Edgar Filing: R&G FINANCIAL CORP

R&G FINANCIAL CORPORATION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


¨		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
		EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003


à		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
		EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
		TO .

Commission file number: 000-21137

R&G FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Puerto Rico		66-0532217


(State of incorporation		(I.R.S. Employer
or organization)		Identification No. )

280 Jesús T. Piñero Avenue
Hato Rey, San Juan, Puerto Rico		00918


(Address of principal executive offices)		(Zip Code)

(787) 758-2424

(Registrant’s telephone number, including area code)

Indicate by checkmark whether Registrant (a) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report (s) and (b) has been subject to such filing requirements for at least 90 days.

YES x NO o

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
x Yes oNO

Number of shares of Class B Common Stock outstanding as of November 11, 2003: 19,670,888 (Does not include 14,373,056 Class A Shares of Common Stock which are exchangeable into Class B Shares of Common Stock at the option of the holder.)

TABLE OF CONTENTS


PART 1-FINANCIAL INFORMATION
	ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2: Management’s Discussion and Analysis
	Item 3: Quantitative and Qualitative Disclosures about Market Risk
	Item 4: Controls and Procedures
PART II — OTHER INFORMATION
	Item 1: Legal Proceedings
	Item 2: Changes in Securities
	Item 3: Defaults Upon Senior Securities
	Item 4: Submission of Matters to a Vote of Security Holders
	Item 5: Other Information
	Item 6: Exhibits and Reports on Form 8-K
SIGNATURES
EX-10.8 GUARANTEE AGREEMENT DATED AUGUST 8, 2003
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO

R&G FINANCIAL CORPORATION

INDEX


			Page
Part I - Financial Information
Item 1. Consolidated Financial Statements				3
		Consolidated Statements of Financial Condition as of September 30, 2003 (Unaudited) and December 31, 2002		3
		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2003 and 2002 (Unaudited)		4
		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2003 and 2002 (Unaudited)		5
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 (Unaudited)		6
		Notes to Unaudited Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis				19
Item 3. Quantitative and Qualitative Disclosures about Market Risk				30
Item 4. Controls and Procedures				30
Part II - Other Information
Item 1. Legal Proceedings				31
Item 2. Changes in Securities				31
Item 3. Defaults Upon Senior Securities				31
Item 4. Submission of Matters to a Vote of Security Holders				31
Item 5. Other Information				31
Item 6. Exhibits and Reports on Form 8-K				31
	Signatures			34

PART 1-FINANCIAL INFORMATION

ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

R&G FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


			September 30, 2003		December 31, 2002

			(Unaudited)
			(Dollars in thousands)
ASSETS
Cash and due from banks			$	81,774	$	128,085
Money market investments:
	Securities purchased under agreements to resell			53,698		—
	Time deposits with other banks			41,306		65,401
	Short-term investments			—		4,157
Mortgage loans held for sale, at lower of cost or market				240,535		258,738
Mortgage-backed and investment securities held for trading, at fair value				33,821		48,651
Trading securities pledged on repurchase agreements, at fair value				7,128		26,106
Mortgage-backed and investment securities available for sale, at fair value				2,135,193		1,819,257
Available for sale securities pledged on repurchase agreements, at fair value				1,040,408		737,656
Mortgage-backed and investment securities held to maturity, at amortized cost (estimated market value: 2003 - $15,927; 2002 - $30,885)				15,436		30,661
Held to maturity securities pledged on repurchase agreements, at amortized cost (estimated market value: 2003 - $57,810; 2002 - $45,926)				55,884		44,930
Loans receivable, net				3,754,039		2,759,689
Accounts receivable, including advances to investors, net				40,911		32,100
Accrued interest receivable				42,425		40,401
Servicing asset				124,149		142,334
Premises and equipment				40,358		38,665
Other assets				127,936		100,415

			$	7,835,001	$	6,277,246

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
	Deposits		$	3,431,976	$	2,802,324
	Federal funds purchased			35,000		—
	Securities sold under agreements to repurchase			2,112,382		1,489,758
	Notes payable			194,632		194,607
	Advances from FHLB			1,098,725		940,725
	Other borrowings			57,739		45,066
	Accounts payable and accrued liabilities			165,844		134,427
	Other liabilities			13,571		8,121

				7,109,869		5,615,028

Stockholders’equity:
	Preferred stock, $.01 par value, 20,000,000 shares authorized:
		Non-cumulative perpetual Monthly Income Preferred Stock, $25 liquidation value:
		7.40% Series A, 2,000,000 shares authorized, issued and outstanding		50,000		50,000
		7.75% Series B, 1,000,000 shares authorized, issued and outstanding		25,000		25,000
		7.60% Series C, 2,760,000 shares authorized, issued and outstanding		69,000		69,000
		7.25% Series D, 2,760,000 shares authorized, issued and outstanding		69,000		69,000
	Common stock:
		Class A - $.01 par value, 40,000,000 shares authorized, 14,373,056 issued and outstanding (2002 - 14,553,056)		144		145
		Class B - $.01 par value, 60,000,000 shares authorized, 19,670,888 issued and outstanding (2002-19,440,206)		197		194
	Additional paid-in capital			115,177		114,951
	Retained earnings			366,720		294,592
	Capital reserves			17,419		17,419
	Accumulated other comprehensive income			12,475		21,917

				725,132		662,218

			$	7,835,001	$	6,277,246

The accompanying notes are an integral part of these statements.

