 0.02%
    
    
    
    (433
    )45,000
    
    November, 2012
    
    
    4.62
    %
    
    1-month LIBOR plus 0.02%
    
    
    
    (2,980
    )$
    74,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (3,946
    )
 Freestanding Derivatives.
 Derivatives  Hedge Accounting.
  Table Q  Derivatives Positions
 March 31, 2011
    
    
    December 31, 2010Notional
    
    
    Fair
    
    
    Notional
    
    
    Fair(In thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueCash Flow HedgesInterest rate swaps
    
    $
    74,000
    
    
    $
    (3,946
    )
    
    $
    74,000
    
    
    $
    (4,677
    )Other DerivativesInterest rate caps
    
    
    210,000
    
    
    
    3
    
    
    
    210,000
    
    
    
    13Forward contracts
    
    
    55,000
    
    
    
    110
    
    
    
    100,000
    
    
    
    (741
    )265,000
    
    
    
    113
    
    
    
    310,000
    
    
    
    (728
    )$
    339,000
    
    
    $
    (3,833
    )
    
    $
    384,000
    
    
    $
    (5,405
    )
  Table R  Fair Value Reconciliation
 Quarter Ended(In thousands)
    
    March 31, 2011Fair value of contracts outstanding at the beginning of the period
    
    $
    (728
    )Changes in fair values during the period
    
    
    841Fair value of contracts outstanding at the end of the period
    
    $
    113
 87




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Table S  Sources of Fair Value
 (In thousands)
    
    Payment Due by PeriodMaturity
    
    
    
    
    
    
    
    
    
    
    Maturityless than
    
    
    Maturity
    
    
    Maturity
    
    
    in excess
    
    
    Total FairAs of March 31, 2011
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    of 5 Years
    
    
    ValuePrices actively quoted
    
    $
    110
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    110Prices provided by internal sources
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3$
    110
    
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    113
   Table T  Derivative Counterparty Credit Exposure
 (Dollars in thousands)
    
    March 31, 2011Weighted AverageContractualNumber of
    
    
    
    
    
    
    Total Exposure at
    
    
    
    
    
    
    
    
    
    
    Maturity (inRating (1)
    
    Counterparties (2)
    
    
    Notional
    
    
    Fair Value (3)
    
    
    Negative Fair Values
    
    
    Total Fair Value
    
    
    years)AA-
    
    
    1
    
    
    $
    180,000
    
    
    $
    3
    
    
    $
    
    
    
    $
    3
    
    
    
    1.52A+
    
    
    1
    
    
    
    104,000
    
    
    
    
    
    
    
    (3,946
    )
    
    
    (3,946
    )
    
    
    1.23A
    
    
    2
    
    
    
    55,000
    
    
    
    237
    
    
    
    (127
    )
    
    
    110
    
    
    
    0.05Total Derivatives
    
    
    4
    
    
    $
    339,000
    
    
    $
    240
    
    
    $
    (4,073
    )
    
    $
    (3,833
    )
    
    
    1.19
 (Dollars in thousands)
    
    December 31, 2010Weighted AverageContractualNumber of
    
    
    
    
    
    
    Total Exposure at
    
    
    
    
    
    
    
    
    
    
    Maturity (inRating (1)
    
    Counterparties (2)
    
    
    Notional
    
    
    Fair Value (3)
    
    
    Negative Fair Values
    
    
    Total Fair Value
    
    
    years)AA-
    
    
    1
    
    
    $
    180,000
    
    
    $
    12
    
    
    $
    
    
    
    $
    12
    
    
    
    1.76A+
    
    
    1
    
    
    
    104,000
    
    
    
    1
    
    
    
    (4,677
    )
    
    
    (4,676
    )
    
    
    1.47A
    
    
    2
    
    
    
    100,000
    
    
    
    95
    
    
    
    (836
    )
    
    
    (741
    )
    
    
    0.06Total Derivatives
    
    
    4
    
    
    $
    384,000
    
    
    $
    108
    
    
    $
    (5,513
    )
    
    $
    (5,405
    )
    
    
    1.24
 
 (1)
    
    Based on the S&P Long-Term Issuer Credit Ratings.(2)
    
    Based on legal entities. Affiliated legal entities are reported separately.(3)
    
    For each counterparty, this amount includes derivatives with a positive fair value
including the related accrued interest receivable/payable (net.) Credit Risk
   88




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Loan Modifications and Troubled Debt Restructurings (TDRs)
  89




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90




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Table U  TDRs
 March 31, 2011
    
    
    December 31, 201090 days and over
    
    
    
    
    
    
    90 days and over(In thousands)
    
    TDRs
    
    
    delinquency
    
    
    TDRs
    
    
    delinquencyConsumer modificationsResidential mortgage
    
    $
    725,614
    
    
    $
    62,824
    
    
    $
    685,429
    
    
    $
    72,585Other consumer
    
    
    1,100
    
    
    
    81
    
    
    
    1,257
    
    
    
    75Total consumer
    
    
    726,714
    
    
    
    62,905
    
    
    
    686,686
    
    
    
    72,660CommercialCommercial real estate
    
    $
    73,215
    
    
    $
    26,618
    
    
    $
    71,501
    
    
    $
    31,314Commercial and industrial
    
    
    6,078
    
    
    
    238
    
    
    
    5,568
    
    
    
    71Construction and land
    
    
    86,672
    
    
    
    27,749
    
    
    
    78,847
    
    
    
    36,438Total commercial
    
    
    165,965
    
    
    
    54,605
    
    
    
    155,916
    
    
    
    67,823Total TDRs
    
    $
    892,679
    
    
    $
    117,510
    
    
    $
    842,602
    
    
    $
    140,483
  90 days and over
    
    
    Percentage of amountYear
    
    Remaining UPB of
    
    
    delinquent at
    
    
    restructuredrestructured
    
    restructured loans
    
    
    March 31, 2011
    
    
    in year past due2007
    
    $
    3,875
    
    
    $
    315
    
    
    
