José Rafael Fernández - President, CEO and Vice Chairman Ganesh Kumar - EVP and CFO José Ramón González - Senior EVP - Banking & Corporate Development

Robert Greene - Sterne Agee & Leach Inc. Derek Hewett - Keefe Bruyette & Woods Inc. Todd Hagerman - Sterne Agee & Leach Inc.

Good morning. My name is Jackie and I will be your conference operator today. Thank you for joining us for this conference call for Oriental Financial Group. Our speakers are José Rafael Fernández, President, Chief Executive Officer and Vice Chairman; and Ganesh Kumar, Executive Vice President and Chief Financial Officer. There is a presentation that accompanies today's remarks. It can be found on the Investor Relations website under News & Presentations and then under Webcasts, Presentations & Other Files. Please note this call may feature certain forward-looking statements about management's goals, plans and expectations which are subject to various risks and uncertainties outlined in the Risks Factors section of Oriental's Securities and Exchange Commission filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments which occur afterward. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. During the question-and-answer session, we ask questioners to not use cellphones or BlackBerry as they might cause loud static on the line. I would now like to turn the call over to Mr. Fernández. Please go ahead. José Rafael Fernández: Thank you for joining us today. I'll review some big picture items and Ganesh will go over key aspects of our income statement and balance sheet. I'll wrap it up and then we'll go into question and answer. Let's start on slide 4. The fourth quarter was a transformative period for us. We closed on the BBVA Puerto Rico acquisition and completed the deleveraging of our investment portfolio, achieving one of our major business strategies. The result is an almost complete change in our balance sheet and the creation of a larger, more diversified and growth-oriented banking financial services platform. Because of BBVA's overall performance in 2012, the valuation closed on December 18 was greater than originally anticipated. As a result, we experienced almost no dilution to book value per share and the estimated time it will take to earn back tangible book value has been greatly reduced. Oriental's core businesses also performed well in the fourth quarter and for all of last year. However, there were several non-recurring items in the quarter, chiefly related to the acquisition or the deleveraging and which negatively affected results as was anticipated. Last year, Oriental still generated $15 million in net income available to common shareholders equal to $0.35 per share. Our outlook for this year is very positive based on our initial guidance and Ganesh will discuss more about that in a little while. If you turn to slide 5, you can begin to see the dramatic change in our loan book and balance sheet. We now have more than $5 billion in loans which is up 225% from September 30. Net loans as a percentage of total assets now equals 56% compared to 26% at the end of the third quarter. Our mix has also improved. Each of our major categories; commercial, residential mortgage and auto and consumer loans now represents about a third each of our non-covered gross loan book. Our deposit base has changed as well. If you turn to slide 6, you can see we now have nearly $6 billion of deposits which is up 157% from December 30. Deposits as a percentage of interest bearing liabilities now equal 70% compared to 43% at the end of the third quarter. Similarly, our mix of deposits has improved with 14% non-interest bearing, 40% in interest bearing savings and demand deposits and 46% in time deposits. I'd like to discuss our strategy going forward. Turning to slide 7, with regards to Puerto Rico, there is still many economic and fiscal issues facing the island but we see encouraging signs of stability. In addition, we are encouraged by the makeup of the new government's economic and fiscal teams. With regards to the local banking market, cost of deposits will continue to decline but probably at a slower pace. Credit problems appear to be stabilizing. Against this background, our strategies to increase market share through a strong combination of products and services and our larger more strategic platform. Turning to slide 8, we're one of the top players in Puerto Rico across a wide spectrum of banking services; including auto loans, small, medium, corporate and institutional, commercial lending, credit cards and consumer lending and residential mortgage, production and sales. We are able to complement our commercial lending business with a great platform for facilitating transactions and providing a wide variety of other services, including treasury services for both domestic and international companies. In addition, we're able to provide commercial clients with top-level wealth management, trust, retirement and insurance products. We now have a significantly larger customer base and branch network for marketing and distributing or products and services. With our sound balance sheet and finances, we're not going to compete on the basis of a low price and low service. We are going to compete based on a fair price cognizant of our expected profitability, great service and the quality of our offerings. Now, I would like to turn the call over to Ganesh.