R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME


					Three month						Nine month
					period ended						period ended
					September 30,						September 30,

					2003			2002			2003			2002

					(Unaudited)						(Unaudited)
					(Dollars in thousands except for per share data)
Interest income:
	Loans				$	59,528		$	50,086		$	166,490		$	127,569
	Money market and other investments					8,003			9,480			24,593			28,113
	Mortgage-backed securities					27,816			29,346			85,078			83,564

		Total interest income				95,347			88,912			276,161			239,246

Interest expense:
	Deposits					23,362			23,826			68,023			65,416
	Securities sold under agreements to repurchase					12,144			12,708			37,729			37,764
	Notes payable					1,519			1,795			5,528			5,152
	Other					10,579			9,273			30,348			21,550

		Total interest expense				47,604			47,602			141,628			129,882

Net interest income						47,743			41,310			134,533			109,364
Provision for loan losses						(4,292	)		(3,970	)		(12,956	)		(13,520	)

Net interest income after provision for loan losses						43,451			37,340			121,577			95,844

Other income:
	Net gain on origination and sale of loans					30,167			24,380			107,970			57,841
	Loan administration and servicing fees					12,587			11,193			38,989			30,817
	Service charges, fees and other					7,943			4,539			20,890			12,471

						50,697			40,112			167,849			101,129

		Total revenues				94,148			77,452			289,426			196,973

Operating expenses:
	Employee compensation and benefits					15,377			12,535			45,030			32,087
	Office occupancy and equipment					6,489			5,138			18,265			14,106
	Other administrative and general					26,638			27,712			99,887			61,681

						48,504			45,385			163,182			107,874

Income before income taxes						45,644			32,067			126,244			89,099

Income tax expense:
	Current					9,179			5,880			21,985			18,575
	Deferred					2,173			1,139			9,376			1,324

						11,352			7,019			31,361			19,899

		Net income			$	34,292		$	25,048		$	94,883		$	69,200

Earnings per common share - Basic					$	0.89		$	0.64		$	2.44		$	1.83

			- Diluted		$	0.89		$	0.63		$	2.43		$	1.81

Weighted average number of shares outstanding - Basic						34,043,641			33,053,988			34,036,563			31,892,007
				- Diluted		34,193,941			33,301,846			34,185,327			32,209,740

The accompanying notes are an integral part of these statements.

R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three month						Nine month
		period ended						period ended
		September 30,						September 30,

		2003			2002			2003			2002

		(Unaudited)						(Unaudited)
		(Dollars in thousands)
Net income		$	34,292		$	25,048		$	94,883		$	69,200

Other comprehensive income, before tax:
Unrealized gains (losses):
Cash flow hedges			2,482			(6,749	)		843			(7,954	)

Investment securities:
	Arising during period		(5,816	)		12,651			(15,477	)		35,265
	Less: Reclassification adjustments for gains included in net income		(11	)		(228	)		(831	)		(449	)

			(5,827	)		12,423			(16,308	)		34,816

			(3,345	)		5,674			(15,465	)		26,862
Income tax (expense) benefit related to items of other comprehensive income			1,295			(2,226	)		6,023			(10,476	)

Other comprehensive (loss) income, net of tax			(2,050	)		3,448			(9,442	)		16,386

Comprehensive income, net of tax		$	32,242		$	28,496		$	85,441		$	85,586

The accompanying notes are an integral part of these statements.

R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS


					Nine month period ended September 30,

					2003			2002
					(Unaudited)
					(Dollars in thousands)
Cash flows from operating activities:
	Net income				$	94,883		$	69,200

		Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				7,055			5,132
		Amortization of premium on investments and mortgage-backed securities, net				10,557			3,042
		Scheduled amortization of servicing asset				17,134			13,669
		Impairment charges on servicing asset				32,113			13,687
		Provision for loan losses				12,956			13,520
		Gain on sales of mortgage-backed and investment securities available for sale				(831	)		(449	)
		Unrealized loss (gain) on trading securities and derivative instruments, net				853			(151	)
		Increase in mortgage loans held for sale				(13,096	)		(54,181	)
		Net decrease in securities held for trading				33,043			20,739
		Increase in receivables				(10,835	)		(13,896	)
		Increase in other assets				(27,835	)		(6,687	)
		Increase in notes payable and other borrowings				12,698			2,356
		Increase in accounts payable and accrued liabilities				38,534			22,619
		Increase in other liabilities				5,450			1,343

			Total adjustments			117,796			20,743

			Net cash provided by operating activities			212,679			89,943

Cash flows from investing activities:
		Purchases of investment securities				(2,043,565	)		(889,752	)
		Proceeds from sales of securities available for sale				121,068			431,949
		Principal repayments on mortgage-backed securities and redemption of securities available for sale				1,335,265			581,476
		Net assets acquired, net of cash received				—			(63,679	)
		Proceeds from sales of loans				129,195			—
		Net originations of loans				(1,136,501	)		(820,786	)
		Purchases of FHLB stock, net				(22,820	)		(19,171	)
		Acquisition of premises and equipment				(7,873	)		(6,796	)
		Acquisition of servicing rights				(31,062	)		(37,285	)

			Net cash used in investing activities			(1,656,293	)		(824,044	)

Cash flows from financing activities:
		Increase in deposits – net				629,652			284,987
		Increase in federal funds purchased				35,000			—
		Increase in securities sold under agreements to repurchase - net				622,624			92,234
		Advances from FHLB, net				158,000			288,500
		Net proceeds from issuance of preferred stock				—			66,591
		Proceeds from issuance of common stock				227			46,096
		Cash dividends:
			Common stock			(10,841	)		(7,876	)
			Preferred stock			(11,913	)		(10,984	)

				Net cash provided by financing activities		1,422,749			759,548

Net (decrease) increase in cash and cash equivalents						(20,865	)		25,447
Cash and cash equivalents at beginning of period						197,643			157,724

Cash and cash equivalents at end of period					$	176,778		$	183,171

Cash and cash equivalents include:
		Cash and due from banks			$	81,774		$	100,577
		Securities purchased under agreements to resell				53,698			—
		Time deposits with other banks				41,306			82,594

					$	176,778		$	183,171

The accompanying notes are an integral part of these statements.

R&G FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - REPORTING ENTITY AND BASIS OF PRESENTATION

Reporting entity

The accompanying unaudited consolidated financial statements include the accounts of R&G Financial Corporation (the “Company”), a diversified financial services company, and its wholly-owned subsidiaries, R-G Premier Bank of Puerto Rico (“Premier Bank”), a Puerto Rico commercial bank, R-G Crown Bank (formerly Crown Bank, F.S.B.) (“Crown Bank”), a Florida-based federal savings bank, R&G Mortgage Corp. (“R&G Mortgage”), Puerto Rico’s second largest mortgage banker, R-G Investments Corporation, a Puerto Rico licensed securities broker-dealer, and Home & Property Insurance Corp., a Puerto Rico insurance agency. The Company, currently in its 31st year of operations, operates as a financial holding company, pursuant to the provisions of the Gramm-Leach-Bliley Act of 1999, and is engaged in banking, mortgage banking, and securities and insurance brokerage through its subsidiaries.