    8.0
    %2008
    
    
    46,634
    
    
    
    12,245
    
    
    
    26.0
    %2009
    
    
    140,349
    
    
    
    23,991
    
    
    
    17.0
    %2010
    
    
    451,884
    
    
    
    24,399
    
    
    
    5.0
    %2011
    
    
    82,872
    
    
    
    1,874
    
    
    
    2.0
    %$
    725,614
    
    
    $
    62,824
    
    
    
    9.0
    %
 Non-performing
Assets
    91




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Table V  Non-performing assets
 March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalNon-performing consumer, excluding FHA/VA(1)Residential mortgage
    
    $
    253,172
    
    
    $
    1,770
    
    
    $
    254,942
    
    
    $
    278,675
    
    
    $
    2,166
    
    
    $
    280,841Lease financing receivables
    
    
    311
    
    
    
    
    
    
    
    311
    
    
    
    415
    
    
    
    
    
    
    
    415Other consumer(2)
    
    
    240
    
    
    
    
    
    
    
    240
    
    
    
    404
    
    
    
    
    
    
    
    404Total non-performing consumer, excluding
FHA/VA
    
    
    253,723
    
    
    
    1,770
    
    
    
    255,493
    
    
    
    279,494
    
    
    
    2,166
    
    
    
    281,660Non-performing commercialCommercial real estate
    
    
    187,076
    
    
    
    
    
    
    
    187,076
    
    
    
    193,556
    
    
    
    
    
    
    
    193,556Commercial and industrial
    
    
    2,789
    
    
    
    
    
    
    
    2,789
    
    
    
    2,522
    
    
    
    
    
    
    
    2,522Construction and land
    
    
    124,580
    
    
    
    1,610
    
    
    
    126,190
    
    
    
    147,127
    
    
    
    1,610
    
    
    
    148,737Total non-performing commercial
    
    
    314,445
    
    
    
    1,610
    
    
    
    316,055
    
    
    
    343,205
    
    
    
    1,610
    
    
    
    344,815Total non-performing loans, excluding FHA/VA
    
    $
    568,168
    
    
    $
    3,380
    
    
    $
    571,548
    
    
    $
    622,699
    
    
    $
    3,776
    
    
    $
    626,475OREO and repossessed unitsResidential mortgage
    
    $
    57,572
    
    
    $
    
    
    
    $
    57,572
    
    
    $
    63,794
    
    
    $
    
    
    
    $
    63,794Commercial
    
    
    17,900
    
    
    
    
    
    
    
    17,900
    
    
    
    17,599
    
    
    
    
    
    
    
    17,599Construction and land
    
    
    27,645
    
    
    
    650
    
    
    
    28,295
    
    
    
    18,230
    
    
    
    650
    
    
    
    18,880Other
    
    
    76
    
    
    
    
    
    
    
    76
    
    
    
    75
    
    
    
    
    
    
    
    75Total OREO and repossessed units
    
    $
    103,193
    
    
    $
    650
    
    
    $
    103,843
    
    
    $
    99,698
    
    
    $
    650
    
    
    $
    100,348Non-performing FHA/VA guaranteed residential(1)(3)(4)
    
    $
    99,357
    
    
    $
    
    
    
    $
    99,357
    
    
    $
    121,305
    
    
    $
    
    
    
    $
    121,305Other non-performing assets
    
    
    3,204
    
    
    
    
    
    
    
    3,204
    
    
    
    3,692
    
    
    
    
    
    
    
    3,692Total non-performing assets(5)
    
    $
    773,922
    
    
    $
    4,030
    
    
    $
    777,952
    
    
    $
    847,394
    
    
    $
    4,426
    
    
    $
    851,820Total NPAs as a percentage of the loan portfolio, net, and OREO (excluding
GNMA defaulted loans)
    
    
    
    
    
    
    
    
    
    
    13.71
    %
    
    
    
    
    
    
    
    
    
    
    14.85
    %Total NPAs as a percentage of consolidated total assets
    
    
    
    
    
    
    
    
    
    
    9.19
    %
    
    
    
    
    
    
    
    
    
    
    9.85
    %Total non-performing loans to total loans (excluding GNMA defaulted loans and
FHA/VA guaranteed loans)
    
    
    
    
    
    
    
    
    
    
    10.36
    %
    
    
    
    
    
    
    
    
    
    
    11.29
    %Ratio of allowance for loan and lease losses to total non-performing loans
(excluding loans held for sale) at end of period(5)
    
    
    
    
    
    
    
    
    
    
    21.11
    %
    
    
    
    
    
    
    
    
    
    
    19.82
    %
 
 (1)
    
    FHA/VA delinquent loans are separated from the non-performing loans that present
substantial credit risk to the Company in order to recognize the different risk of loss
presented by these assets.(2)
    
    Includes delinquency related to personal loans, revolving lines of credit and other consumer
loans.(3)
    
    Does not include approximately $116.2 million and $112.8 million of GNMA defaulted
loans over 90 days delinquent (for which the Company has the option, but not an obligation, to
buy back from the pools serviced), included as part of the loans held for sale portfolio as of
March 31, 2011 and December 31, 2010, respectively.(4)
    
    In November 2009, the Company evaluated its non-performing assets policy and placed
in accrual status all FHA loans until 270 days delinquent because the principal balance of
these loans is insured or guaranteed under applicable FHA program and interest is, in most
cases, fully recovered in foreclosures proceedings. As a result of the change in policy, total
non-performing FHA guaranteed residential mortgage loans exclude $21.6 million and $31.5
million of FHA loans as of March 31, 2011 and December 31, 2010, respectively, that were 90
days or more past due.(5)
    
    Excludes FHA and VA claims amounting to $13.3 million and $12.5 million as of March
31, 2011 and December 31, 2010, respectively. 92




