W HOLDING COMPANY, INC.
THE FINANCIAL HOLDING COMPANY OF WESTERNBANK PUERTO RICO
REPORTS AN INCREASE OF 60% IN NET INCOME
FOR THE SECOND QUARTER ENDED JUNE 30, 2004

Mayagüez, Puerto Rico, July 20, 2004. W HOLDING COMPANY, INC. (NYSE: "WHI"), the financial holding company of WESTERNBANK PUERTO RICO, reported today its results for the three and six months ended June 30, 2004.

W Holding reported a net income of $41.0 million or $0.32 earnings per basic common share ($0.31 on a diluted basis) for the quarter ended June 30, 2004, as compared to a net income of $25.7 million or $0.20 earnings per basic common share ($0.19 on a diluted basis) for the same period in 2003, after giving effect to the three-for-two (3x2) stock split in the form of a stock dividend and a two percent (2%) stock dividend declared on November 4, 2003 and November 11, 2003, respectively, and distributed both on December 10, 2003. This is an increase of $15.4 million or 60% over the prior year quarter. The $25.7 million net income reported for the three months ended June 30, 2003, was affected by a loss on sale of securities of $7.0 million ($5.2 million net of tax) resulting from the liquidation of the Company’s portfolio of CBO’s and CLO’s on June 6, 2003, as previously reported. Excluding this $7.0 million loss ($5.2 million net of tax) for a more meaningful comparison against the 2004 second quarter results, net income for the second quarter of 2003 would have been $30.9 million, which when compared to the net income of $41.0 million for the second quarter of 2004 represents an increase of $10.1 million or 33% over the adjusted comparable quarter of 2003.

For the six months ended June 30, 2004, W Holding reported a net income of $81.5 million or $0.64 earnings per basic common share ($0.62 on a diluted basis), as compared to a net income of $40.5 million or $0.31 earnings per basic common share ($0.30 on a diluted basis) (as adjusted) for the same period in 2003, an increase of $41.0 million or 101%. The $40.5 million net income reported for the six months ended June 30, 2003, was affected by a loss of $22.7 million ($17.0 million net of tax) on valuation and disposition of the Company’s investment in CBO’s and CLO’s, as previously reported. Excluding this $22.7 million loss ($17.0 million net of tax) for a more meaningful comparison against the six months ended June 30, 2004 results, net income for the same period in 2003 would have been $57.5 million, which when compared to the net income of $81.5 million for the six months ended June 30, 2004 represents an increase of $23.9 million or 42% over the adjusted comparable period of 2003.

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

The return on assets (ROA) and the return on common stockholders’ equity (ROCE) for the quarter ended June 30, 2004, were 1.30% and 28.01%, respectively, as compared to 1.12% and 22.41% reported for the same period in 2003. For the six months ended June 30, 2004, the ROA and the ROCE were 1.33% and 28.70%, respectively, compared to 0.92% and 17.09%, for the same period in prior year. These ratios for the comparable prior year periods were affected by the loss referred to in the previous paragraph. W Holding achieved this strong ROA notwithstanding the continued increase in total assets attained during the three and six months ended June 30, 2004.

At June 30, 2004, driven by strong increases in W Holding activities, total assets ended at $13.1 billion. Total assets grew $1.6 billion or 13.60%, from $11.5 billion at December 31, 2003. Loans receivable-net, grew by $714.8 million or 15.26% from $4.7 billion at December 31, 2003, as a result of the Company’s continued strategy of growing its loan portfolio through commercial real estate, asset-based and other commercial loans. Our investment portfolio, excluding short-term money market instruments, increased $867.7 million or 15.01%, from $5.8 billion at December 31, 2003, to $6.6 billion at June 30, 2004.

On a year to year basis, total assets grew $3.6 billion or 37.77%, from $9.5 billion at June 30, 2003. Loans receivable-net, grew by $1.1 billion or 26.83%, from $4.3 billion as of June 30, 2003, while the investment portfolio, excluding short-term money market instruments, increased $2.3 billion or 54.18%, from $4.3 billion at June 30, 2003.