Premier Bank and Crown Bank provide a full range of banking services, including residential, commercial and personal loans and a variety of deposit products. Premier Bank operates through thirty-one branches located mainly in the northeastern part of the Commonwealth of Puerto Rico. Crown Bank operates in the Orlando and Tampa/St. Petersburg metropolitan areas through fifteen full service branches and six commercial lending offices. Premier Bank also provides private banking and trust and other financial services to its customers. Premier Bank and Crown Bank are subject to the regulations of certain federal and Puerto Rico agencies, and undergo periodic examinations by those regulatory agencies.

Crown Bank is also engaged in the origination of FHA-insured, VA-guaranteed and privately insured first and second mortgage loans on residential real estate (1 to 4 families) in the States of New York, New Jersey, Connecticut, North Carolina and Florida, through its wholly-owned subsidiary, Continental Capital Corporation (“Continental Capital”).

R&G Mortgage is engaged primarily in the business of originating FHA-insured, VA- guaranteed, and privately insured first and second mortgage loans on residential real estate (1 to 4 families), directly and through its wholly-owned subsidiary, Mortgage Store of Puerto Rico, Inc. R&G Mortgage pools FHA and VA loans into GNMA mortgage-backed securities and collateralized mortgage obligation certificates for sale to investors. After selling the loans, it retains the servicing on the loans. R&G Mortgage is also a FNMA and FHLMC seller-servicer of conventional loans.

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. However, in the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (principally consisting of normal recurring accruals) necessary for a fair presentation of the Company’s financial condition as of September 30, 2003 and the results of operations and changes in its cash flows for the three and nine months ended September 30, 2003 and 2002.

The results of operations for the three and nine month periods ended September 30, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2002.

Basis of consolidation

All significant intercompany balances and transactions have been eliminated in the accompanying unaudited financial statements.

New accounting pronouncements

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees of Indebtedness of Others (an interpretation of FASB Statements No. 5, 57, 107 and rescission of FASB Interpretation No. 34)” (“FIN No. 45”). FIN No. 45 clarifies the requirements of FASB Statement No. 5, “Accounting for Contingencies” relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. FIN No. 45 requires a guarantor of certain guarantees to recognize at its inception a liability for the fair value of the obligation undertaken when issuing the guarantee, and also expands the related disclosures. The provisions of initial recognition are effective for guarantees issued or modified after December 31, 2002. The adoption of FIN No. 45 on January 1, 2003 did not have a significant impact on the Company’s consolidated financial statements.

On April 30, 2003 the FASB issued SFAS No. 149, “Amendment of Statement 133 or Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivatives instruments embedded in other contracts, and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This Statement is effective for contracts entered into or modified after June 30, 2003. The adoption of this Statement on July 1, 2003 had no significant effect on the consolidated financial condition or results of operations of the Company.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” FAS 150 represents phase 1 of the FASB’s broader project on (1) distinguishing between liability and equity instruments and (2) accounting for instruments that have characteristics of both types of instruments (the “liabilities and equity project”). SFAS No. 150 covers a limited number of instruments that are to be classified as liabilities and specifies that such instruments embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. It is expected that phase 2 of the project will address (1) separating compound financial instruments (including convertible debt and conditionally redeemable stock) that have characteristics of liabilities and equity into their liability and equity components, (2) the definition of an ownership relationship, and (3) the definition of liabilities in FASB Concepts Statement No. 6 (CON 6), “Elements of Financial Statements.”

Under the provisions of this Statement, SFAS No. 150 was effective July 1, 2003 for the Company. Among the instruments specified by SFAS No. 150, mandatorily redeemable financial instruments must be classified as liabilities. The Company has $35 million of guaranteed preferred beneficial interest in company junior subordinated deferrable interest debentures (“trust preferred securities”) that had already been classified as other borrowings in its consolidated statements of financial condition as of June 30, 2003 and accordingly, the adoption of this Statement did not have any effect on the Company’s consolidated financial statements.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”). Under FIN 46 entities that would be assessed for consolidation are typically referred to as Special-Purposed Entities (“SPEs”), although non-SPE-type entities may also be subject to the guidance. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entities residual returns, or both. FIN 46 was effective immediately for variable interest entities created after January 31, 2003. For variable interest entities created prior to February 1, 2003, the provisions of FIN 46 became effective July 1, 2003. On October 9, 2003 the FASB opted to defer to October 1, 2003 the effective date for variable interest entities created prior to February 1, 2003. The provisions of FIN 46 continue to apply to variable interest entities created after January 31, 2003.

Under the provisions of FIN 46, effective July 1, 2003, the Company deconsolidated a limited number of vehicles, consisting of the wholly-owned Delaware statutory business trusts (“R&G Capital Trust I and II”) discussed in Note 1 on pages 64 of R&G Financial’s 2002 Annual Report, which had issued trust preferred securities. As discussed above, the Company had classified its $35 million trust preferred securities as borrowings in its consolidated statements of financial condition prior to such deconsolidation. The primary effect of deconsolidating these trusts was to change the balance sheet classification of the liabilities from guaranteed preferred beneficial interest in company junior subordinated deferrable interest debentures to long-term debt.

The deconsolidation requirements were also applied to another wholly-owned Delaware statutory business trust (“R&G Capital Trust IV”) created by the Company in August 2003, which issued $15 million in trust preferred securities in a private placement, and will be applied to another wholly-owned Delaware statutory business trust (“R&G Capital Trust III”) which in October 2003 issued $100 million of trust preferred securities in a public offering. Based on interim guidance issued by the Federal Reserve Board, the deconsolidation of these vehicles pursuant to FIN 46 would not impact the Tier 1 capital treatment of the liabilities to the extent permitted under current regulations until notice is given to the contrary.

On October 31, 2003, the FASB issued an Exposure Draft of a Proposed Interpretation, “Consolidation of Variable Interest Entities – a modification of FIN 46” to modify and clarify certain of the provisions of FIN 46. Due to the complexity of FIN 46 and evolving interpretations, the Company continues to assess the accounting and disclosure impact of FIN 46 on all of its relationships with variable interest entities. However, based on presently available information, the implementation of FIN 46 is not expected to have a material impact on the Company’s consolidated balance sheet, earnings or capital resources.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per common share are computed by dividing net income (less preferred stock dividends) by the weighted average number of shares of common stock outstanding. The weighted average number of outstanding stock options granted in connection with the Company’s Stock Option Plan (150,300 and 247,858 during the three months ended September 30, 2003 and 2002, respectively, and 148,764 and 317,733 during the nine month periods ended September 30, 2003 and 2002, respectively), are included in the weighted average number of shares for purposes of the diluted earnings per share computation. No other adjustments are made to the computation of basic earnings per share to arrive at diluted earnings per share.