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##### Table of Contents



Table W  Non-performing loans activity by portfolio
 Quarter Ended March 31, 2011Non-FHA/VA
    
    
    
    
    
    
    
    
    
    
    Commercial Real
    
    
    Commercial and
    
    
    Construction and(In thousands)
    
    Residential
    
    
    Other Consumer
    
    
    Total Consumer
    
    
    Estate
    
    
    Industrial
    
    
    Land
    
    
    Total Commercial
    
    
    TotalBalance at beginning of period
    
    $
    280,841
    
    
    $
    819
    
    
    $
    281,660
    
    
    $
    193,556
    
    
    $
    2,522
    
    
    $
    148,737
    
    
    $
    344,815
    
    
    $
    626,475Additions
    
    
    47,261
    
    
    
    882
    
    
    
    48,143
    
    
    
    14,763
    
    
    
    1,014
    
    
    
    2,742
    
    
    
    18,519
    
    
    
    66,662Repurchases
    
    
    2,628
    
    
    
    
    
    
    
    2,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,628Remediated/Cure
    
    
    (60,922
    )
    
    
    (651
    )
    
    
    (61,573
    )
    
    
    (19,321
    )
    
    
    (728
    )
    
    
    (9,792
    )
    
    
    (29,841
    )
    
    
    (91,414
    )Foreclosed
    
    
    (11,640
    )
    
    
    
    
    
    
    (11,640
    )
    
    
    (1,922
    )
    
    
    
    
    
    
    (13,907
    )
    
    
    (15,829
    )
    
    
    (27,469
    )Write-downs
    
    
    (3,226
    )
    
    
    (499
    )
    
    
    (3,725
    )
    
    
    
    
    
    
    (19
    )
    
    
    (1,590
    )
    
    
    (1,609
    )
    
    
    (5,334
    )Balance at end of period
    
    $
    254,942
    
    
    $
    551
    
    
    $
    255,493
    
    
    $
    187,076
    
    
    $
    2,789
    
    
    $
    126,190
    
    
    $
    316,055
    
    
    $
    571,548
 Quarter Ended March 31, 2010Non-FHA/VA
    
    
    
    
    
    
    
    
    
    
    Commercial Real
    
    
    Commercial and
    
    
    Construction and(In thousands)
    
    Residential
    
    
    Other Consumer
    
    
    Total Consumer
    
    
    Estate
    
    
    Industrial
    
    
    Land
    
    
    Total Commercial
    
    
    TotalBalance at beginning of period
    
    $
    397,698
    
    
    $
    1,610
    
    
    $
    399,308
    
    
    $
    130,811
    
    
    $
    933
    
    
    $
    306,954
    
    
    $
    438,698
    
    
    $
    838,006Additions
    
    
    78,162
    
    
    
    647
    
    
    
    78,809
    
    
    
    38,627
    
    
    
    1,396
    
    
    
    43,804
    
    
    
    83,827
    
    
    
    162,636Repurchases
    
    
    5,192
    
    
    
    
    
    
    
    5,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,192Remediated/Cure
    
    
    (58,421
    )
    
    
    (1,109
    )
    
    
    (59,530
    )
    
    
    (8,854
    )
    
    
    (198
    )
    
    
    (45,301
    )
    
    
    (54,353
    )
    
    
    (113,883
    )Foreclosed
    
    
    (12,305
    )
    
    
    
    
    
    
    (12,305
    )
    
    
    (2,885
    )
    
    
    (25
    )
    
    
    (1,012
    )
    
    
    (3,922
    )
    
    
    (16,227
    )Write-downs
    
    
    (3,070
    )
    
    
    
    
    
    
    (3,070
    )
    
    
    (256
    )
    
    
    (198
    )
    
    
    (32
    )
    
    
    (486
    )
    
    
    (3,556
    )Balance at end of period
    
    $
    407,256
    
    
    $
    1,148
    
    
    $
    408,404
    
    
    $
    157,443
    
    
    $
    1,908
    
    
    $
    304,413
    
    
    $
    463,764
    
    
    $
    872,168
       93




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##### Table of Contents



Table X  Composition of mortgage non-performing loans
 March 31, 2011
 Collateral Type
    
    Loan To Value
    
    
    DistributionFHA/VA loans
    
    
    n/a
    
    
    
    28.0
    %Loans with private mortgage insurance
    
    
    n/a
    
    
    
    4.7
    %Loans with no mortgage insurance
    
    
    < 60
    %
    
    
    14.2
    %61-80
    %
    
    
    28.6
    %81-90
    %
    
    
    10.8
    %Over 91%
    
    
    13.7
    %Total loans
    
    
    
    
    
    
    100.0
    %
     94




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##### Table of Contents



Table Y  Construction and land loan portfolio analysis
 March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalResidential construction loans
    
    $
    166,746
    
    
    $
    300
    
    
    $
    167,046
    
    
    $
    181,240
    
    
    $
    300
    
    
    $
    181,540Land, Multi-family, condominium and commercial
construction loans
    
    
    167,838
    
    
    
    98,878
    
    
    
    266,716
    
    
    
    168,659
    
    
    
    108,535
    
    
    
    277,194Undisbursed funds under existing commitments(1)
    
    
    40,105
    
    
    
    19,341
    
    
    
    59,446
    
    
    
    44,336
    
    
    
    9,539
    
    
    
    53,875Total non-performing loans
    
    
    124,580
    
    
    
    1,610
    
    
    
    126,190
    
    
    
    147,127
    
    
    
    1,610
    
    
    
    148,737Net charge offs
    
    
    1,590
    
    
    
    
    
    
    
    1,590
    
    
    
    54,944
    
    
    
    991
    
    
    
    55,935Allowance for loan losses
    
    
    28,473
    
    
    
    2,169
    
    
    
    30,642
    
    
    
    22,761
    
    
    
    2,265
    
    
    