Stockholders’ equity increased to $886.4 million as of June 30, 2004, compared to $828.5 million as of December 31, 2003. Such increase resulted primarily from the net income of $81.5 million generated during the six months ended June 30, 2004, partially offset by dividends paid during the period of $11.7 million and $13.5 million on our common and preferred stock, respectively, and a decrease of $112,000 in other comprehensive loss as a result of an improvement in the mark to market position of our portfolio of investment securities available for sale at June 30, 2004, when compared to December 31, 2003. The period-end number of common shares outstanding increased from 106,290,294 as of December 31, 2003, to 106,741,159 as of June 30, 2004, as a result of the conversion of 103,692 shares of the Company’s convertible preferred stock series A, into 236,115 shares of the Company’s common stock, and the issuance of 214,750 common shares from the exercise of stock options.

Net Interest Income

Net interest income for the second quarter ended June 30, 2004 was $74.6 million, an increase of $18.3 million or 32.50%, from $56.3 million for the same period of last year. Average interest-earning assets for the second quarter of 2004 increased by $3.3 billion, compared to the same quarter in previous year, mainly driven by increases in the average loan portfolio of $1.1 billion, particularly in the commercial real estate and other commercial loan portfolios, and in the average investment portfolio which increased by $2.2 billion, primarily in tax exempt securities, such as U.S. Government and agencies obligations. For the six months ended June 30, 2004, net interest income increased from $105.9 million, to $145.8 million, an increase of $39.9 million or 37.63%, primarily supported by an increase in average interest-earning assets of $3.2 billion or 38.20%. This increase in average interest-earning assets was driven by increases in the average loan portfolio of $1.0 billion, mainly in the commercial real estate and other commercial loan portfolios, and in the average investment portfolio of $2.2 billion, primarily in tax exempt securities, such as U.S. Government and agencies obligations. The average yield in interest-earning assets decreased from 5.04% to 4.68% and from 5.08% to 4.73%, for the second quarter and six months ended June 30, 2004, respectively, when compared to prior year periods. The decrease in the average yield was primarily due to the low interest rate environment compared to the prior year periods affecting our loan repricing, primarily our commercial loan portfolio with floating rates and the reinvestment rates on matured and called securities, and lower rates on purchased securities for most of the periods.

We continue to administer our liability costs effectively, decreasing the overall cost of rates paid from 2.62% to 2.37%, and from 2.72% to 2.37% for the quarter and six months ended June 30, 2004, as compared to the same periods in 2003, while continuing to offer competitive rates, almost offsetting our decrease in the yield of our interest-earning assets. The strong growth in average interest-earning assets between both periods was in part offset by increases in the average interest-bearing liabilities of $3.0 billion for both periods, or 35.75% and 37.91%, for the three and six month periods ended June 30, 2004, respectively. Interest-bearing deposits grew in average by $1.2 billion and $1.1 billion, during the quarter and the six months ended June 30, 2004, while other borrowings in average (mainly federal funds bought and securities sold under agreements to repurchase) rose by $1.8 billion and $1.9 billion for the same periods.

Net Interest Margin

Our net interest margin decreased 9 basis points during the second quarter of 2004 to 2.48% from 2.57% in the second quarter of 2003, however on a tax equivalent basis our net interest margin increased 2 basis points from 2.90% to 2.92% for each period. The 9 basis points decrease before any tax effect, is mainly attributed to the Company’s decrease in the loan portfolio average yield. For the six months ended June 30, 2004, our net interest margin decreased 1 basis point, but on a tax equivalent basis it increased by 14 basis points, when compared to the six months ended June 30, 2003. On a linked quarterly comparison, our net interest margin decreased by 3 basis points from 2.51% in the first quarter of 2004. Our net interest margin on a tax equivalent basis decreased 4 basis points to 2.92% from 2.96%, when compared to the first quarter of 2004 and the fourth quarter of 2003.