Dividends per share on common stock declared and paid by the Company were as follows:


Three month			Nine month
period ended			period ended
September 30,			September 30,
2003	2002		2003		2002

$0.1140	$	0.086375	$	0.3180	$	0.243875

NOTE 3 - INVESTMENT AND MORTGAGE-BACKED SECURITIES

The carrying value and estimated fair value of investment and mortgage-backed securities by category are shown below. The fair value of investment securities is based on quoted market prices and dealer quotes, except for the investment in Federal Home Loan Bank (FHLB) stock which is valued at its redemption value.


		September 30,		December 31,
		2003		2002

		(Unaudited)
		(Dollars in thousands)
Mortgage-backed securities held for trading:
	GNMA certificates	$	—	$	9,741
	FHLMC certificates		37,034		65,016

			37,034		74,757

Investment securities held for trading:
	Mortgage securities portfolio mutual fund		2,589		—
	US government securities mutual fund		538		—
	HLB Bonds		480		—
	Other		308		—

			3,915		—

		$	40,949	$	74,757


		September 30, 2003				December 31, 2002
		Amortized		Fair		Amortized		Fair
		cost		value		cost		value

		(Unaudited)
		(Dollars in thousands)
Mortgage-backed securities available for sale:
Collaterized mortgage obligations (CMO):
	Due within one year	$	—	$	—	$	113	$	113
	Due from one to five years		7,440		7,589		17,178		17,288
	Due from five to ten years		11,278		11,394		31,571		32,219
	Due over ten years		932,119		933,357		404,981		409,830

			950,837		952,340		453,843		459,450

CMO residuals (interest only), and interest only strips (IO’s)			74,470		76,398		30,964		32,759

FNMA certificates:
	Due from one to five years		71		73		—		—
	Due from five to ten years		75,704		74,787		370		390
	Due over ten years		420,570		434,720		258,805		269,367

			496,345		509,580		259,175		269,757

FHLMC certificates:
	Due within one year		2		2		2		2
	Due from one to five years		5		5		20		21
	Due from five to ten years		21,581		21,306		889		935
	Due over ten years		486,279		494,836		738,041		756,228

			507,867		516,149		738,952		757,186

GNMA certificates:
	Due from one to five years		50		52		—		—
	Due from five to ten years		13,339		13,727		16,515		16,759
	Due over ten years		361,573		366,119		440,767		446,339

			374,962		379,898		457,282		463,098

			2,404,481		2,434,365		1,940,216		1,982,250

Investment securities available for sale:
Mortgage securities portfolio mutual fund			—		—		3,266		2,964

U.S. Government and Agencies securities:
	Due within one year		54,104		54,724		—		—
	Due from one to five years		370,789		372,458		263,632		267,896
	Due from five to ten years		120,630		122,790		137,756		143,695

			545,523		549,972		401,388		411,591

Corporate debt obligations:
	Due within one year		17,481		17,786		3,205		3,367
	Due from one to five years		48,589		51,707		52,779		55,283
	Due from five to ten years		2,463		2,444		2,979		2,385
	Due over ten years		—		—		9,805		9,808

			68,533		71,937		68,768		70,843

US Municipal debt obligations- Due over ten years			12,212		12,170		4,884		4,879

FHLB Stock			107,157		107,157		84,337		84,337

Other			—		—		49		49

			733,425		741,236		562,692		574,663

		$	3,137,906	$	3,175,601	$	2,502,908	$	2,556,913


		September 30, 2003				December 31, 2002

		Amortized		Fair		Amortized		Fair
		cost		value		cost		value

		(Unaudited)
		(Dollars in thousands)
Mortgage-backed securities held to maturity:
GNMA certificates:
	Due from one to five years	$	805	$	818	$	—	$	—
	Due from five to ten years		3,451		3,534		5,457		5,513
	Due over ten years		27,479		28,230		33,521		34,091

			31,735		32,582		38,978		39,604

FNMA certificates- Due over ten years			5,067		5,293		6,328		6,698

FHLMC certificates- Due over ten years			87		85		102		102

			36,889		37,960		45,408		46,404

Investment securities held to maturity:
United States Government and Agencies obligations:
	Due within one year		2,529		2,529		997		997
	Due from one to five years		—		—		1,500		1,500

			2,529		2,529		2,497		2,497

Puerto Rico Government and Agencies obligations:
	Due within one year		248		253		—		—
	Due from one to five years		26,156		27,694		26,586		26,804
	Due from five to ten years		5,398		5,201		1,000		1,005

			31,802		33,148		27,586		27,809

Other - Due from one to five years			100		100		100		100

			34,431		35,777		30,183		30,406

		$	71,320	$	73,737	$	75,591	$	76,810

In addition to the investment and mortgage-backed securities pledged on repurchase agreements and reported as pledged assets in the statement of financial condition, at September 30, 2003 the Company had investment and mortgage-backed securities pledged as collateral on repurchase agreements where the counterparties do not have the right to sell or repledge the assets as follows:


	Carrying Amount

	(Unaudited)
	(Dollars in thousands)
Mortgage-backed and investment securities available for sale, at fair value	$	1,114,887
Mortgage-backed securities held to maturity, at amortized cost		314

	$	1,115,201

NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans consist of the following:


			September 30,			December 31,
			2003			2002

			(Unaudited)
			(Dollars in thousands)
Real estate loans:
	Residential - first mortgage		$	2,237,384		$	1,473,051
	Residential - second mortgage			34,890			40,429
	Land			68,110			27,521
	Construction			449,392			355,367
	Commercial			806,292			633,233

				3,596,068			2,529,601
Undisbursed portion of loans in process				(177,282	)		(90,432	)
Net deferred loan costs (fees)				956			(45	)

				3,419,742			2,439,124

Other loans:
	Commercial			166,604			152,743
	Consumer:
	Secured by deposits			23,279			28,070
	Secured by real estate			56,651			68,156
	Other			123,990			104,715
Unearned interest				(498	)		(444	)

				370,026			353,240

		Total loans		3,789,768			2,792,364
	Allowance for loan losses			(35,729	)		(32,675	)

			$	3,754,039		$	2,759,689

The changes in the allowance for loan losses follow:


	Nine months ended
	September 30,

	2003			2002

	(Unaudited)
	(Dollars in thousands)
Balance, beginning of period	$	32,675		$	17,428
Provision for loan losses		12,956			13,520
Acquired reserves		—			7,463
Loans charged-off		(11,284	)		(9,763	)
Recoveries		1,382			798

Balance, end of period	$	35,729		$	29,446

The following table sets forth the amounts and categories of R&G Financial’s non-performing assets at the dates indicated.


