THE FINANCIAL HOLDING COMPANY OF
WESTERNBANK PUERTO RICO
REPORTS AN INCREASE OF 28% IN NET INCOME
FOR THE SECOND QUARTER ENDED JUNE 30, 2003

Mayagüez, Puerto Rico, July 17, 2003. W HOLDING COMPANY, INC. (NYSE: "WHI"), the financial holding company of WESTERNBANK PUERTO RICO, reported today results for the three and six months ended June 30, 2003.

W Holding reported a net income of $25.7 million or $0.31 earnings per basic common share ($0.30 on a diluted basis) for the second quarter ended June 30, 2003, as compared to net income for the comparable quarter of 2002 of $20.1 million or $0.27 earnings per basic and diluted common share, an increase of $5.6 million or 28%. This very strong increase in net earnings includes an additional charge of $7.0 million ($5.2 million net of tax) resulting from the liquidation of the Company’s portfolio of corporate bond and loan obligations (“CBO’s” and “CLO’s”) on June 6, 2003, as previously reported.

For the six months ended June 30, 2003, W Holding reported a net income of $40.5 million or $0.47 earnings per basic common share ($0.46 on a diluted basis), as compared to net income of $38.0 million or $0.50 earnings per basic and diluted common share for the same period in 2002, an increase of $2.6 million or 7%. W Holding achieved such increase in earnings eventhough the six months results include a total charge of $22.7 million ($17.0 million net of tax) on the Company’s investment in CBO’s and CLO’s.

The following table provides a reconciliation of net income as reported to net income excluding the charge regarding the Company’s investment made during 1999 and 2000 in CBO’s and CLO’s for the periods indicated:

During the three and six months periods net income increased by $5.6 million or 27.83% and $2.6 million or 6.77%, strong increases considering the $7.0 million ($5.2 million net of tax) charge recognized during the second quarter and the $15.7 million ($11.8 million net of tax) charge recognized in the first quarter, both related to our investment in CBO’s and CLO’s. The combined $22.7 million ($17.0 million net of tax) loss resulted from the impairment losses recorded on March 31, 2003, adjusting the fair value of the entire portfolio with an original total investment of $62.9 million to $45.4 million, and a $7.0 million ($5.2 million net of tax) additional loss on the final liquidation of the entire portfolio on June 6, 2003.

Mr. Stipes further said: “It was a direct and voluntary management’s decision to take this action, conservatively and proactively to remove from the balance sheet all exposure to CBO’s and CLO’s, and at the same time eliminate the possibility of future charges to earnings, without dissimulating or disappearing the loss or potential loss with a combined sale of assets or securities, as our strong balance sheet and core generation of income requires non of that. Even considering this isolated event, which does not have in any way an impact in the core banking thrust and performance, going forward we expect to exceed comfortably $100 million in net earnings during 2003 and accordingly reach our goal of $10.0 billion in total assets. Our asset quality continues to be among the strongest within our peer group, as well as our non-performing loans and net charge-offs remain within our estimates, particularly considering the economic recession and global developments. We continue to expand full steam ahead in the San Juan Metropolitan area, with new clients, business and financial activities filling our pipeline which is in high gear and growing soundly and strongly. As a matter of fact, Mr. Stipes indicated that in the first 15 days of July, there are approximately $150.0 million in new loans to be closed.”

The return on assets (ROA) and the return on common stockholders’ equity (ROCE) for the second quarter were 1.12% and 22.41%, respectively, compared to 1.17% and 30.07% for the same period in 2002. For the six months ended June 30, 2003, the ROA and the ROCE were 0.92% and 17.09%, respectively, compared to 1.18% and 28.52%, for the same period in prior year. These ratios are within management’s expectations considering the strong growth in assets, the additional capital infusion, the significant resources invested in new areas of business and the charge to earnings during both periods explained before.

At June 30, 2003, driven by strong increases in W Holding activities, total assets ended at $9.5 billion, breaking the $9 billion mark. Total assets grew $1.3 billion or 15.77%, up from $8.2 billion at December 31, 2002. The investment portfolio increased $710.6 million or 16.99%, from $4.2 billion at December 31, 2002, to $4.9 billion in 2003. Loans receivable-net, grew by $501.7 million or 13.36%, resulting from the Company’s continued strategy of growing its loan portfolio through commercial real estate, asset-based and other commercial loans, as well as its consumer loan portfolios.