Under a flat interest rate scenario for the next twelve month period, based on our asset and liability composition as of June 30, 2004, we estimate our net interest margin will remain relatively stable within a range of 2.49% to 2.53% during said period. Assuming an instantaneous 100 basis points decrease in the fed funds rate, we estimate our net interest margin will fluctuate within a range of 2.38% to 2.55% during said period. Assuming a 100 basis points increase in the fed funds rate, we estimate our net interest margin will fluctuate within a range of 2.25% to 2.51%. Furthermore, a 200 basis points increase in the fed funds rate will cause our net interest margin to fluctuate between a range of 2.09% to 2.57%. The lower and higher values of such range meaning the lowest and highest net interest margin for any given quarter within the said twelve month period. These ranges are management’s estimates based on instantaneous rate shocks of 100 and 200 basis points and does not consider any asset/liability management strategy it could undertake given such interest rate changes.

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 increased $6.7 million for the three month period ended June 30, 2004, when compared to the same period in 2003. The primary reason for the increase was that the comparable 2003 quarter included a $7.0 million loss resulting from the liquidation of the Company’s portfolio of CBO’s and CLO’s on June 6, 2003, and included in loss on sales and valuation of loans, securities and other assets, as previously reported. Service charges on deposits accounts and other fees increased by $104,000 or 1.49%. The increase was mainly due to higher activity associated with charges on deposit accounts, other fees generated by our asset-based lending operation, and increases in other areas resulting from the Company’s overall growing volume of business.

For the six months ended June 30, 2004, other income increased $21.9 million, when compared to the same period in 2003. The increase was mainly due to the net loss of $22.7 million recorded during the same period in 2003, relating to our investment in CBO’s and CLO’s. Service charges on deposit accounts and other fees increased by $785,000 or 6.00%, when compared to the six months ended June 30, 2003.

Operating Expenses

Total operating expenses increased $5.5 million or 27.70% for the three-month period ended June 30, 2004, and $9.9 million or 25.46% for the six months ended June 30, 2004, when compared to the corresponding periods in 2003. Salaries and employees' benefits, which is the largest component of total operating expenses, increased $815,000 or 9.96% for the second quarter of year 2004, and $1.6 million or 9.70% for the six months ended June 30, 2004, as compared to the corresponding periods in 2003. Such increases are attributed to the continued expansion of the Company, including increases in personnel, normal salary increases and related employees’ benefits, principally attributed to our continued expansion in the San Juan Metropolitan area. At June 30, 2004, the Company had 1,170 full-time employees, including its executive officers, an increase of 92 employees or 8.53%, since June 30, 2003.

Advertising expense increased by $1.6 million or 91.16% for the three months ended June 30, 2004, and $2.9 million or 95.01% for the six months ended June 30, 2004, when compared to the same periods in 2003. This increase is principally due to various radio, newspaper and television campaigns promoting Westernbank’s institutional image and positioning the Company for its strategy in the San Juan Metropolitan area, as well as the 2004 Individual Retirement Accounts (“IRA’s”) promotional campaign.

Operating expenses, other than salaries and employees’ benefits, and advertising discussed above, increased $3.0 million or 31.01% for the second quarter of 2004, and $5.5 million or 28.12% for the six months ended June 30, 2004, resulting primarily from costs associated with the Company’s strong growth and expansion in all of its business areas.

Eventhough such increases in operating expenses, the Company maintained operating expenses at adequate levels, and achieved an efficiency ratio of 30.91% for the second quarter of year 2004, and 30.62% for the six months ended June 30, 2004, well below management’s long term target of 40% to 42%.