			September 30,			December 31,
			2003			2002
			(Unaudited)

			(Dollars in thousands)
Non-accruing loans:
	Residential real estate (1)		$	60,928		$	43,281
	Residential construction			1,471			1,512
	Commercial real estate			21,796			29,375
	Commercial business			1,871			2,197
	Consumer unsecured			871			802

		Total		86,937			77,167

Accruing loans greater than 90 days delinquent:
	Residential real estate (1)			45			104
	Residential construction			168			—
	Commercial real estate			—			—
	Commercial business			301			261
	Consumer			352			667

		Total accruing loans greater than 90 days delinquent		866			1,032

		Total non-performing loans		87,803			78,199

Real estate owned (2)				18,577			15,544
Other repossessed assets				191			292

				18,768			15,836

		Total non-performing assets	$	106,571		$	94,035

		Total non-performing loans as a percentage of total loans		2.21	%		2.71	%

		Total non-performing assets as a percentage of total assets		1.36	%		1.50	%

		Allowance for loan losses as a percentage of total non-performing loans		40.69	%		41.79	%

		Allowance for loan losses as a percentage of total loans outstanding		0.90	%		1.13	%

		Net charge-offs to average loans outstanding		0.38	%		0.41	%

(1)		R&G Financial’s historical charge-offs with respect to residential real estate loans have been low. As a result, R&G Financial’s aggregate charge-offs as a percentage of total average loans outstanding amounted to 0.38% during the nine months ended September 30, 2003 and 0.41% during the year ended December 31, 2002.

(2)		Consist primarily of residential real estate foreclosed by the Company.

NOTE 5 - SERVICING ASSET

The changes in the servicing asset of the Company follows:


		Three months						Nine months
		period ended						period ended
		September 30,						September 30,

		2003			2002			2003			2002

		(Unaudited)						(Unaudited)
		(Dollars in thousands)
Balance at beginning of period		$	127,146		$	146,199		$	142,334		$	105,146
Rights originated			7,227			6,132			21,310			19,041
Crown Bank acquired			—			—			—			32,478
Rights purchased			242			12,117			9,752			22,682
Scheduled amortization			(5,889	)		(6,161	)		(17,134	)		(13,669	)
Impairment charges:
	Unscheduled amortization		(6,142	)		(3,774	)		(18,966	)		(7,187	)
	Reversal (provision) of valuation reserves		1,565			(6,959	)		(13,147	)		(6,500	)
Other adjustments			—			—			—			(4,437	)

Balance at end of period		$	124,149		$	147,554		$	124,149		$	147,554

NOTE 6 - DEPOSITS

Deposits are summarized as follows:


	September 30,		December 31,
	2003		2002

	(Unaudited)
	(Dollars in thousands)
Passbook savings	$	348,503	$	329,489

NOW accounts		120,469		100,031
Super NOW accounts		427,175		335,015
Regular checking accounts (non-interest bearing)		120,355		107,586
Commercial checking accounts (non-interest bearing)		284,164		282,769

		952,163		825,401

Certificates of deposit:
Under $100,000		646,993		652,065
$100,000 and over		1,478,964		991,504

		2,125,957		1,643,569

Accrued interest payable		5,353		3,865

	$	3,431,976	$	2,802,324

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Commitments to buy and sell GNMA certificates

As of September 30, 2003, the Company had open commitments to issue GNMA certificates of approximately $113.9 million.

Commitments to sell mortgage loans

As of September 30, 2003 the Company had commitments to sell mortgage loans to third party investors amounting to approximately $269.4 million.

Lease commitments

The Company is obligated under several noncancelable leases for office space and equipment rentals, all of which are accounted for as operating leases. The leases expire at various dates with options for renewals.

Other

At September 30, 2003, the Company is liable under limited recourse provisions resulting from the sale of loans to several investors, principally FHLMC. The principal balance of these loans, which are serviced by the Company, amounts to approximately $1.0 billion at September 30, 2003. At September 30, 2003, the Company has an allowance for recourse provisions of $3.9 million. Historical losses on recourse obligations have not been significant.

In April 2002, R&G Acquisition Holdings Corporation (a wholly-owned subsidiary of R&G Financial) (“RAC”), a Florida corporation and the holding company of Crown Bank, formed R&G Capital Trust I. R&G Capital Trust I issued $25.0 million of trust preferred securities in a private placement. In addition, in August 2003, RAC also formed R&G Capital Trust IV which issued $15 million of trust preferred securities in a private placement. Subsequent to September 30, 2003, the Company formed R&G Capital Trust III, which in October 2003 issued $100 million of trust preferred securities in a public offering (see Note 1). The Company has guaranteed certain obligations of RAC to R&G Capital Trust I and IV, and has guaranteed certain obligations of R&G Capital Trust III.

During the second quarter of 2003, the US Internal Revenue Service (“IRS”) began an income tax examination of the income tax returns for the year 2001 for the predecessor thrift holding company of Crown Bank prior to its acquisition by the Company in June 2002. Management believes that this examination should not result in any significant adverse effect on the Company’s financial condition or results of operations.