    25,026Non-performing loans to total construction and land
loans
    
    
    37.23
    %
    
    
    1.62
    %
    
    
    29.09
    %
    
    
    42.05
    %
    
    
    1.48
    %
    
    
    32.42
    %Net charge-offs on an annualized basis to total construction
and land loans
    
    
    1.93
    %
    
    
    
    %
    
    
    1.49
    %
    
    
    15.70
    %
    
    
    0.91
    %
    
    
    12.19
    %
 
 (1)
    
    Includes undisbursed funds to matured loans and loans in non-accrual status that are
still active.  Table Z  Loans past due 90 days and still accruing
 March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalConsumer loans(1)Credit cards(2)
    
    $
    640
    
    
    $
    
    
    
    $
    640
    
    
    $
    973
    
    
    $
    
    
    
    $
    973Other consumer(3)
    
    
    954
    
    
    
    
    
    
    
    954
    
    
    
    1,022
    
    
    
    
    
    
    
    1,022Total consumer
    
    
    1,594
    
    
    
    
    
    
    
    1,594
    
    
    
    1,995
    
    
    
    
    
    
    
    1,995Commercial loansCommercial and industrial
    
    
    588
    
    
    
    
    
    
    
    588
    
    
    
    560
    
    
    
    
    
    
    
    560Total loans past due 90 days and still accruing
    
    $
    2,182
    
    
    $
    
    
    
    $
    2,182
    
    
    $
    2,555
    
    
    $
    
    
    
    $
    2,555
 
 (1)
    
    Excludes $21.6 million and $31.5 million of FHA/VA guaranteed mortgage loans past
due 90 days and still accruing, as of March 31, 2011 and December 31, 2010, respectively.(2)
    
    Credit cards until 180 days delinquent.(3)
    
    Revolving lines of credit until 180 days delinquent.  95




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##### Table of Contents



Table AA  Loans past due 30-89 days
 March 31, 2011
    
    
    December 31, 2010(In thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    TotalConsumerResidential mortgage(1)
    
    $
    71,471
    
    
    $
    
    
    
    $
    71,471
    
    
    $
    71,750
    
    
    $
    
    
    
    $
    71,750Lease financing receivables
    
    
    308
    
    
    
    
    
    
    
    308
    
    
    
    245
    
    
    
    
    
    
    
    245Other consumer
    
    
    1,074
    
    
    
    
    
    
    
    1,074
    
    
    
    1,343
    
    
    
    
    
    
    
    1,343Total past-due consumer
    
    
    72,853
    
    
    
    
    
    
    
    72,853
    
    
    
    73,338
    
    
    
    
    
    
    
    73,338CommercialCommercial real estate
    
    
    21,538
    
    
    
    
    
    
    
    21,538
    
    
    
    35,353
    
    
    
    
    
    
    
    35,353Construction and land
    
    
    815
    
    
    
    
    
    
    
    815
    
    
    
    2,286
    
    
    
    
    
    
    
    2,286Commercial and industrial
    
    
    790
    
    
    
    
    
    
    
    790
    
    
    
    3,900
    
    
    
    
    
    
    
    3,900Total past-due commercial
    
    
    23,143
    
    
    
    
    
    
    
    23,143
    
    
    
    41,539
    
    
    
    
    
    
    
    41,539Total loans past-due 30-89 days(2)
    
    $
    95,996
    
    
    $
    
    
    
    $
    95,996
    
    
    $
    114,877
    
    
    $
    
    
    
    $
    114,877
 
 (1)
    
    Excludes $5.8 million and $7.4 million of FHA/VA guaranteed loans as of
March 31, 2011 and December 31, 2010.(2)
    
    Regulatory guidance regarding days past due followed by many banks provides
that the number of days past due may be based upon the number of payments missed. According to
this regulatory guidance, monthly pay loans are reported as 30-89 days past due when the
borrower has missed two payments. Doral follows this guidance in its reporting except that it
more conservatively reports loans 90 days past due based upon the contractual number of days
past due. Other Real Estate Owned (OREO)
     Table BB  Other real estate owned activity
 Quarters Ended March 31,(In thousands)
    
    2011
    
    
    2010Balance at beginning of period
    
    $
    100,273
    
    
    $
    94,219Additions
    
    
    29,372
    
    
    
    18,289Sales
    
    
    (22,726
    )
    
    
    (5,860
    )Retirements
    
    
    (2,384
    )
    
    
    (2,389
    )Lower of cost or market adjustments
    
    
    (768
    )
    
    
    (3,914
    )Balance at end of period
    
    $
    103,767
    
    
    $
    100,345
 96




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##### Table of Contents



Allowance for Loan and Lease Losses (ALLL)
  Residential mortgage.
 Construction and land, commercial real estate, commercial and industrial.
    Consumer.
 97




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##### Table of Contents



TDRs.
   98




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##### Table of Contents



Table CC  Allowance for Loan and Lease Losses
 Quarters Ended March 31,2011
    
    
    2010(Dollars in thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    PR
    
    
    US
    
    
    2010Balance at beginning of period
    
    $
    117,821
    
    
    $
    5,831
    
    
    $
    123,652
    
    
    $
    136,878
    
    
    $
    3,896
    
    
    $
    140,774Provision (recovery) for loans and lease losses:Non-FHA/VA residential mortgage
    
    
    745
    
    
    
    10
    
    
    
    755
    
    
    
    6,593
    
    
    
    16
    
    
    
    6,609Lease financing receivables
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )
    
    
    (254
    )
    
    
    
    
    
    
    (254
    )Other consumer
    
    
    776
    
    
    
    
    
    
    
    776
    
    
    
    1,887
    
    
    
    
    
    
    
    1,887Total consumer
    
    
    1,239
    
    
    
    10
    
    
    
    1,249
    
    
    
    8,226
    
    
    
    16
    
    
    
    8,242Commercial real estate
    
    
    (5,755
    )
    
    
    (1
    )
    