On a year to year basis, total assets grew $2.5 billion or 35.82% from $7.0 billion at June 30, 2002. The investment portfolio increased $1.4 billion or 38.44% from $3.5 billion as of June 30, 2002, while loans receivable-net, grew by $1.0 billion or 32.26% for the same period.

Stockholders’ equity increased to $710.6 million as of June 30, 2003, compared to $584.7 million as of December 31, 2002. Such increase resulted from the combination of the issuance of 4,232,000 shares of the Company’s Series F Preferred Stock completed in June 2003, providing a net capital infusion of $102.2 million, plus the net income generated for the six months ended June 30, 2003, partially offset by dividends paid during the six month period ended June 30, 2003 of $9.0 million and $8.6 million on our common and preferred stock, respectively, and a decrease of $126,000 in other comprehensive loss. The period-end number of common shares outstanding increased from 68,346,306 as of December 31, 2002 to 68,647,175 as of June 30, 2003, as a result of the conversion of 201,594 shares of the Company’s convertible preferred stock series A, into 300,869 shares of the Company’s common stock.

Net Interest Income

Net interest income for the second quarter ended June 30, 2003 was $55.8 million, an increase of $16.1 million or 40.39%, from $39.8 million for the same period of last year. Average interest-earning assets for the second quarter of 2003 increased by $1.8 billion, compared to the same quarter the previous year, mainly driven by a rise in the average loan portfolio of $847.5 million, particularly in the commercial real estate, other commercial loans and the consumer loan portfolios. In addition, the average investment portfolio increased by $992.1 million, mainly U.S. Government and agencies obligations and mortgage-backed securities. For the six months ended June 30, 2003, net interest income increased from $76.7 million to $105.0 million, an increase of $28.4 million or 36.98%, primarily supported by an increase in average interest-earning assets of $1.9 billion or 27.94%. Average yields decreased from 5.45% to 5.04% and from 5.57% to 5.08%, for the second quarter and six months ended June 30, 2003, respectively. The decrease in average yields was primarily due to a drop in market interest rates during both periods affecting our loan repricing, primarily our commercial loan portfolio with floating rates and the reinvestment rates on matured, called and purchased securities. However, these decreases were more than offset by decreases in our costs of funds during both periods.

We continue to manage our liability costs carefully, decreasing the overall cost of rates paid from 3.39% to 2.64%, and from 3.46% to 2.75% for the quarter and six month periods ended June 30, 2003, respectively, while continuing to offer competitive rates completely offsetting our decreases in the yields of our interest earning assets. Notwithstanding, the impact of the strong growth in average interest-earning assets in both periods was in part offset by an increase in the average interest-bearing liabilities of $1.8 billion or 28.16% and $1.8 billion or 28.92%, for the second quarter of 2003 and the six months ended June 30, 2003, respectively. Interest-bearing deposits grew in average by $970.5 million and $1.0 billion during the second quarter and the six months ended June 30, 2003, respectively, while other borrowings in average (mainly securities sold under agreements to repurchase) rose by $851.2 million and $765.9 million for the same periods.

Net Interest Margin

Our net interest margin increased 26 basis points during the second quarter of 2003 to 2.55% from 2.29% in the second quarter of 2002. On a linked quarterly comparison, our net interest margin also increased by 9 basis points from 2.46% in the first quarter of 2003 and 17 basis points from 2.38% in the fourth quarter ended December 31, 2002. We achieved these increases in spite of industry wide interest margin compression pressures. Although our average yield on interest-earning assets decreased during this quarter, the decrease in our liability costs more than offset the effect of such reduction.

Under a flat interest rate scenario for the remaining two quarters of year 2003, based on our asset and liability composition as of June 30, 2003, we estimate our net interest margin will remain relatively stable within a range of 2.45% to 2.52% during said period. Assuming an instantaneous 50 basis points decrease in the fed funds rate, we estimate our net interest margin will fall slightly to within a range of 2.36% to 2.41% during said period. Assuming a 50 basis points increase in the fed funds rate, we estimate our net interest margin will also remain stable within a range of 2.45% to 2.51%. Futhermore, a 100 basis points increase in the fed funds rate will cause our net interest margin to fluctuate between a range of 2.42% to 2.59%. The lower and higher values of such range meaning the lowest and highest net interest margin for the remaining quarters of year 2003.