NOTE 8 - SUPLEMENTAL INCOME STATEMENT INFORMATION

Employee costs and other administrative and general expenses are shown in the Consolidated Statements of Income net of direct loan origination costs. Direct loan origination costs are capitalized as part of the carrying cost of mortgage loans and are offset against mortgage loan sales and fees when the loans are sold, or amortized as a yield adjustment to interest income on loans held for investment. Total employee costs and other expenses before capitalization follows:


	Three month period ended				Nine month period ended
	September 30,				September 30,
	2003		2002		2003		2002

	(Unaudited)				(Unaudited)
	(Dollars in thousands)
Employee costs	$	24,575	$	19,524	$	70,879	$	51,940

Other administrative and general expenses	$	28,912	$	29,083	$	105,132	$	65,530

NOTE 9 - INDUSTRY SEGMENTS

The following summarized information presents the results of the Company’s operations for its traditional banking and mortgage banking activities:


	(Dollars in thousands)
	Three month period ended September 30,

	2003								2002

	(Unaudited)

			Mortgage				Segments				Mortgage				Segments
	Banking		Banking		Other (1)		Totals		Banking		Banking		Other (1)		Totals

Revenues	$	56,578	$	34,747	$	4,484	$	95,809	$	39,991	$	35,733	$	2,310	$	78,034
Non-interest expenses		24,174		23,961		1,410		49,545		18,924		26,333		984		46,241
Income before income taxes	$	32,404	$	10,786	$	3,074	$	46,264	$	21,067	$	9,400	$	1,326	$	31,793


	Nine month period ended September 30,

	2003								2002

	(Unaudited)

			Mortgage				Segments				Mortgage				Segments
	Banking		Banking		Other (1)		Totals		Banking		Banking		Other (1)		Totals

Revenues	$	144,367	$	136,106	$	11,682	$	292,155	$	103,809	$	89,067	$	6,131	$	199,007
Non-interest expenses		67,879		94,153		3,764		165,796		49,378		58,996		2,466		110,840
Income before income taxes	$	76,488	$	41,953	$	7,918	$	126,359	$	54,431	$	30,071	$	3,665	$	88,167

(1)

Comprised of broker-dealer and insurance agency operations.

The following is a reconciliation of reportable segment revenues and income before income taxes to the Company’s consolidated amounts (unaudited):


	Three month period ended						Nine month period ended
	September 30,						September 30,
	2003			2002			2003			2002

	(Dollars in thousands)
Revenues:
Total revenues for reportable segments	$	95,809		$	78,034		$	292,155		$	199,007
Elimination of intersegment revenues		(2,029	)		(1,248	)		(4,012	)		(3,949	)
Corporate revenues		368			666			1,283			1,915

Total consolidated revenues	$	94,148		$	77,452		$	289,426		$	196,973

Income before income taxes:
Total income before income taxes for reportable segments	$	46,264		$	31,793		$	126,359		$	88,167
Elimination of intersegment profits		(767	)		(171	)		(644	)		(388	)
Unallocated corporate income		147			445			529			1,320

Income before income taxes, consolidated	$	45,644		$	32,067		$	126,244		$	89,099

Total assets of the Company among its industry segments and a reconciliation of reportable segment assets to the Company’s consolidated total assets as of September 30, 2003 and December 31, 2002 follows:


	September 30,			December 31,
	2003			2002

	(Unaudited)
	(Dollars in thousands)
Assets:
Banking	$	6,995,792		$	5,453,321
Mortgage Banking		885,387			908,660
Other		137,988			111,005

Total assets for reportable segments		8,019,167			6,472,986
Parent company assets		50,892			62,971
Elimination of intersegment balances		(235,058	)		(258,711	)

Consolidated total assets	$	7,835,001		$	6,277,246

Item 2: Management’s Discussion and Analysis

Cautionary Statement Regarding Forward-Looking Statements

A number of the presentations and disclosures in this Form 10-Q, including, without limitation, statements regarding the level of allowance for loan losses, the rate of delinquencies and amounts of charge-offs, and the rates of loan growth, and any statements preceded by, followed by or which include the words “may,” “could,” “should,” “will,” “would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar expressions constitute forward-looking statements. These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including our expectations and estimates with respect to our revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors (some of which are beyond our control). The following factors, among others, could cause our financial performance to differ materially from our goals, plans, objectives, intentions, expectations and other forward-looking statements:

	•		the strength of the United States economy in general and the strength of the regional and local economies within our markets;

	•		adverse changes in the local real estate market, as most of the Company’s loans are concentrated in Puerto Rico and Florida and a substantial portion of these loans have real estate as collateral;

	•		the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

	•		inflation, interest rate, market and monetary fluctuations;

	•		adverse changes in asset quality and the resulting credit risk-related losses and expenses;

	•		our timely development of new products and services in a changing environment, including the features, pricing and quality of our products and services compared to the products and services of our competitors;

	•		the willingness of users to substitute competitors’ products and services for our products and services;

	•		the impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;

	•		technological changes;

	•		changes in consumer spending and savings habits; and

	•		regulatory or judicial proceedings.

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

We do not intend to update our forward-looking information and statements, whether written or oral, to reflect change. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

General

R&G Financial Corporation (the “Company”) is a Puerto Rico chartered diversified financial holding company that, through its wholly-owned subsidiaries, is engaged in banking, mortgage banking, securities and insurance brokerage activities. The Company, currently in its 31st year of operations, operates 31 bank branches mainly located in the northeastern section of Puerto Rico, 15 bank branches in the Orlando and Tampa/St. Petersburg Florida markets, 6 mortgage and 6 commercial lending offices in the continental United States, and 44 mortgage offices in Puerto Rico, including 24 facilities located within Premier Bank’s branches.

The Company is engaged in providing a full range of banking services through R-G Premier Bank of Puerto Rico (“Premier Bank”), its Puerto Rico commercial bank, and R-G Crown Bank (formerly Crown Bank, F.S.B.) (“Crown Bank”), its Florida-based federal savings bank acquired in June 2002. Banking activities include commercial banking services, corporate and construction lending, consumer lending and credit cards, offering a variety of deposit products and, to a lesser extent, trust and investment services through private banking.

The Company is also engaged in mortgage banking activities. Mortgage banking activities are conducted through R&G Mortgage Corp., Puerto Rico’s second largest mortgage banker, The Mortgage Store of Puerto Rico, Inc., also a Puerto Rico mortgage company, and Continental Capital Corporation, a New York mortgage banking subsidiary of Crown Bank with offices in New York, North Carolina and Florida. Mortgage banking activities include the origination, purchase, sale and servicing of mortgage loans on single-family residences, the issuance and sale of various types of mortgage-backed securities, the holding of mortgage loans, mortgage-backed securities and other investment securities for sale or investment, and the purchase and sale of servicing rights associated with such mortgage loans and, to a lesser extent, the origination of construction loans and mortgage loans secured by income producing real estate and land (the “mortgage banking business”).