    
    (5,756
    )
    
    
    3,068
    
    
    
    
    
    
    
    3,068Commercial and industrial
    
    
    199
    
    
    
    (308
    )
    
    
    (109
    )
    
    
    (51
    )
    
    
    (23
    )
    
    
    (74
    )Construction and land
    
    
    7,302
    
    
    
    (96
    )
    
    
    7,206
    
    
    
    2,696
    
    
    
    (11
    )
    
    
    2,685Total commercial
    
    
    1,746
    
    
    
    (405
    )
    
    
    1,341
    
    
    
    5,713
    
    
    
    (34
    )
    
    
    5,679Total provision (recovery) for loan and lease losses
    
    
    2,985
    
    
    
    (395
    )
    
    
    2,590
    
    
    
    13,939
    
    
    
    (18
    )
    
    
    13,921Charge-offs:Non-FHA/VA residential mortgage
    
    
    (3,226
    )
    
    
    
    
    
    
    (3,226
    )
    
    
    (4,715
    )
    
    
    
    
    
    
    (4,715
    )Lease financing receivables
    
    
    (110
    )
    
    
    
    
    
    
    (110
    )
    
    
    (310
    )
    
    
    
    
    
    
    (310
    )Other Consumer
    
    
    (1,489
    )
    
    
    
    
    
    
    (1,489
    )
    
    
    (2,139
    )
    
    
    
    
    
    
    (2,139
    )Total consumer
    
    
    (4,825
    )
    
    
    
    
    
    
    (4,825
    )
    
    
    (7,164
    )
    
    
    
    
    
    
    (7,164
    )Commercial real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    (256
    )Commercial and industrial
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )
    
    
    (198
    )
    
    
    
    
    
    
    (198
    )Construction and land
    
    
    (1,590
    )
    
    
    
    
    
    
    (1,590
    )
    
    
    (32
    )
    
    
    
    
    
    
    (32
    )Total commercial
    
    
    (1,609
    )
    
    
    
    
    
    
    (1,609
    )
    
    
    (486
    )
    
    
    
    
    
    
    (486
    )Total charge-offs
    
    
    (6,434
    )
    
    
    
    
    
    
    (6,434
    )
    
    
    (7,650
    )
    
    
    
    
    
    
    (7,650
    )Recoveries:Non-FHA/VA residential mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing receivables
    
    
    302
    
    
    
    
    
    
    
    302
    
    
    
    26
    
    
    
    
    
    
    
    26Other consumer
    
    
    94
    
    
    
    
    
    
    
    94
    
    
    
    215
    
    
    
    
    
    
    
    215Total consumer
    
    
    396
    
    
    
    
    
    
    
    396
    
    
    
    241
    
    
    
    
    
    
    
    241Commercial real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    50Commercial and industrial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Construction and land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    122Total commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    195Total recoveries
    
    
    396
    
    
    
    
    
    
    
    396
    
    
    
    436
    
    
    
    
    
    
    
    436Net charge-offs
    
    
    (6,038
    )
    
    
    
    
    
    
    (6,038
    )
    
    
    (7,214
    )
    
    
    
    
    
    
    (7,214
    )Balance at end of period
    
    $
    114,768
    
    
    $
    5,436
    
    
    $
    120,204
    
    
    $
    143,603
    
    
    $
    3,878
    
    
    $
    147,481ALLL plus partial charge-offs and discounts to loans
receivable (excluding FHA/VA guaranteed loans and
loans on savings deposits)
    
    
    
    
    
    
    
    
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    3.58
    %ALLL as a percentage of loans receivable outstanding,
at the end of period
    
    
    
    
    
    
    
    
    
    
    2.17
    %
    
    
    
    
    
    
    
    
    
    
    2.68
    %ALLL to period-end loans receivable (excluding FHA/VA
guaranteed loans and loans on savings deposits)
    
    
    
    
    
    
    
    
    
    
    2.24
    %
    
    
    
    
    
    
    
    
    
    
    2.76
    %Provision for loan losses to net charge-offs
    
    
    
    
    
    
    
    
    
    
    42.89
    %
    
    
    
    
    
    
    
    
    
    
    192.97
    %Net charge-offs to average loans receivable
outstanding
    
    
    
    
    
    
    
    
    
    
    0.11
    %
    
    
    
    
    
    
    
    
    
    
    0.13
    %ALLL to net charge-offs on an annualized basis
    
    
    
    
    
    
    
    
    
    
    490.88
    %
    
    
    
    
    
    
    
    
    
    
    504.09
    %
 99




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##### Table of Contents



Table DD  Allocation of Allowance for Loans and Lease Losses
 March 31, 2011
    
    
    December 31, 2010(Dollars in thousands)
    
    PR
    
    
    US
    
    
    Total
    
    
    Percentage
    
    
    PR
    
    
    US
    
    
    Total
    
    
    PercentageConsumer:Residential mortgage
    
    $
    53,769
    
    
    $
    247
    
    
    $
    54,016
    
    
    
    64
    %
    
    $
    56,250
    
    
    $
    237
    
    
    $
    56,487
    
    
    
    64
    %FHA/VA guaranteed mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    %Lease financing receivable
    
    
    428
    
    
    
    
    
    
    
    428
    
    
    
    
    %
    
    
    518
    
    
    
    
    
    
    
    518
    
    
    
    
    %Other consumer
    
    
    5,137
    
    
    
    
    
    
    
    5,137
    
    
    
    1
    %
    
    
    5,756
    
    
    
    
    
    
    
    5,756
    
    
    
    1
    %Total consumer
    
    
    59,334
    
    
    
    247
    
    
    
    59,581
    
    
    
    68
    %
    
    
    62,524
    
    
    
    237
    
    
    
    62,761
    
    
    
    68
    %Commercial:Commercial real estate
    
    
    23,807
    
    
    
    149
    
    
    
    23,956
    
    
    