Attached as Exhibits IIIa, IIIb and IIIc are supplemental unaudited data schedules providing additional information on the net interest margin including average balances and average rates for both interest-earning assets and interest-bearing liabilities, as well as changes in volumes and rates for the periods presented.

Other Income

Other income was $735,000 and $7.1 million for the three and six month periods ending June 30, 2003, compared to $5.3 million and $10.9 million for the same periods last year. The primary reason for the decrease during the quarter ended June 30, 2003 was the net loss on sales and valuation of loans, securities and other assets of $7.0 million ($5.2 million net of tax) regarding our investments in CBO’s and CLO’s. However, the quarter also reflected increased service charges on deposit accounts and other fees as a result of the Company’s continued strategy to diversify and increase its fee income. Other factors included increases in fees associated to our trust division, insurance commissions earned by Westernbank Insurance Corp., a wholly-owned subsidiary of W Holding, and fees generated by our asset-based lending operation as well as strong increases in other areas resulting from the Company’s overall growing volume of business. The net effect of the above-mentioned factors, in addition to a slight increase in unrealized gain on derivative instruments, resulted in a net decrease in total other income of $4.6 million for the quarter ended June 30, 2003, when compared to same quarter in year 2002.

The decrease in other income (loss) for the six month period ended June 30, 2003, was mainly due to a net loss on sales and valuation of loans, securities and other assets of $22.7 million ($17.0 million net of tax) recorded during the period, also related to the CBO’s and CLO’s portfolio liquidated on June 6, 2003.

Operating Expenses

Total operating expenses increased $2.2 million or 12.27% for the three month period ended June 30, 2003, and $4.6 million or 13.41% for the six months ended June 30, 2003, when compared to the corresponding periods in 2002. Salaries and employees' benefits accounted for the majority of such increase, rising $1.6 million or 24.05% for the second quarter of year 2003, and $3.6 million or 27.97% for the six months ended June 30, 2003, as compared to the corresponding periods in 2002. Such increases are attributed to the continued expansion of the Company, including increases in personnel, normal salary increases and related employee benefits. At June 30, 2003, the Company had 1,078 full-time employees, including its executive officers, an increase of 77 employees or 7.69%, since June 30, 2002. New personnel and additional infrastructure were added to support the continued expansion of the Company, largely related to the inception of Westernbank’s new division, Expresso of Westernbank, which accounted for 121 new employees at June 30, 2003.

Operating expenses, other than the salaries and employees’ benefits discussed above, increased $573,000 or 5.21% for the second quarter of 2003 and $992,000 or 4.63%, for the six months ended June 30, 2003, resulting mostly from increases in occupancy and equipment expenses, advertising, and other expenses, primarily associated with the new Expresso Division, launched in July 2002, as well as the costs associated with the additional investment in technology and general infrastructure to sustain and coordinate the Company’s expansion in all of its business areas.

The Company continued its strict cost control measures, maintaining operating expenses at adequate levels, further evidenced by its efficiency ratio of 31.46% achieved for the second quarter of year 2003 and 32.99% for the six months ended June 30, 2003, well below management’s long term target of 40% to 42%.

Asset Quality

W Holding asset quality continues to be strong and well over its peer group, as measured by our reserves to total loans, non-performing loans as a percentage of total loans and net-charge-offs to average loans. Also, credit quality overall continues to be very strong in spite of the present economic environment. Notwithstanding the Company’s aggressive market penetration, it continues to exercise conservative underwriting and sound, prudent and highly skilled management. W Holding is essentially a secured lender having 81% of its loan portfolio as of June 30, 2003 secured by real estate. The consumer loan portfolio, including the Expresso of Westernbank loan portfolio, had a total delinquency ratio, including the categories of 60 days and over of 1.22% at June 30, 2003, when compared to 1.23% for the comparable period in previous year. The commercial loan portfolio had a total delinquency ratio, including the categories of 60 days and over, of 0.99% (less than 1%); when compared to 0.61% reported for the year ago period, very strong ratios by any standard. Our combined delinquency on all portfolios, including the categories of 60 days and over, continues to be below our benchmark of 1% for both periods.