Thank you, José Rafael. Let's go over some major items on the income statement. Turning to slide 9, we reported a loss for the quarter of about $23 million equal to $0.53 a share. The year was profitable at $15 million equal to $0.35 per share. In both of these cases, the basic EPS is the same as the diluted EPS which is calculated using if-converted method and considering the most diluted result. The quarter included a number of non-recurring type items that negatively affected the results by $29 million in the quarter and $22 million in the year. Deleveraging of our portfolio cost $23 million in the fourth quarter. When combined with the gain on sales in the third quarter, the net P&L impact of deleveraging was close to the plan at $12 million. In addition, we experienced a $2.6 million loss from net income in the sales that occurred at the end of the third quarter, and later unwinding the repos and hedges in the fourth quarter. Approximately $5.4 million of non-interest expenses in the fourth quarter were related to BBVA acquisition and integration. These expenses totaled more than $7 million for the year. The fourth quarter also benefited from $3.7 million of net income after-tax that we realized from 13 days of BBVA operations after the closing. For this quarter, we also incurred $2 million in dividends on [PDC] and D preferred shares that we (inaudible) of the capital rates in anticipation of the acquisition. The dividends totaled close to $4 million for the year. Please turn to slide 10 for more detail on our deleveraging. During the third and fourth quarters, Oriental sold $1 billion of securities and paid down our extinguished $1.4 billion of repos and associated hedges. After the acquisition, we also sold $420 million of securities and terminated $336 million of repos that were in BBVA PR's balance sheet. Due to favorable market conditions, we were able to sell securities at higher prices than originally anticipated. And consequently we were able to retain $300 million more in unencumbered securities. These securities will have an average yield of 2.7% and will benefit the net interest income in 2013. As part of our deleveraging, we reevaluated the securities book and reclassified them and they held the maturities portfolio until available for sale. This resulted in a complete change in our balance sheet profile as José Rafael mentioned earlier. Investment as a percentage of total assets dropped from 58% to 24%. Borrowings as a percentage of interest bearing liabilities declined from 59% to 30%. Turning to slide 11, you will see we recorded BBVA PR for loan portfolio at a discount of 6.47% which is in line with our original estimate of 6.5%. Because of day one valuation coming in greater, we recorded only $53 million in goodwill less than our original $95 million estimate. As compared to the prior quarter, there was minimal dilution to book value per common share and the tangible book value per share was $13.79 versus an original estimate of $12.50. This naturally reduced the tangible book earn back period that we initially projected. As per our business, we had a strong quarter and a strong year with regard to the core performance, which also partly – the quarter also partly benefitted from the inclusion of the 13 days results, I mentioned previously. Turning to slide 12, NIM in the quarter was 2.97% and for the year was 2.65%, exceeding our guidance of 2.5% to 2.6% range that we provided during the year. Most of the increase was due to steadily working down the cost of deposits. During the fourth quarter, the cost of deposits fell 1.12% and came in for the year at 1.33%, down 48 basis points year-over-year. Turning to slide 13, the interest income from loans was up 19% in the fourth quarter compared to the third and up 22% for the year. Non-interest income from wealth management, banking services and mortgage banking activity fees increased 30% quarter-over-quarter and 13% year-over-year. Now looking at slide 14, trust assets increased 3% from September 30 and 14% year-over-year. Similarly, broker dealer assets rose 26% from September 30 and 41% year-over-year. Broker dealer assets benefitted from the addition of BBVA's securities business, but all of the assets under management in 2012 reflected increased business levels and as well as the increased market values. We ended the year with a stronger capital position and better overall than our original acquisition estimates. If you turn to slide 15, you will see that our capital ratios are well in excess of regulatory minimums. We also anticipate that our capital position will continue to strengthen even with the expected implementation of Basel III rules. Included in capital was $77 million realized from common and preferred stock offerings as part of the acquisition related capital raise. We are also especially pleased that the integration program is progressing smoothly. As you will see on slide 16, the combined organizations are starting to operate as one. Loan volumes and deposits have grown over the course of the second half of the last year and continues to grow still. We expect to complete the consolidation of operations and technology platforms by the second half of 2013. We are now budgeting a total acquisition and integration costs of $35 million which is less than our original estimate of $40 million. Of this $35 million, we already expensed $7 million and capitalized around $12 million this year. The balance will be expensed or amortized over the course of 2013 and next four years. We anticipate to have a non-recurring expense associated with the integration efforts of around $8 million in 2013. Looking at slide 17, as you will see, we are now providing an initial guidance of 2013 of $1.40 per share fully diluted earnings. We have not provided any EPS guidance previously. We are doing this for a couple of reasons. One, it is difficult to see from fourth quarter results what the income statement going forward would look like from the combined organization. And two, we expect increased financial stability from having much less reliance on investment securities. Specifically, we believe 2013 will benefit from higher loan balances and net interest margin, growth of non-interest income from wealth management, banking services and mortgage banking activities, sharply reduced premium amortization on investment securities and absence of non-recurring costs associated with last year's deleveraging. I would like to note, however, that we do anticipate higher amortization of FDIC shared-loss indemnification asset. This is a result of our continued improved performance with the former Eurobank portfolio. And now, I'll turn the call back to José Rafael. José Rafael Fernández: Thank you, Ganesh. I'd like to wrap up by reiterating some of the things I said on our news release. Oriental is now in a very solid position, financially and operationally, to realize benefits of the combination with BBVA Puerto Rico. We want to thank our customers for their continuing support, placing their trust in our ability to serve them. We also want to recognize our employees for their contribution. Employee morale and enthusiasm are high, and our integration efforts are well underway. We're very pleased with the momentum that we have as an organization and the initial progress that we've made deploying our lending and deposit gathering initiatives. Without any legacy issues weighing us down, Oriental is poised to realize its potential as one of Puerto Rico's leading banking institutions, with a strong capital and significantly improved market position. We look forward to a very good year. This concludes our formal remarks. Operator, let's open the call for questions. Thank you.