    12
    %
    
    
    29,562
    
    
    
    150
    
    
    
    29,712
    
    
    
    12
    %Commercial and industrial
    
    
    3,154
    
    
    
    2,871
    
    
    
    6,025
    
    
    
    12
    %
    
    
    2,974
    
    
    
    3,179
    
    
    
    6,153
    
    
    
    12
    %Construction and land
    
    
    28,473
    
    
    
    2,169
    
    
    
    30,642
    
    
    
    8
    %
    
    
    22,761
    
    
    
    2,265
    
    
    
    25,026
    
    
    
    8
    %Total commercial
    
    
    55,434
    
    
    
    5,189
    
    
    
    60,623
    
    
    
    32
    %
    
    
    55,297
    
    
    
    5,594
    
    
    
    60,891
    
    
    
    32
    %Total
    
    $
    114,768
    
    
    $
    5,436
    
    
    $
    120,204
    
    
    
    100
    %
    
    $
    117,821
    
    
    $
    5,831
    
    
    $
    123,652
    
    
    
    100
    %
     100




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##### Table of Contents



Table EE  Allowance for Loan and Lease Losses Coverage Ratios
 March 31, 2011
    
    
    December 31, 2010ALLL
plus partial charge-offs and  discount as a % of: (1)
    
    
    ALLL as a % of:(2)
    
    

ALLL
plus partial charge-offs and discount as a % of:(1)
    
    
    ALLL as a % of:(2)Loans(3)(6)
    
    
    NPLs(4)(5)
    
    
    Loans(6)
    
    
    NPLs(5)
    
    
    Loans(3)(6)
    
    
    NPLs(4)(5)
    
    
    Loans(6)
    
    
    NPLs(5)Consumer:Residential mortgage
    
    
    2.37
    %
    
    
    31.88
    %
    
    
    1.52
    %
    
    
    21.36
    %
    
    
    2.46
    %
    
    
    31.77
    %
    
    
    1.59
    %
    
    
    20.29
    %Lease financing receivable
    
    
    11.49
    %
    
    
    137.62
    %
    
    
    11.49
    %
    
    
    137.62
    %
    
    
    10.78
    %
    
    
    124.82
    %
    
    
    10.78
    %
    
    
    124.82
    %Other consumer
    
    
    10.91
    %
    
    
    2,163.33
    %
    
    
    10.81
    %
    
    
    2,140.42
    %
    
    
    11.22
    %
    
    
    1,431.68
    %
    
    
    11.17
    %
    
    
    1,424.75
    %Total consumer
    
    
    2.49
    %
    
    
    34.03
    %
    
    
    1.66
    %
    
    
    23.51
    %
    
    
    2.60
    %
    
    
    33.94
    %
    
    
    1.74
    %
    
    
    22.48
    %Commercial:Commercial real estate
    
    
    6.43
    %
    
    
    24.15
    %
    
    
    3.52
    %
    
    
    12.81
    %
    
    
    7.17
    %
    
    
    26.33
    %
    
    
    4.31
    %
    
    
    15.37
    %Commercial and industrial
    
    
    0.90
    %
    
    
    216.03
    %
    
    
    0.90
    %
    
    
    216.03
    %
    
    
    0.97
    %
    
    
    243.97
    %
    
    
    0.97
    %
    
    
    243.97
    %Construction and land
    
    
    14.45
    %
    
    
    53.95
    %
    
    
    7.06
    %
    
    
    24.28
    %
    
    
    12.79
    %
    
    
    42.00
    %
    
    
    5.46
    %
    
    
    16.83
    %Total commercial
    
    
    6.48
    %
    
    
    37.75
    %
    
    
    3.40
    %
    
    
    19.19
    %
    
    
    6.55
    %
    
    
    34.68
    %
    
    
    3.42
    %
    
    
    17.67
    %Total
    
    
    3.83
    %
    
    
    36.09
    %
    
    
    2.24
    %
    
    
    21.11
    %
    
    
    3.92
    %
    
    
    33.83
    %
    
    
    2.29
    %
    
    
    19.82
    %
 
 (1)
    
    Loans and NPL amounts are increased by the amount of partial charge-offs and
discounts.(2)
    
    Loans and NPL amounts are not increased by the amount of partial charge-offs and
discounts.(3)
    
    Reflects partial charge-offs and credit related discounts on loans of $30.6 million
and $32.0 million in the residential mortgage, $21.2 million and $21.2 million commercial real
estate and $37.4 million and $38.6 million in construction and land portfolios as of March 31,
2011 and December 31, 2010, respectively.(4)
    
    Reflects partial charge-offs and credit related discounts on loans of $26.5 million
and $28.7 million in the residential mortgage, $21.2 million in commercial real estate and
$37.4 million in construction and land portfolios as of March 31, 2011 and December 31, 2010,
respectively.(5)
    
    Excludes $2.2 million and $2.7 million of non-performing loans classified as held
for sale as March 31, 2011 and December 31, 2010, respectively.(6)
    
    Excludes $161.4 million and $187.5 million of FHA/VA guaranteed loans and $2.4
million and $2.9 million of loans on saving deposits as of March 31, 2011 and December 31,
2010, respectively.    Table FF  Impaired loans and related allowance
 (In thousands)
    
    March 31, 2011
    
    
    December 31, 2010Impaired loans with allowance
    
    $
    733,388
    
    
    $
    774,946Impaired loans without allowance
    
    
    406,440
    
    
    
    419,016Total impaired loans
    
    $
    1,139,828
    
    
    $
    1,193,962Related allowance
    
    $
    60,804
    
    
    $
    68,875
  101




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##### Table of Contents



Counterparty Risk
   Operational Risk
  Overview of Operational Risk Management
  Internal Control Over Financial Reporting
 Controls and Procedures
 Liquidity Risk
  General Business, Economic and Political Conditions; Puerto Rico Economy and Fiscal Condition
  102