The provision for possible loan losses amounted to $6.6 million for the quarter ended June 30, 2003, up from $3.5 million for the same period in the previous year, an increase of $3.1 million or 90.28%. The allowance for possible loan losses amounted to $55.1 million as of June 30, 2003. The increase in the provision for loan losses is attributable to the overall growth in the loan portfolio, particularly of the Westernbank Business Credit division, which specializes in commercial business loans secured principally by accounts receivable, inventory and equipment, and for Expresso of Westernbank, which specializes in small, unsecured consumer loans up to $15,000 and collateralized consumer loans up to $75,000. Westernbank Business Credit loan portfolio grew to $656.7 million at June 30, 2003, an increase of $224.1 million or 51.80%, when compared to December 31, 2002, or an increase of $280.7 million or 74.65%, when compared to June 30, 2002. Expresso of Westernbank loan portfolio grew by $33.3 million, net of repayments or 28.60%, from $116.4 million at December 31, 2002, to $149.7 million at June 30, 2003. The Expresso of Westernbank division began operations in July 2002. As a result of the increase in both portfolios, the provision for loan losses for Westernbank Business Credit and Expresso of Westernbank divisions amounted to $2.1 million and $3.2 million, respectively, for the six months ended June 30, 2003, contributing to the increase of $5.7 million in the provision for loan losses between both periods. The average yields of Westernbank Business Credit and the Expresso of Westernbank loan portfolios were 5.40% and 18.90%, respectively, for the six months ended June 30, 2003.

Non-performing loans stand at $32.2 million or 0.75% (less than 1%) of the Bank’s loan portfolio at June 30, 2003, up from 0.51% or an increase of $12.8 million, from $19.4 million as of December 31, 2002. Excluding real estate loans, these ratios were 0.03% and 0.09% at June 30, 2003 and December 31, 2002, respectively. The increase in non-performing loans primarily comes from the Company’s commercial and regular consumer loan portfolios. Non-performing loans on the commercial loan portfolio increased by $9.9 million, when compared to December 31, 2002. This increase is mostly attributed to seven commercial loans with principal balances of $1.6 million, $1.4 million, $1.3 million, $1.1 million, and three other loans with outstanding principal balances below $1.0 million, all of which are collateralized by real estate properties. At June 30, 2003, two of these loans with an outstanding balance of $1.6 million and $1.1 million, had an specific valuation allowance of $764,000 and $277,000, respectively. At June 30, 2003, the allowance for possible loan losses was 171.17% of total non-performing loans (reserve coverage), slightly lower than our previous reserve coverage ratio. However, of the total allowance, $4.8 million is our estimated allowance for specific reserved loans and the remaining $50.3 million is for our general and unallocated reserves.

Net charge-offs in the second quarter of 2003 were $3.0 million or 0.29% (annualized) to average loans, compared to $1.3 million or 0.28% (annualized) to average loans for the same period in 2002, an increase of $1.7 million or one basis point when compared to the same period in 2002. For the six month period ended June 30, 2003, net charge-offs amounted to $4.8 million, an increase of $2.9 million, when compared to $1.9 million in 2002. Both increases were primarily due to loans charged-off in the ordinary course of business on our commercial and consumer loan portfolios. The increase in commercial loans charged-off for the six months ended June 30, 2003, was primarily due to two loans charged-off with a principal balance of $699,000 and $165,000. The increase in consumer loans charged-off for the six month period ended June 30, 2003, was principally due to loans charged-off by the Expresso of Westernbank division. Loans charged-off associated to the Expresso of Westernbank Division amounted to $2.8 million or 4.05% (annualized) to average Expresso loans for the six months period ended June 30, 2003. Delinquencies on our newest Expresso of Westernbank division portfolio at June 30, 2003, were 1.21%, including the categories of 60 days and over. These ratios are within management’s estimates for the first year of operations of the Expresso of Westernbank division.

Total Investments, Loans and Deposits

In line with the Company’s long-standing policy of spreading risk, W Holding has continuously maintained a diversified asset base almost 50/50 between investments and lending. The investment portfolio stands at $4.9 billion at June 30, 2003, growing $710.6 million or 16.99% in comparison to December 31, 2002. Such growth is primarily focused on securities guaranteed by the United States Government and mortgage backed securities, both accounting for 56.57% and 29.44%, respectively, of our investment portfolio as of June 30, 2003. The investment portfolio at June 30, 2003, had an average contractual maturity of 59 months as of June 30, 2003. The Company’s interest rate risk model, takes into consideration the callable feature of certain investment securities. Given the present interest rate scenario, and taking into consideration the callable features of these securities, the investment portfolio as of June 30, 2003, had a remaining average maturity of 10 months. However, no assurance can be given that such levels will be maintained in future periods.