Asset Quality

W Holding asset quality continues to be strong, as measured by our reserves to total loans, non-performing loans as a percentage of total loans and net charge-offs to average loans. W Holding is essentially a secured lender having 82% of its loan portfolio as of June 30, 2004 secured by real estate. The delinquency ratio on the commercial loan portfolio for the categories of 60 days and over, decreased 22 basis points to 0.77% (less than 1%), when compared to 0.99% reported for the year ago period. The delinquency ratio on the consumer loan portfolio, including the Expresso of Westernbank loan portfolio, for the categories of 60 days and over increased 9 basis points to 1.31% at June 30, 2004, when compared to 1.22% for the comparable period last year. Our combined delinquency on all portfolios for the categories of 60 days and over continues to be below our benchmark of 1% for both periods, being 0.79% at June 30, 2004 and 0.94% at June 30, 2003.

The provision for possible loan losses amounted to $10.8 million for the quarter ended June 30, 2004, up from $6.6 million for the same period in the previous year, an increase of $4.2 million or 64.03%. The allowance for possible loan losses reached $72.4 million as of June 30, 2004. The increase in the provision for loan losses is attributable to the overall growth in the Company’s loan portfolio, particularly those of its commercial real estate loans portfolio and the loan portfolio of its asset-based lending division, Westernbank Business Credit, and to cover the write-off experience of the loan portfolio of the Expresso of Westernbank division. The commercial real estate loan portfolio grew to $2.8 billion at June 30, 2004, an increase of $516.3 million or 22.83%, when compared to December 31, 2003. On a year to year basis, the commercial real estate loan portfolio grew $820.4 million or 41.91%, from $2.0 billion at June 30, 2003. Westernbank Business Credit loan portfolio grew to $785.9 million at June 30, 2004, an increase of $145.0 million or 22.60%, when compared to December 31, 2003, and an increase of $129.3 million or 19.69%, when compared to June 30, 2003. The Expresso of Westernbank loan portfolio decreased from $155.6 million at December 31, 2003, to $146.5 million at June 30, 2004, a decrease of $8.8 million or 5.66%. On a year to year basis, the Expresso of Westernbank loan portfolio decreased by $2.9 million or 1.94% from $149.7 million at June 30, 2003. The decrease in the Expresso of Westernbank loan portfolio was mainly due to management’s strategy of stabilizing charge-offs as the division portfolio matures and average yields continue to increase. The average yields of Westernbank Business Credit and the Expresso of Westernbank loan portfolios were 6.19% and 19.39%, respectively, for the six months ended June 30, 2004.

Non-performing loans stand at $36.0 million or 0.66% (less than 1%) of Westernbank’s loan portfolio at June 30, 2004, unchanged on a percentage basis from the 0.66% reported at December 31, 2003. In absolute amounts, non-performing loans increased by $4.8 million, from $31.2 million as of December 31, 2003. Excluding real estate loans, these ratios were 0.04% and 0.03% at June 30, 2004 and December 31, 2003, 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 $2.3 million, when compared to December 31, 2003. This increase is mostly attributed to one commercial loan with a principal balance of $2.4 million, which is collateralized by real estate. At June 30, 2004, this loan had a specific valuation allowance of $1.5 million. At June 30, 2004, the allowance for possible loan losses was 201.09% of total non-performing loans (reserve coverage), slightly up from the 197.17% reported at December 31, 2003. Moreover, of the total allowance of $72.4 million, $9.4 million is for our estimated specific allowance and the remaining $63.0 million is for our general allowance.