The Company is also engaged in insurance brokerage through Home & Property Insurance Corp., a Puerto Rico insurance agency, and securities brokerage through R-G Investments Corporation, a Puerto Rico licensed broker-dealer.

The Company is the second largest mortgage loans originator and servicer of mortgage loans on single family residences in Puerto Rico. R&G Financial’s mortgage servicing portfolio amounted to approximately $10.9 billion as of September 30, 2003, compared to $11.3 billion as of the same date a year ago, a decrease of 2.9%. R&G Financial’s servicing portfolio during such period was affected by a high level of prepayments due to lower interest rates. Nonetheless, R&G Financial’s strategy is to increase the size of its mortgage servicing portfolio by relying principally on internal loan originations.

As part of its strategy to maximize net interest income, R&G Financial maintains a substantial portfolio of mortgage-backed and investment securities. At September 30, 2003, the Company held securities available for sale with a fair market value of $3.2 billion, which included $2.4 billion of mortgage-backed securities, of which $363.0 million consisted of Puerto Rico GNMA securities, the interest on which is tax-exempt to the Company. These securities are generally held by the Company for longer periods prior to sale in order to maximize the tax-exempt interest received thereon. R&G Financial’s lower effective tax rate compared to the maximum statutory rate reflect the exemption under Puerto Rico law of the net interest income derived from such securities. In addition, the Company invests in certain U.S. agency securities that are exempt from Puerto Rico taxation and are not subject to federal income taxation. Finally, through an international banking subsidiary, the Company may invest in various U.S. securities, the income on which is exempt from Puerto Rico income taxation and is also not subject to federal income taxation.

A substantial portion of R&G Financial’s total mortgage loan originations has been comprised of refinance loans. R&G Financial’s future results could be adversely affected by a significant increase in mortgage interest rates that reduces refinancing activity. However, the Company believes that refinancing activity is less sensitive to interest rate changes in Puerto Rico than in the mainland United States because a significant amount of refinance loans are made for debt consolidation purposes.

R&G Financial customarily sells or securitizes into mortgage-backed securities substantially all the loans it originates, except for certain non-conforming conventional mortgage loans and certain consumer, construction, land, and commercial loans which are held for investment and classified as loans receivable.

Financial Condition

At September 30, 2003, total assets amounted to $7.8 billion, as compared to $6.3 billion at December 31, 2002. The $1.56 billion or 24.8% increase in total assets since the beginning of the year was primarily the result of a $618.9 million or 24.2% increase in mortgage-backed and investment securities available for sale, and a $994.4 million or 36.0% increase in loans receivable, net, due to record loan production during the nine month period ended September 30, 2003 of $3.4 billion, a 64.1% increase when compared to the corresponding period in 2002.

At September 30, 2003, R&G Financial had $3.5 billion of borrowings (consisting of securities sold under agreements to repurchase, notes payable, FHLB advances and other borrowings), compared to $2.7 billion at December 31, 2002. R&G Financial utilized repurchase agreements and deposits to fund its growth during the period; total deposits grew 22.5% from $2.8 billion at December 31, 2002 to $3.4 billion at September 30, 2003, whereas repurchase agreements increased by $622.6 million or 41.8%.

At September 30, 2003, R&G Financial’s allowance for loan losses totaled $35.7 million, which represented a $3.1 million or 9.3% increase from the level maintained at December 31, 2002. At September 30, 2003, R&G Financial’s allowance represented approximately 0.90% of the total loan portfolio and 40.69% of total non-performing loans. However, excluding R&G Financial’s residential loan portfolio, which has minimal charge-off experience, the allowance for loan losses to total loans and to total non-performing loans would have been 2.11% and 133.17%, respectively, at September 30, 2003, compared to 2.39% and 98.12% at December 31, 2002.

Non-performing loans amounted to $87.8 million at September 30, 2003, an increase of $9.6 million when compared to $78.2 million at December 31, 2002. The increase is primarily related to a $17.6 million increase in delinquent residential real estate loans over 90 days past due. At September 30, 2003, $61.0 million or 69.4% of non-performing loans consisted of residential mortgage loans in which R&G Financial has historically experienced a low level of loan charge-offs. As a result, R&G Financial’s aggregate charge-offs as a percentage of total average loans outstanding amounted to 0.38% during the nine months ended September 30, 2003 and 0.41% during the year ended December 31, 2002. Although loan delinquencies have historically been higher in Puerto Rico than in the United States, actual foreclosures and the resulting loan charge-offs have historically been lower than in the United States.

Real estate owned properties of the Company also increased 19.5% from $15.5 million at December 31, 2002 to $18.6 million at September 30, 2003. The increase is mostly related to residential real estate loans foreclosed by the Company during the period.

Stockholders’ equity increased from $662.2 million at December 31, 2002 to $725.1 million at September 30, 2003. The $62.9 million or 9.5% increase was due primarily to the net income recognized during the period, net of dividends paid.

Results of Operations

During the three and nine months ended September 30, 2003, R&G Financial reported net income of $34.3 million and $94.9 million, or $0.89 and $2.43 of earnings per diluted share, respectively, compared to net income of $25.0 million and $69.2 million or $0.63 and $1.81 of earnings per diluted share for the comparative periods in 2002. Such results reflect an increase in earnings per diluted share of 41.3% and 34.3% for the three and nine months periods ending September 30, 2003 over the comparable periods in 2002.

Net interest income increased by $25.2 million or 23.0% during the nine month period ended September 30, 2003 to $134.5 million, due to a $1.6 billion increase in the average balance of interest-earning assets, partially offset by a 21 basis point decrease in the net interest margin from 2.96% to 2.75%. Contributing to the increase in average earning assets were the assets of Crown Bank, the Company’s Florida-based banking subsidiary acquired in June 2002. The decrease in the Company’s net interest margin during the period is due primarily to the repricing at lower rates of interest of a portion of the Company’s earning assets as a result of an increase in prepayments in the Company’s loans and investment securities portfolio caused by lower interest rates.

The provision for loan losses amounted to $13.0 million during the nine months ended September 30, 2003, a 4.2% decrease over the prior comparable period, reflecting the fact that approximately 69.4% of total non-performing loans as of September 30, 2003 consist of residential mortgage loans, in which the Company’s historical charge-off experience has been very low.