(Operator Instructions). Again, we ask questioners to not use cellphones or BlackBerry as they might cause a loud static on the line. Thank you. Our first question comes from the line of Robert Greene with Sterne Agee, Leach. Robert Greene - Sterne Agee & Leach Inc.: Good morning, everyone, and congratulations on a very busy quarter. José Rafael Fernández: Thank you, Robert. Robert Greene - Sterne Agee & Leach Inc.: Just a couple of quick questions. First, I want to address the $1.40 guidance. Specifically, are you including the $8 million in restructuring charges in that? José Rafael Fernández: The answer to that question is yes. I'll let Ganesh go into details to that question.

Yeah, $1.40 includes everything. It is the GAAP earnings that we are going to report. Robert Greene - Sterne Agee & Leach Inc.: Okay. And I guess in relation to guidance, I'm just going back to the presentation when the deal was announced and it seems like the guidance now versus kind of what you indicated for the accretion at the deal announcement, it seems a little bit more conservative at this point and I'm wondering what's changed really over the past six months to cause that? José Rafael Fernández: I've got to comment on that. One is, remember that the presentation was based on analyst estimates back in June of last year. So, that's one reason. But also I'd like to point out, and Ganesh mentioned it in his remarks, we're seeing improved performance on the Eurobank portfolio. So, we're seeing also a higher amortization of the FDIC indemnification asset vis-à-vis 2012 for 2013. Robert Greene - Sterne Agee & Leach Inc.: Okay, that's helpful. Just a follow-up on the BBVA, I guess, reevaluation. It looks like the loan marks kind of came in [at] expectations. So I'm just wondering if you can go into little more detail as to how the actual asset was kind of revalued higher resulting in a lower goodwill? José Rafael Fernández: Yes, I'll let Ganesh go answer that one.