Net loans charge-off in the second quarter of 2004 were $5.1 million or 0.39% (annualized) to average loans, compared to $3.0 million or 0.29% to average loans for the same period in 2003, an increase of $2.1 million, but still very low charge-off ratios for both periods. For the six month period ended June 30, 2004, net charge-offs amounted to $9.0 million or 0.35% to average loans, an increase of $4.1 million, when compared to $4.8 million or 0.24% to average loans in 2003. Both increases were primarily due to loans charged-off in the ordinary course of business, mainly in our consumer loan portfolio. The increase in consumer loans charged-off for the quarter and six months ended June 30, 2004, was principally due to loans charged-off by the Expresso of Westernbank division, which amounted to $3.4 million and $6.7 million, respectively, for the three and six month periods ended June 30, 2004. The delinquency ratio of the Expresso of Westernbank division portfolio at June 30, 2004, was 2.38% for the categories of 60 days and over. This ratio is slightly above management’s estimate and accordingly, management is further emphasizing an increase in the overall yield charged on such loans, continuously revising its underwriting policies as well as increasing the level of collateralized loans, to compensate for such higher delinquency. The loan portfolio of Expresso of Westernbank collateralized by real estate at June 30, 2004, accounts for 11.89% of the outstanding balance, attaining our goal of having at least 10% of the Expresso loan portfolio collateralized by real estate.

Total Loans, Investments and Deposits

Loans receivable-net, grew $714.8 million or 15.26% to $5.4 billion at June 30, 2004, compared to $4.7 billion at December 31, 2003, and $1.1 billion or 26.83% compared to $4.3 billion at June 30, 2003. These increases reflect the Company’s emphasis on continued growth in its loan portfolio through commercial real estate, asset-based, consumer and construction lending. As a result, the portfolio of real estate loans secured by first mortgages, increased from $3.0 billion as of June 30, 2003, to $3.4 billion as of December 31, 2003, and to $3.9 billion as of June 30, 2004, up by $944.7 million or 31.49% on a year to year basis and $586.6 million or 17.47%, when compared to December 31, 2003. Commercial real estate loans secured by first mortgages increased from $2.0 billion as of June 30, 2003, to $2.3 billion as of December 31, 2003, and to $2.8 billion as of June 30, 2004, an increase of $820.4 million or 41.91% on a year to year basis and $516.3 million or 22.83%, when compared to December 31, 2003. 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 $1.3 billion as of June 30, 2003, to $1.4 billion as of December 31, 2003, and further increased to $1.5 billion as of June 30, 2004, up by $214.5 million or 16.36% on a year to year basis and $139.0 million or 10.02%, when compared to December 31, 2003. The unsecured portion of the Expresso of Westernbank loan portfolio increased slightly from $128.9 million at December 31, 2003, to $129.1 million at June 30, 2004, as management has sought to stabilize charge offs as the portfolio matures and average yields continue to increase. Attached as Exhibit IV is a supplemental unaudited data schedule providing additional information on W Holding loan portfolio.

W Holding investment portfolio, excluding short-term money market instruments, stands at $6.6 billion at June 30, 2004, growing $867.7 million or 15.01% in comparison to December 31, 2003. Such growth is focused on tax-exempt securities guaranteed by the United States Government and agencies, accounting for 80.20% of our investment portfolio as of June 30, 2004. The investment portfolio at June 30, 2004, had an average contractual maturity of 65 months. The Company’s interest rate risk model, takes into consideration the callable feature of certain investment securities. Taking into consideration the callable features of these securities, the investment portfolio as of June 30, 2004, had a remaining average maturity of 14 months. However, no assurance can be given that such levels will be maintained in future periods.

As of June 30, 2004, total deposits reached $6.1 billion, from $5.4 billion at December 31, 2003, representing an increase of $690.7 million or 12.83%, while federal funds bought and securities sold under agreements to repurchase increased to $5.8 billion, from $5.0 billion at December 31, 2003, an increase of $797.3 million or 15.80%, mainly to fund W Holding strong loans-net growth of 15.26% and investments growth of 15.01%.

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.

WESTERNBANK PUERTO RICO, a wholly-owned subsidiary of W HOLDING COMPANY, INC., is the second largest commercial bank in Puerto Rico, based on total assets, operating throughout 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.

FINANCIAL HIGHLIGHT
AND ADDITIONAL EXHIBITS

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