Good morning. My name is Paula, and I'll be your conference operator today. Thank you for joining us for this conference call for Oriental Financial Group. Our participants are José Rafael Fernández, President, Chief Executive Officer and Vice Chairman; and Ganesh Kumar, Executive Vice President and Chief Financial Officer. Please note this call may feature historical or forward looking statements about management's goals, plans and expectations which are subject to various risks and uncertainties outlined in the Risk Factor 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 speaker's remarks there will be a question and answer session. During the question and answer session we ask question questioners to not use cell phones or Blackberries as they might cause loud static on the line. I would now like to turn the conference over to Mr. Fernandez. José Fernández: Thank you for listening in today. Also with us today are Jose Ramón Gonzalez, our Senior Executive Vice President of Banking and Corporate Development; Norberto Gonzalez, Executive Vice President and Chief Risk Officer; and Ramón Rosado, our Senior Vice President and Treasurer. We have a presentation that accompanies our remarks and provides other information. It can be found on the webcast presentations and other files on our website. I'll review our results and Ganesh will go over the first quarter income statement and balance sheet. I'll come back and give you our thoughts regarding the 2012 outlook from a general perspective and then we'll go into the Q&A. We are very pleased with our first quarter performance which shows great progress…

Thank you, Mr. Rafael. I'll start with the interest income details first. Interest income from loans as a percentage of total interest income equaled 57%, up from 41% in the year ago quarter underscoring Oriental's greater emphasis on growing our commercial franchise. Interest income from loans of $40 million represented an increase of 23% year-over-year and was also up quarter-over-quarter. Year-over-year growth stems from our strong management of covered loans, the former Eurobank portfolio. Sequentially the results benefitted from growth in Oriental's non-covered commercial, auto leasing and consumer portfolio. Interest income from investment securities of $30 million declined 34% year-over-year but increased 17% quarter-over-quarter. The year-over-year reduction reflects lower yields and the strategic decision to reduce the size of the investment securities portfolio. The quarter-over-quarter improvement benefitted from the previously mentioned reduction in premium amortization. Total interest expense of $31 million declined 24% year-over-year and 17% quarter-over-quarter. This reflects lower cost of funds and balances on both deposits and wholesale funding. Regarding non-interest income, our wealth management business continues to grow in response to our focused marketing effort and positive market reaction to client engagement methods we adopt. The total banking wealth plus management revenues of $11 million rose 14% year-over-year with wealth management revenues up 26% due to increased brokerage, trust and insurance business. Assets under management were a record $4.4 billion on March 31, 2012, up 9.7% 1 year ago and 7% from the end of the preceding quarter, reflecting new assets and improved market valuations. Growth of new assets is indicative of our strong market penetration as we gather more customers and their assets. Total non-core non-interest income was $1.3 million, compared to a loss of $2.8 million in the year ago quarter and a loss of $23 million in the preceding quarter. First quarter 2012 results…

[Operator Instructions] Your first question comes from the line of Michael Sarcone of Sandler O'Neill.

So my first question. You guys revised upwards slightly the guidance on the NIM for 2012. Can you just walk us through what that implies for your outlook for the securities portfolio net yields? José Fernández: Remember, Michael, that when we look at our securities portfolio, specifically the MBS portfolio, we have to be cognizant of prepayment speeds and the premier amortization. That is an issue that we've talked about in prior calls. So our assumption is that we will have the same level of premier amortization as last year, which I have Ramón here. The level was close to $40 million or so, right? So that’s kind of the assumption. Also the cost of borrowings, it's pretty much very well detailed in the last couple of presentations that we made and we included in this call with the opportunity to re-price the $825 million in borrowings that are coming due this year. And the third leg of it is, as I mentioned in the call, retail cost of funds, which we feel that we have good momentum to continue to lower especially the second half of this year. We've done already quite a bit of a reduction in the first half. We see further reduction in the second half.

Okay, thanks. And then on share buybacks. Can you give us an update on any buybacks so far in the second quarter? José Fernández: Well, we enter into a black period once we end the quarter, so at this time we have not done any further repurchase since we enter in that blackout period. So, that's the update.

