Fitch Downgrades IDR of R&G Financial to 'BB-'; Negative Outlook

Business Wire, May 7, 2007

NEW YORK -- Fitch Ratings downgraded the long-term issuer default rating (IDR) of R&G Financial Corporation (R&G) to 'BB-' from 'BB'. This downgrade reflects a longer-than-expected delay in releasing its audited financials, regulatory and legal issues, deteriorating operating results in 2006 and ongoing concerns regarding the mix and level of capitalization. The Rating Outlook remains Negative. A complete list of ratings follows this release.

R&G is lagging its Puerto Rican peers in the resolution of its accounting issues. In late March 2007, R&G announced that it will not file its 2004 10-K/A in 1Q07 as previously expected. Reports for subsequent years will not be filed until after the 2004 10-K/A. R&G reports that it has made substantial progress on the restatement process, but continues to not express a view regarding the completion of this process. In the aftermath of its accounting and regulatory issues, new management is in place, including a new CEO and CFO, among others.

In 2006, R&G reported after-tax losses (based on its regulatory filings) versus profits in the prior year. Performance was hampered by NIM pressure, lower non-interest income, and accounting and legal costs. Capital ratios declined substantially in 2006, following estimated accounting restatement charges and the unwinding of its mortgage sales. Capital ratios still exceed regulatory minimums, but high portions of trust preferred securities and preferred stock are in the capital structure. Unless R&G is able to issue additional common equity, its capital position will likely remain comparatively weak.

Resolution of the Negative Rating Outlook will be driven by the following factors: the establishment of timely audited financial statements, resolution of regulatory issues, as well as greater clarity regarding the potential negative impact of an SEC investigation and shareholder class action suit. Furthermore, a stabilization of operating performance and an improvement in the level and mix of capitalization would have to be attained.

Fitch downgrades the following ratings with a Negative Outlook:

R&G Financial Corporation

--Long-term IDR to 'BB-' from 'BB';

--Preferred stock to 'B-' from 'B'.

R-G Premier Bank

--Long-term IDR to 'BB-' from 'BB';

--Long-term deposits to 'BB' from 'BB ';

--Individual to 'D' from 'C/D'.

R-G Crown Bank

--Long-term IDR to 'BB-' from 'BB';

--Long-term deposits to 'BB' from 'BB ';

--Individual to 'D' from 'C/D'.

R&G Mortgage

--Long-term IDR to 'BB-' from 'BB'.

Fitch affirms the following ratings:

R&G Financial Corporation

--Individual at 'D';

--Support at '5'.

R-G Premier Bank

--Short-term Issuer at 'B';

--Short-term Deposits at 'B';

--Support at '5'.

R-G Crown Bank

--Short-term Issuer at 'B';

--Short-term Deposits at 'B';

--Support at '5'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.