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103




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##### Table of Contents



Fiscal Condition, Fiscal Stabilization Plan, Government Reorganization
Plan, Unfunded Pension Benefit Obligations and Funding Shortfalls of the Retirement System,
Economic Reconstruction Plan, and Economic Development Plan
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  104




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Risk Factors
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
   
 ITEM 4. REMOVED AND RESERVED
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS.
   105




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##### Table of Contents



ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Doral Financial, as currently in effect. (Incorporated herein by reference
to exhibit number 3.1(j) to Doral Financials Annual Report on Form 10-K for the year ended December 31,
2007 filed with the Commission on March 19, 2008).3.2
    
    Bylaws of Doral Financial, as amended on August 2, 2007. (Incorporated herein by reference to exhibit
number 3.1 of Doral Financials Current Report on Form 8-K filed with the Commission on August 6, 2007).3.3
    
    Certificate of Amendment of the Certificate of Incorporation of Doral Financial dated March 12, 2010
(Incorporated herein by reference to exhibit number 3.1 of Doral Financials Current Report on Form 8-K
filed with the Commission on March 16, 2010).3.4
    
    Certificate of Designations of Mandatorily Convertible Non-Cumulative Non-Voting Preferred Stock dated
April 20, 2010 (Incorporated herein by reference to exhibit number 3.1 of Doral Financials Current Report
on Form 8-K filed with the Commission on April 26, 2010).4.1
    
    Common Stock Certificate (Incorporated herein by reference to exhibit number 4.1 to Doral Financials
Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Commission on March 19,
2008).4.2
    
    Loan and Guaranty Agreement among Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority (AFICA), Doral Properties, Inc. and Doral Financial.
(Incorporated herein by reference to exhibit number 4.1 of Doral Financials Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 filed with the Commission on November 15, 1999).4.3
    
    Trust Agreement between AFICA and Citibank, N.A. (Incorporated herein by reference to exhibit number 4.2
of Doral Financials Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 filed with the
Commission on November 15, 1999).4.4
    
    Form of Serial and Term Bond (included in Exhibit 4.3 hereof).4.5
    
    Deed of Constitution of First Mortgage over Doral Financial Plaza. (Incorporated herein by reference to
exhibit number 4.4 of Doral Financials Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
filed with the Commission on November 15, 1999).4.6
    
    Mortgage Note secured by First Mortgage referred to in Exhibit 4.5 hereto (included in Exhibit 4.5 hereof).4.7
    
    Pledge and Security Agreement. (Incorporated herein by reference to exhibit number 4.6 of Doral
Financials Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 filed with the Commission
on November 15, 1999).4.8
    
    Indenture, dated May 14, 1999, between Doral Financial and U.S. Bank National Association, as trustee,
pertaining to senior debt securities. (Incorporated herein by reference to exhibit number 4.1 of Doral
Financials Current Report on Form 8-K filed with the Commission on May 21, 1999).4.9
    
    Indenture, dated May 14, 1999, between Doral Financial and Bankers Trust Company, as trustee, pertaining
to subordinated debt securities. (Incorporated herein by reference to exhibit number 4.3 of Doral
Financials Current Report on Form 8-K filed with the Commission on May 21, 1999).4.10
    
    Form of Stock Certificate for 7% Noncumulative Monthly Income Preferred Stock, Series A. (Incorporated
herein by reference to exhibit number 4(A) of Doral Financials Registration Statement on Form S-3 filed
with the Commission on October 30, 1998).
 106




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##### Table of Contents



ExhibitNumber
    
    Description4.11
    
    Form of Stock Certificate for 8.35% Noncumulative Monthly Income Preferred Stock, Series B. (Incorporated
herein by reference to exhibit number 4.1 of Doral Financials Registration Statement on Form 8-A filed
with the Commission on August 30, 2000).4.12
    
    First Supplemental Indenture, dated as of March 30, 2001, between Doral Financial and Deutsche Bank Trust
Company Americas (formerly known as Bankers Trust Company), as trustee. (Incorporated herein by reference
to exhibit number 4.9 to Doral Financials Current Report on Form 8-K filed with the Commission on April
2, 2001).4.13
    
    Form of Stock Certificate for 7.25% Noncumulative Monthly Income Preferred Stock, Series C. (Incorporated
herein by reference to exhibit number 4.1 of Doral Financials Registration Statement on Form 8-A filed
with the Commission on May 30, 2002).4.14
    
    Form of Stock Certificate for 4.75% Perpetual Cumulative Convertible Preferred Stock. (Incorporated herein
by reference to exhibit number 4 to Doral Financials Current Report on Form 10-K filed with the
Commission on March 31, 2003).4.15
    
    Form of Stock Certificate for Mandatorily Convertible Non-Cumulative Non-Voting Preferred Stock
(Incorporated herein by reference to exhibit number 4.1 of Doral Financials Current Report on Form 8-K
filed with the Commission on April 26, 2010)(included in Exhibit 3.4 hereto).10.1
    
    Order to Cease and Desist issued by the Board of Governors of the Federal Reserve System on March 16,
2006. (Incorporated herein by reference to exhibit number 99.2 of Doral Financials Current Report of Form
8-K filed with the Commission on March 17, 2006).10.2
    
    Stipulation and Agreement of Partial Settlement, dated as of April 27, 2007. (Incorporated herein by
reference to same exhibit number of Doral Financials Annual Report on Form 10-K for the year ended
December 31, 2006 filed with the Commission on April 30, 2007).10.3
    
    Order to Cease and Desist issued by the Federal Deposit Insurance Corporation, dated February 19, 2008.
(Incorporated herein by reference to exhibit number 99-2 of Doral Financials Current Report of Form 8-K
filed with the Commission on February 21, 2008).10.4
    