Okay, and then on your thoughts on capital priorities, meaning capital return versus both organic and inorganic growth opportunities. Can you just walk us through how you are looking at that? José Fernández: Yes. We have good momentum on our organic progress, on our organic strategies, so we feel that as we continue to strengthen our marketing and our position here in Puerto Rico, we have a good opportunity to continue to invest in quality credits here in Puerto Rico. So that’s priority #1. Priority #2 is also we still believe that the banking market in Puerto Rico is still over-banked and there is still opportunities for us to entertain any inorganic opportunity, meaning businesses or pools of loans et cetera. So we also have a -- that as part of our strategy, and that’s something that we have been saying for the last year or so. And lastly the repurchase, stock repurchase and that's the program that we still have in place. As Ganesh mentioned, we have close to $31 million or $32 million left and authorized and we plan to execute on the 3 strategies concurrently as they present theirselves. I think the main one is the organic which is the one that we can influence the most and certainly develop our strategy going forward to add value to shareholders.

Okay, and the inorganic growth opportunities, do you guys have in mind any sense of timing as to when you could possibly see more consolidation? José Fernández: Specifically we don't have anything that we can discuss right now. In general we feel that the market in Puerto Rico needs to do some further consolidation. It took a while before the first wave. It's probably going to take some time also for the second wave. So it's hard for us to predict.

[Operator Instructions] Your next question comes from Joe Gladue of B. Riley.

I guess I'd like to touch on loan demand and the outlook, sort of breaking things out between the commercial and the mortgage loans. And I guess let me start with the mortgage. Wondering if you could just give us an update on how the mortgage market is looking in Puerto Rico and what you are expectations are going forward for the year. José Fernández: Okay why don’t I start by talking about the residential mortgage and then I'll pass to José Ramón to give some details on the commercial side. So, on the mortgage loan production. It's getting more complicated, the residential mortgage business, Joe. Regulatory-wise, with all the new rules that are being put in place, it is a more costly endeavor. So starting from that premise and then adding the fact that there is still a lot of loan to value issues when we -- when clients try to refinance loans, you still have higher loan to values that we really are not entertaining as part of our credit policy. So we expect mortgage origination and mortgage production going into 2012 to remain around these levels, between $45 million and $50 million a quarter. We will -- most of the production is conforming, so we originate and sell and we expect mortgages banking activities to continue the same run rate of around $10 million for the year. So that’s on the mortgage residential mortgage side. I would like to pass it to José Ramón to give some detail on the commercial side.

Sure, José Rafael. On the commercial side, Joe, the -- I think our growth and success thus far is a function of first being now well organized as a commercial bank in terms of the teams of teams of bankers and the credit underwriting process that we have put into place over the 1.5 years, which allows us to develop momentum and have more effectiveness in dealing with clients. It is also still a function of the fact that the competition in Puerto Rico remains somewhat constrained by other players' reduced ability to handle increased growth given their own situation or lower appetite for growth in Puerto Rico, which is -- plays to our benefit of the best capitalized bank in Puerto Rico and one of the few very few that can actually grow. It is not significantly based on growth of the economy at the moment. The economy continues to be, as José Rafael said, weak, showing signs of stability and slight improvement but not yet significant growth. So, it is still a market where we are very cautious in choosing our opportunities and our clients. Hopefully, things will improve. The government is in fact projecting improvement in the economy over the next year, 1.5 years, and that will then further offer more opportunities for growth if it plays out, in fact, in that manner. But again, it is -- I think our growth is a function of having been able now to fully roll out a commercial banking model and be effective in it and still rather attenuated competition for clients so it's a good market for us we are active in. The third quarter was very strong in terms of volume and it is an indication of the beginning of the year. It's always quarter-to-quarter, as we see opportunities. We're not going to be seeking growth for growth sakes. We're still very cautious, so we may not have identical quarters the rest of the year. But in general we are on target to meet our growth objectives for commercial loan growth during the year.