W Holding loans receivable-net, grew 13.36% to $4.3 billion, compared to $3.8 billion at December 31, 2002, and 32.26% compared to $3.2 billion at June 30, 2002. The increase reflects the Company’s emphasis on continued growth in its loan portfolio through commercial real estate, asset-based, unsecured business and construction lending, as well as its consumer loan portfolios. As a result, the portfolio of real estate loans secured by first mortgages, increased from $2.4 billion as of June 30, 2002, to $2.7 billion as of December 31, 2002, further increasing to $3.0 billion as of June 30, 2003, an increase of $623.1 million or 26.21% on a year to year basis and $326.3 million or 12.20%, when compared to December 31, 2002. Commercial real estate loans secured by first mortgages increased from $1.4 billion as of June 30, 2002, to $1.6 billion as of December 31, 2002, an increase of $249.6 million or 17.84%. On a year to year basis commercial real estate loans grew by $567.1 million or 40.53%. Other loans portfolio, including commercial loans not collateralized by real estate, consumer loans (including the Expresso of Westernbank loans portfolio), loans on deposits and credit cards, increased from $884.5 million as of June 30, 2002, to $1.1 billion as of December 31, 2002, further increasing to $1.3 billion as of June 30, 2003, an increase of $243.3 million or 27.50%, and $183.3 million or 16.26%, respectively. Such increases were primarily driven by increases in Westernbank Business Credit loan portfolio, in addition to loans originated by Expresso of Westernbank since its inception in July 2002, both in line with the Company’s business strategy, as explained before. Attached as Exhibit IV is a supplemented unaudited data schedule providing additional information on W Holding loan portfolio.

As of June 30, 2003, total deposits reached $4.9 billion, from $4.3 billion at December 31, 2002, representing an increase of 13.46%, while securities sold under agreements to repurchase increased to $3.7 billion from $3.1 billion at December 31, 2002, an increase of 19.29%, in order to fund W Holding strong loans growth of 13.26%, investments growth of 16.99%, and total assets growth of 15.77%.

This press release may contain some information that constitutes “forward-looking statements.” Such information can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe” or the negatives or other variations of these terms or comparable terminology. Forward-looking statements with respect to future financial conditions, results of operations and businesses of the Company are always subject to various risk and market factors out of management’s control which could cause future results to differ materially from current management expectations or estimates and as such should be understood. Such factors include particularly, but are not limited; to the possibility of prolonged adverse economic conditions or that an adverse interest rate environment could develop.

W HOLDING COMPANY, INC. is the third largest public financial holding company headquartered in Puerto Rico, based on total assets. WESTERNBANK PUERTO RICO, operates throughout Puerto Rico through 51 full fledged branches, including 33 in the Southwestern region of Puerto Rico, 7 in the Northeastern region, and 11 at the San Juan Metropolitan area of Puerto Rico. W HOLDING COMPANY, INC. also owns Westernbank Insurance Corp., a general insurance agent placing property, casualty, life and disability insurance, whose results of operations and financial condition are reported on a consolidated basis.

Messrs. Frank C. Stipes, Freddy Maldonado and Ricardo Hernandez, Chief Executive Officer, Chief Financial Officer and the Company’s Comptroller, respectively, will discuss W HOLDING’s second quarter results via teleconference on Friday, July 18, 2003 at 10:00 AM (EST). Please register at https://ww4.premconf.com/PremCallAudRSVP?PPass=726866. You will be assigned a Personal Identification Number (PIN) that should be used in order to join the conference. Conference dial-in numbers: Toll Free: 800-207-0148 or 1-719-884-8877, if you can't dial in with the toll-free number. Conference passcode: 726866

You may also contact any of the above officers at (787) 834-8000; or via internet at westernbank@wbpr.com or URL: http://www.wholding.com.

FINANCIAL HIGHLIGHT
AND ADDITIONAL EXHIBITS

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