So, actually in the goodwill calculation, obviously, there are other adjustments that you need to make primarily, but if you look at it, when we did the initial calculations, we had an estimate of what the contribution from the income that's earned by BBVA during the course of the 2012 would be. And I think that estimate at that point in time -- we were presenting during June our estimates were a little conservative and the performance of the organizations was much better, and that was one. And then there are other valuations associated with other assets that are coming in, like accounts receivables and repos and all the other items that add to the differences that we are talking about. So primarily what happened was we had an original estimate of $95 million in goodwill. We revised it three months back to $85 million and now we are booking it on -- $53 million would be the resulting goodwill or $54 million would be the resulting goodwill of the combined book. Robert Greene - Sterne Agee & Leach Inc.: Thank you. Well, that's all the questions I have and I appreciate you taking my questions. José Rafael Fernández: You're welcome.

(Operator Instructions). Your next question comes from the line of Derek Hewett with KBW. Derek Hewett - Keefe Bruyette & Woods Inc.: Good morning, everyone. José Rafael Fernández: Hi, Derek. Derek Hewett - Keefe Bruyette & Woods Inc.: Hi. Given your outlook for the higher indemnity amortization given that the Eurobank portfolio is exceeding expectations, how much remaining accretion is left at this point?

Accretable yield is around $188 million. Derek Hewett - Keefe Bruyette & Woods Inc.: Okay. And was there any sort of meaningful movement from non-accretable to accretable during this quarter?

Not much. Derek Hewett - Keefe Bruyette & Woods Inc.: Okay. And then maybe kind of thinking about this relative to maybe some of the numbers that were presented when the deal was first announced, is the primary difference just be lower – excuse me, the higher indemnity amortization or is there anything else that's kind of moving results maybe a little bit lower? José Rafael Fernández: When you look at operating -- I mean, GAAP earnings like we're guiding here as $1.40, I mentioned the FDIC amortization as one aspect. I also think that, as I mentioned earlier, we used analyst estimates, we worked through 2012 the last six months of the year and there was a shift in interest rates that also affected. And then we're adding here the restructuring charges and the restructuring charges when the estimates were or original projections were made, they were taking them all at once which is the $40 million and that also is something that can't be done. So, as we explained in the call, we are doing some expensing out of the merger-related expenses in 2012 and beyond and then we're capitalizing or we capitalize some of them into 2012 also. So those are the moving parts, Derek. Really from an operating perspective, we see a very encouraging and very positive momentum in both operations. And we feel that again we're giving a guidance here for the first time. It's been a pretty short period of time since we acquired BBVA and we want to make sure that we have all the moving parts under control going forward. So we will be updating the guidance as the year goes by because we feel that there is still potential here to do a faster savings rate than in terms of the savings that we projected, and also the potential to increase our fee income and loans. Also, I'd like to point out something that I think goes a little bit unnoticed or if it goes unnoticed, I just want to be repetitive here a little bit. But if you look at our management style and our management views, we have one goal and that is to over-deliver. And that's what consistently has differentiated us from the rest of the competitors and that's part of what we're trying to do here. We want to make sure that once we get the full grip of the entire organization as we move forward in 2013, we will be updating that guidance. So I wanted to add all those points, Derek, simply because I want to highlight the fact that this has been a very busy quarter for us including the acquisition. Derek Hewett - Keefe Bruyette & Woods Inc.: Okay, great. I appreciate that color. And just in terms of cost saves, I believe that the original estimate was roughly 20% cost saves. And of that amount, 50% should be achieved in 2013 and the remaining in 2014. Is that factored into the 2013 guidance? José Rafael Fernández: Yes.

That's factored into the 2013 guidance. But in my presentation, Derek, I pointed out the consolidation and technology and operations platform that will happen only in the second half of the year. So it does not have the entire benefit of what we would accomplish by let's say October -- September, October. Therefore, it's not a significant portion but it is factored in to the extent that we would recognize those savings. Derek Hewett - Keefe Bruyette & Woods Inc.: Okay, great. Thank you very much. José Rafael Fernández: You're welcome.