Okay. All right. I guess I would like to switch over a couple of questions on the deposit side. I did notice there was a little bit of a decrease in non-interest bearing deposits from the end of the year. Just curious -- so was that some seasonal effect or was anything particular driving that? And I guess I will ask the second part of the question is just, overall, a very nice increase in core deposits and just wondering if -- what’s driving that? Are you, I guess, taking market share from competitors? Anyway, just wonder if you could expand on that a little. José Fernández: Sure. The first question, Joe, it's pretty much seasonal. The beginning of the year commercial accounts have needs for -- higher needs for cash and basically are the reason for the reduction. We do have -- as José Ramón mentioned, as we continue to grow our commercial business, those loans, we'll be adding additional non-interest bearing deposits and that should be also building going forward. In regards to our retail cost of funds and retail balances, we keep on being differentiated. We are here again having a very good opportunity to capitalize on the differentiation. We are the cleanest bank. We are smaller, more nimble and more agile, so we can have more a contact with our clients and add value to them. It's not something that we feel that we have achieved an excellent performance yet, but it's something that we have improved on and when we compare ourselves to the rest of the market I think we do an excellent job. So in that regards I think the differentiation is being noticed. And again, that coupled with a reduction in the cost of funds sends a good message to us that we are doing the right thing and the clients are valuing the offerings that we're making and the advice that we are providing.

And I'll just ask one more. Just appreciate the added detail on the asset quality in the presentation in the press release. José Fernández: We thought a lot about you Joe on that one.

But I'll just ask one short asset quality question. Just wondering if you could tell us how enclosed to non-accrual, where and how they related relative to what they were in the fourth quarter. José Fernández: Okay, I'll give some general response and I'll pass to Norberto, and if we need to add something specific on those -- on that question to you afterwards, Joe, we will do. But in general what we are seeing is a very nice reduction in the influence of non-accruals. We have been working hard especially on the residential portfolio which is the vast majority of the non-performing and non-accruals. And I think we've done a very good job at not only working out the loans that we need to work out and pass them to REO and then eventually selling them. But we are also managing very well the early delinquency buckets in residential as well as in commercial. So in general we are very much encouraged with that. So I'll pass to Norberto if we have any additional information specifically. Norberto González: I think you summarized it very well. There were -- I would say, if I understand your question, in terms of inflows, there were not significant cases that were added at the non-accruals during the quarter that we expect will be added to non-accruals in upcoming months, let's say. We're obviously working with them. We have been able to reduce the delinquency at the early stages. I think we were -- while the good news of the quarter is that we finally see some significant reduction in the non-performing mortgage, and now increasing the non-performing commercial. In fact, there were some decrease in the non-performing commercial loans. So that's why we were able in a sense to have a lower provision in this quarter than the one that we had in previous quarters. So asset quality's, in general, looking good in the nonforward portfolio.

[Operator Instructions] Your next question comes from Derek Hewett of KBW.

Could you guys talk a little about the increase in the indemnity amortization this quarter, and will we see a further boost to the accretable yields? José Fernández: I think Ganesh can go into that. They gave a lot of time and effort to that in the last several months.

Okay. The FDIC amortization, the increase that you see is primarily because of the re-yielding, right Derek? When you re-yield, you expect lower losses and therefore you need to amortize the FDIC assets at a faster rate. So although we are not sure whether the $4.8 million is there to stay for a remaining period of loss-share, we think that some part of it is going to be increased amortization of the re-yielding we did. I am not sure if we would have any more re-yielding because the re-yielding would be done based on cash flow -- entire cash flow revisions, and while we take a look at quarter-by-quarter certain pools, we also -- on an annual basis, we completely recap the cash flow projections. That's due either in September quarter as we have done in the last year. So maybe there would be some chances for re-yielding some of the pools in that quarter.

And can you give me some specifics on the accretable yields?

Correct. Accretable yields is closer to what we showed in the 10-K. It was -- on December 31st, it was $188 million. I think it's close. Right now, it's $174.8 million. It hasn’t changed quite a bit. Accretable yields will change only when there is a re-yielding and recapture from the accretable yields are there in a significant amount.