    Purchase Agreement, dated September 23, 2003, between Doral Financial Corporation and Wachovia Securities
LLC, as Representative of the Initial Purchasers of Doral Financials 4.75% Perpetual Cumulative
Convertible Preferred Stock named therein. (Incorporated herein by reference to exhibit number 1 to Doral
Financials Current Report on Form 8-K filed with the Commission on March 31, 2003).10.5
    
    Employment Agreement, dated as of May 23, 2006, between Doral Financial Corporation and Glen Wakeman.
(Incorporated herein by reference to exhibit number 10.1 to Doral Financials Current Report on Form 8-K
filed with the Commission on May 30, 2006).10.6
    
    Employment Agreement, dated as of August 14, 2006, between Doral Financial Corporation and Lesbia Blanco.
(Incorporated herein by reference to exhibit number 10.1 to Doral Financials Quarterly Report on Form
10-Q for the quarter ended March 31, 2006 filed with the Commission on December 29, 2006).10.7
    
    Employment Agreement, dated as of October 2, 2006, between Doral Financial Corporation and Enrique R.
Ubarri, Esq. (Incorporated herein by reference to exhibit number 10.7 to Doral Financials Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006 filed with the Commission on December 29, 2006).10.8
    
    Employment Agreement, dated as of June 25, 2007, between Doral Financial Corporation and Paul Makowski
(Incorporated herein by reference to exhibit number 10.11 to Doral Financials Annual Report on Form 10-K
for the year ended December 31, 2007 filed with the Commission on March 19, 2008).
 107




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##### Table of Contents



ExhibitNumber
    
    Description10.9
    
    Employment Agreement, dated as of June 1, 2007, between Doral Financial Corporation and Christopher
Poulton (Incorporated herein by reference to exhibit number 10.10 to Doral Financials Annual Report on
Form 10-K for the year ended December 31, 2007 filed with the Commission on March 19, 2008).10.10
    
    Securityholders Registration Rights Agreement dated as of July 19, 2007, between Doral Financial
Corporation and Doral Holding Delaware, LLC (Incorporated herein by reference to exhibit number 10.1 to
the Current Report on Form 8-K filed with the Commission on July 20, 2007).10.11
    
    Advisory Services Agreements, dated as of July 19, 2007, between Doral Financial Corporation and Bear
Stearns Merchant Manager III, L.P. (Incorporated herein by reference to exhibit number 10.2 to the Current
Report on Form 8-K filed with the Commission on July 20, 2007).10.12
    
    Doral Financial 2008 Stock Incentive Plan (Incorporated herein by reference to Annex A to the Definitive
Proxy Statement for the Doral Financial 2008 Annual Stockholders Meeting filed with the Commission on
April 11, 2008).10.13
    
    Employment Agreement, dated as of March 24, 2009, between Doral Financial and Robert E. Wahlman.
(Incorporated herein by reference to exhibit number 99.2 to Doral Financials Current Report on Form 8-K
filed with the Commission on March 26, 2009).10.14
    
    Summary of Doral Financials 2007 Key Incentive Plan (Incorporated herein by reference to Exhibit 10.15 to
Amendment No. 1 to Doral Financials Registration Statement of Form S-4 filed with the Commission on
September 29, 2009).10.15
    
    Cooperation Agreement dated as of April 19, 2010 between Doral Financial Corporation, Doral Holdings
Delaware, LLC, Doral Holdings, L.P. and Doral GP, Ltd. (Incorporated herein by reference to exhibit number
10.15 to Doral Financials Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed with
the Commission on May 10, 2010).10.16
    
    Stock Purchase Agreement dated as of April 19, 2010 between Doral Financial Corporation with the
purchasers named therein. (Incorporated herein by reference to exhibit number 10.16 to Doral Financials
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed with the Commission on May 10,
2010).10.17
    
    Amendment to Employment Agreement between the Company and Robert Wahlman dated June 25, 2010.
(Incorporated herein by reference to exhibit number 10.3 to Doral Financials Current Report on Form 8-K
filed with the Commission on June 25, 2010).10.18
    
    Form of Restricted Stock Award Granted to Certain Named Executive Officers of the Company on June 25,
2010. (Incorporated herein by reference to exhibit number 10.1 to Doral Financials Current Report on Form
8-K filed with the Commission on June 25, 2010).10.19
    
    Form of Retention Bonus Letter Regarding Retention Bonuses Granted to Certain Named Executive Officers of
the Company on June 25, 2010. (Incorporated herein by reference to exhibit number 10.2 to Doral
Financials Current Report on Form 8-K filed with the Commission on June 25, 2010).10.20
    
    Amendment No. 1 to Securityholders and Registration Rights Agreement between Doral Financial Corporation
and Doral Holdings Delaware, LLC dated as of August 5, 2010. (Incorporated herein by reference to Exhibit
10.1 to Doral Financials Current Report on Form 8-K filed with the Commission on August 10, 2010).10.21
    
    Form of Restricted Stock Award Agreement for Directors of Doral Financial Corporation under the 2008 Stock
Incentive Plan. (Incorporated herein by reference to exhibit number 10.1 to Doral Financials Current
Report on Form 8-K filed with the Commission on January 24, 2011).
 108




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ExhibitNumber
    
    Description10.22
    
    Employment Agreement, dated as of December 31, 2010, betwee Doral Financial and Maurice Spagnoletti.
(Incorporated herein by reference to exhibit number 10.22 to Doral Financials Annual Report on Form 10-K
for the year ended December 31, 2010 filed with the Commission on March 9, 2011).12.1
    
    Computation of Ratio of Earnings to Fixed Charges.12.2
    
    Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.31.1
    
    CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of
2002.32.2
    
    CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of
2002.
 109




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SIGNATURES
  DORAL FINANCIAL CORPORATION
(Registrant)Date: May 16, 2011
    /s/  Glen R. WakemanGlen R. WakemanChief Executive Officer and PresidentDate: May 16, 2011
    /s/ Robert E. WahlmanRobert E. WahlmanExecutive Vice President and

Chief Financial Officer 110