(Operator Instructions). Your next question comes from the line of Todd Hagerman with Sterne Agee. Todd Hagerman - Sterne Agee & Leach Inc.: Good morning, everyone. A couple of questions. First, Ganesh, with some of the moving parts on the margin with the deleveraging that you talked and the sale on the securities a little bit better than expected, if you can give a little bit more color in terms of the outlook for the margin was I think about lower premium amortization, lower deposit costs but at a slower pace, and then with balance sheet now, how should we think about the margin outlook for '13 relative I think to your original expectations approaching 3% close to 4% perhaps with the changes in the balance sheet?

So, if you remember back in June, we said that we expect the margins to be inching closer to the 4% mark, because that's where we want to operate in our balance sheet profile. We still think that's possible but if you want a range, I would say somewhere between 3.78% to 3.95% would be my range. The reason why I'm giving the range is it also depends on our SOP calculation which we have to fully factor in, in the first quarter to see what that could result in. But without that, just comparing the loan book and not applying the purchase accounting, it should be around the 3.78% to 3.95% range that I mentioned. Todd Hagerman - Sterne Agee & Leach Inc.: Okay. And then on the accretable yield, the $188 million that you've mentioned, just to go a step further, what's the expected change year-over-year just as I think about 2012 to 2013 and the better performance in that – I just want to clarify the $188 million, what that specifically relates to in terms of the year and year-over-year change?

The second quarter of last year, we had a reyielding primarily, right? So I think that added -- if I remember correctly, I don't have the numbers in front of me but I can send it to you, maybe around $20 million to $30 million over the year in accretable yield as part of that reyielding that we did. And then there was further improvements that we saw when we did the annual recasting of the cash flows in October and therefore, that's the reason why we have better yield numbers in terms of covered loan portfolio, but also on the other hand we have higher FDIC amortizations due to that. Todd Hagerman - Sterne Agee & Leach Inc.: Okay, that's very helpful. Then just finally, José, going back to your prepared remarks with respect to the economy signs of stabilization and now in terms of the diversification in the balance sheet, particularly the C&I. Can you talk a little bit further about what you're now seeing in terms of commercial specifically and how that may be split up or -- as I think about commercial real estate or construction versus C&I, where are you seeing kind of incremental improvements or demand at this point? José Rafael Fernández: Todd, I think that's a very good question because as I mentioned, the economy is in a tough spot still even though it's showing some signs of stabilization. But having said that, we see our focus on C&I, we see our focus on the commercial C&I type of loan. We view a great opportunity with the middle markets and the middle segment there were (inaudible) there is great focus from our competitors, maybe they will focus now that I'm saying it. But having said that, I think on the commercial side we have a very good opportunity to gain some market share from some of the competitors given that we don't have any legacy issues and that's what our focus really is service. And I'd like to also, Todd, mention interest rate cost has started to go down throughout 2011 and '12 and probably the pace is going to be slower. Having said that, I'm starting to see some best figures of 2006 and '07 in terms of pricing of commercial loans here in Puerto Rico. So, I'm a little concerned with how pricing is moving along here in Puerto Rico. That's why we are very emphatic in saying that we're going to be pricing for our services and be very rationale about this process. So those are the dynamics in the market as we see them right now, and we think we realize that we don't have an economy growing, therefore there's no loan growth and our job is to differentiate ourselves by adding value and providing quality products and services and gaining market share like that. Todd Hagerman - Sterne Agee & Leach Inc.: That's very helpful. Then just finally, in terms of the new administration there on the island, could you just give kind of your initial impressions with the new fiscal team that's been appointed by the governor and kind of what the sense is in terms of the outlook relative to the past administration, some of the various incentive programs that were in place? José Rafael Fernández: I think we have a very solid economic team that has been appointed recently. I think they have taken the bull by the horns and they have initially done the things that need to be done, let's call it the low hanging fruit. Decisions have been made or are being made as we speak. I think the next 40 to 60 days are going to be critical for them as they tackle the pension issues and they tackle some of the fiscal issues in Puerto Rico. But Secretary of the Treasury, the President of the GDB and the Chairman of the Board of the GDB are excellent professionals as well as the rest of the economic team that has been appointed. So, my view of it is everybody knows what needs to be done. It's also challenged politically. So hopefully, the team and the private sector can correlate to make sure that the politicians make the decision that need to be made. And I am pretty confident that during the next two to three months, those decisions will be made because that's key for our future. Todd Hagerman - Sterne Agee & Leach Inc.: That's very helpful, I appreciate it. José Rafael Fernández: You're welcome.

