Related Party Transactions and Outside Related Director Information


9/30/2005 Proxy Information

On June 30, 2005, we sold Las Cumbres building, a two-story structure located at 1990 Las Cumbres Avenue, San Juan, Puerto Rico, for the amount of $3,355,000 to Jorge Luis Fernández and his spouse. Mr. Fernandez is the brother of José Enrique Fernández, the Chairman of our Board of Directors. The building was our principal property for banking operations and other services. The Oriental Bank and Trust’s mortgage banking division and one of our principal branches and financial services office (brokerage and insurance) are located in this building. The book value of this property at June 30, 2005, was $1,300,000. Also, on the same date, Oriental Bank and Trust entered into a triple net lease agreement with the new owner for a period of 10 years. In summary, the lease agreement provides for an annual rent of $324,000 or a monthly rent of $27,000 for 13,200 square feet of office space, including 42 parking spaces. During the lease term, the rental fee will increase by 6% every three years, except for the last year on which the increment will be 2%. the transaction was accounted in accordance to the provisions of SFAS 13, as amended by SFAS 98, “Accounting for Leases: Sale-leaseback Transactions Involving Real Estate,” and accordingly, the lease portion of the transaction was classified as an operating lease and the gain on the sale portion of the transaction was deferred and will be amortized to income over the lease term (10 years) in proportion to the related gross rental expense for the leased-back property each period.