Okay, great. And then in terms of the ROA and ROE goals, José, are you looking at that more from a GAAP basis are you looking at it more from a -- kind of an "earnings basis?" José Fernández: We're really working hard, Derek, on trying to show to the Street the most normalized level of our performance as possible given the model -- the financial model that we have, and which really has, still, 69-70% of asset investments. So having gone through 2011 with the different levels of premium amortization that at the end of the day it normalizes to a level that we feel is close to what happened last year, which around $40 million or so. We're trying to get to a more normalized level of result. And when we look at ROE and ROA, if we just look at GAAP, it really distorts, given who we are, it distorts our reality. So we feel that trying to look forward and giving you guys a pretax, pre-provision -- remember, we also have purchasing accounting to deal with as you saw this quarter. It really distorts the entire story. So we are more inclined to look at it from a pretax, pre-provisioning, even though we still have there the premium amortization effects. And we are working in this quarter to share with you what the level, on a yearly basis, should look like and how it translates into ROA and ROE going forward so there are not as many surprises. I think we've heard throughout our different visits with investors throughout the last couple of quarters how we need to work on that and that's what we are trying to do.

The next question comes from Dan Oxman of Jacobs Asset Management.

Can you please reconcile the increase in CPR rates with the decline in premium amortization? José Fernández: Can you be more specific? CPR went up, according to our presentation...

It is also the methodology differences of how we calculate the premium amortization. We basically take a look at the preceding 3 quarters' average to calculate the premium amortization. So what's there is the current CPR rates of 2-month lag will be shown in the next quarter versus immediately in that quarter.

Okay, that helps. And on the re-yielding and securities book, you had a big hit to the indemnification asset but your affective yield at 17.5% wasn’t much greater than last quarter. Can you talk a little bit about that? José Fernández: You're talking about the increase from 17.12% last quarter to 17.52% this quarter on the covered loans?

Correct. The indemnification asset impact was 3 times greater. José Fernández: You mean on the amortization?

Correct. Norberto González: The amortization on the indemnification asset, if I understand your question correctly, is something that is not part of the net interest income calculation. So basically it does affect in the sense that it is, let's say, indirectly by other re-yields [ph] and the loan and so on, but basically the yield is a calculation of the interest income divided by the corresponding average balances of the forward portfolio. José Fernández: So I am sorry to ask you about your question, but are you comparing the first quarter of 2011 versus the first quarter of 2012, or are you looking at…

No, the Q4. The Q4 -- if you divide interest income from covered loans divided by the average balance for covered loans, you get an effective yield of about 17%. And if you look at the calculation this quarter, it's also 17%. But you'd said that the loan's performing better which is why you have such a big impact to the indemnification asset of $4.8 million. But I see the yield pretty much flat. José Fernández: Well yes, but when we say that the loans are performing better, they are performing better not necessarily quarter versus quarter, trading quarter, but throughout last year we didn’t the re-yielding at the beginning of the year. We did later in the year. So when you compare to last quarter, it doesn’t make that much of a difference on the yield, but when you compare it to the March or June quarter, it’s a larger difference. So I think it's in the semantics that...

But also going back to Norberto's point, in the yields calculation, we don't include the FDIC amortization. It is presented as a non-core.

Right, I understand that. José Fernández: I am trying to see if I understand your -- where you come from the comparison perspective. If you are looking at our amortization of the FDIC indemnification asset, as of March was $1.2 million versus $4.8 million, positive versus negative. So if -- the reason why you have a larger amortization and you had an accretion in the first quarter, it's because of the re-yielding that we have done. That back in the first quarter, we had not done any.

Right. You're comparing year-over-year. I'm comparing linked quarter. José Fernández: No, linked quarter is from $3.2 million to $4.8 million. So it's up $1.7 million.

At this time, there are no further questions. I will now turn the call back to over to José Rafael Fernández for any closing remarks. José Fernández: Well thank you everyone for listening today. We will look forward to talking to you again when we report second quarter results. Have a great day.

Thank you. This concludes your conference. You may now disconnect.