(Operator Instructions). Your next question comes from the line of [James Ellman with Ascend].

Good morning. I was hoping you might be able to just comment on what you're seeing in terms of real estate trends in the island? And if you could maybe comment particularly on the more generalized single family housing, and then also some of the higher end, high-rise properties along the beaches they were built maybe potentially for second homes? Thank you. José Rafael Fernández: Yes. Real estate, I'll make some general comments. José Ramón is on the line, so he can add if he needs to add anything to what I say. But I feel from a residential perspective, home prices on residences between 100,000 to 253,000 I think that's kind of a market that has stabilized and there is some excess demand right now. High rises in the beach, second homes, I think that's a pretty tough market right now and I'm not seeing much activity there. And if there is some activity, it's probably going to be seen on the bulk side the stress pricing type of thing. José Ramón, if you want to add anything, please go ahead. José Ramón González: Sure. I think you've covered it on the residential loans. I think pricing pressures attenuated somewhat in housing below $300,000. There is of course no need for construction. What we're doing is, is selling out the inventory that was built up over the last five years and the secondary market transactions, but again they seem to have a better tone in pricing that goes up to middle level. With respect to higher cost properties that was described in the question, that is still relatively slow but I think we have to mention that over the course of 2012, we saw a more aggressive participation by opportunistic wholesale buyers of those properties and some of the very significant [REO] banks of that nature have been sold at a significant discount, but they've been moving and now are beginning to move on a retail basis. So, I think slowly and only after a long cycle we are seeing this position realistic prices of some of the overbuild properties, particularly high rises and second home type properties that were accumulated over the last five years. So that market is still in a workout phase, but the workout appears to be moving more significantly than in past years.

All right, thank you. And one other follow-up question is, there still is one business bank in Puerto Rico that has continued to struggle and have not seem to have been able to put its problems behind it. Do you see that you've been picking up much share from that bank? And is there much opportunity there going forward? José Rafael Fernández: I don't like particularly to comment on competitors, but I can tell you in general Oriental's position is very good right now to attract clients from competitors. And we have attracted more clients from some competitors than others and we'll continue to focus on that. But I really would not like to comment on our competitors.

All right. And finally if there is additional consolidation on the island from one of the foreign banks that has a subsidiary in the island or if there were another failure, is Oriental interested in participating in that consolidation? José Rafael Fernández: We are always looking at ways to maximize the decision of our capital. But having said that, we have a year ahead of us that is integration focus and maximizing the value of these great acquisitions. So, I'm not going to say that we're not going to look and evaluate if anything appears, but frankly I don't see it in 2013. At least from Oriental's perspective, we will be dedicated full heart to the integration efforts as well as maximization of the value of these acquisitions.

Okay, very good. Thank you so much for the time. José Rafael Fernández: You're welcome.

At this time, we have no further questions. I would now like to turn the call back over to management for any closing remarks. José Rafael Fernández: Well, thank you for being here and being in the call. I appreciate your time and I really look forward to the first quarter of 2013 that we will show full results of the combined organization and be able to share that information with you. We're very excited for 2013 and look forward to continue communication with our analysts and investors in 2013. Thank you very much and have a great day.

Thank you. This concludes today's conference call. You may now disconnect.