R&G Financial also experienced an increase in non-interest income during the nine months ended September 30, 2003 over the comparable period. Net gain on sale of loans increased by $50.1 million or 86.7% over the prior comparable period, as a result of record loan production and sales. Total loan production during the nine months ended September 30, 2003 amounted to $3.4 billion compared to $2.1 billion during the prior comparable period. Loan administration and servicing fees also increased by $8.2 million or 26.5% over the comparable periods, due to an increase in the average outstanding loan servicing portfolio as a result of the $2.6 billion portfolio acquired in connection with the acquisition of Crown Bank in June 2002. Other fee income also increased by $8.4 million or 67.5%. Such increase reflects the added contributions made by the Company’s insurance agency and broker-dealer subsidiaries, as well as the fee income generated through the operations of Crown Bank.

Net interest income increased by $6.4 million or 15.6% to $47.7 million during the quarter ended September 30, 2003 over the prior comparable period, due to a 1.4 billion increase in the average balance of interest-earning assets, partially offset by a 24 basis points decrease in the net interest margin from 2.96% to 2.72%. Net gain on sale of loans increased 23.7% to $30.2 million during the three month ended September 30, 2003, together with a $1.4 million or 12.5% increase in loan administration and servicing fees and a $3.4 million or 75.0% increase in other fee income.

Total expenses increased by $55.3 million or 51.3% during the nine months ended September 30, 2003 over the comparable 2002 period, partially due to a $12.9 million or 40.3% increase in employee compensation and benefits associated with general growth in Company operations, including expenses associated with the operations of Crown Bank. The increase in total expenses was also due to a $38.2 million or 61.9% increase in other administrative and general expenses, which includes an $18.4 million increase in expenses associated with impairment charges (including unscheduled amortization) of the Company’s servicing asset, as well as increased expenses related to the operations of Crown Bank.

Increased unscheduled amortization amounts are a result of higher prepayment speeds in the Company’s servicing portfolio. The increases in prepayments reflect decreases in interest rates for new mortgage loans, which reached historically low levels during the second quarter of 2003. During the third quarter of 2003, however, interest rates for mortgage loans increased from the last quarter, and prepayment speeds have declined from the last quarter as a result. The value of the Company’s servicing portfolio is expected to increase if rates remain at the current or higher levels due to lower prepayment speeds. Unscheduled amortization amounts are expected to continue, however, although at a lower pace, until prepayment speeds further decline.

Total expenses increased by $3.1 million or 6.9% during the three month period ended September 30, 2003 over the prior comparable period, due to a $2.8 million or 22.7% increase in employee compensation and benefits, and a $1.4 million or 26.3% increase in occupancy expenses, partially offset

by a $1.1 million or 3.9% decrease in other general and administrative expenses, which includes a $6.2 million decrease in expenses associated with impairment charges of the Company’s servicing asset.

Interest Rate Risk Management

The following table summarizes the anticipated maturities or repricing or R&G Financial’s interest-earning assets and interest-bearing liabilities as of September 30, 2003, based on the information and assumptions set forth in the notes below. For purposes of this presentation, the interest earning components of loans held for sale and mortgage-backed securities held in connection with the Company’s mortgage banking business as well as all securities held for trading, are assumed to mature within one year. In addition, investments held by the Company which have call features are presented according to their contractual maturity date.


		Within			Four to			More Than			More Than
		Three			Twelve			One Year to			Three Years			Over Five
(Dollars in Thousands)		Months			Months			Three Years			to Five Years			Years			Total

Interest-earning assets(1):
Loans receivable		$	1,075,306		$	441,078		$	690,636		$	423,844		$	1,158,446		$	3,789,310
Mortgage loans held for sale			55,518			27,184			62,437			50,413			44,983			240,535
Mortgage-backed securities(2)(3)			152,097			433,091			510,370			294,201			1,108,940			2,498,699
Investment Securities(3)			190,226			189,589			191,709			195,381			22,456			789,361
Other interest-earning assets(4)			95,004			—			—			—			—			95,004

Total		$	1,568,151		$	1,090,942		$	1,455,152		$	963,839		$	2,334,825		$	7,412,909

Interest bearing liabilities:
Deposits (5)
	NOW and Super NOW accounts	$	27,381		$	76,669		$	84,282		$	68,268		$	291,044		$	547,644
	Passbook savings accounts		8,712			25,266			62,905			50,324			201,296			348,503
	Regular and commercial checking		20,226			56,632			62,256			50,427			214,977			404,518
	Certificates of deposit		246,064			742,110			633,675			502,215			1,893			2,125,957
FHLB advances			281,125			—			494,600			183,000			140,000			1,098,725
Securities sold under agreements to repurchase (6)			932,849			449,462			501,871			125,000			138,000			2,147,182
Other borrowings(7)			64,904			137,468			—			—			—			202,372

Total			1,581,261			1,487,607			1,839,589			979,234			987,210			6,874,901

Effect of hedging instruments			170,000			—			(65,000	)		(25,000	)		(80,000	)		—

Excess (deficiency) of interest-earning assets over interest-bearing liabilities		$	156,890		($	396,665	)	($	449,437	)	($	40,395	)	$	1,267,615		$	538,008

Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities		$	156,890		($	239,775	)	($	689,212	)	($	729,607	)	$	538,008

Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities as a percent of total assets			2.00	%		-3.06	%		-8.80	%		-9.31	%		6.87	%

(footnotes on following page)

(1)		Adjustable-rate loans are included in the period in which interest rates are next scheduled to adjust rather that in the period in which they are due, and fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization, in each case as adjusted to take into account estimated prepayments.

(2)		Reflects estimated prepayments in the current interest rate environment.

(3)		Includes securities held for trading, available for sale and held to maturity.

(4)		Includes securities purchased under agreement to resell, time deposits with other banks and federal funds sold.

(5)		Does not include non-interest-bearing deposit accounts.

(6)		Includes federal funds purchased, if any,

(7)		Comprised of warehousing lines, notes payable and other borrowings.

As of September 30, 2003, the Company had a one year negative gap of approximately $239.8 million, which constituted 3.1% of total assets at such date, compared to a positive gap of approximately $498.1 million or 7.9% of total assets at December 31, 2002. R&G Financial had a positive gap within one year until June 30, 2003, due primarily to an increasing amount of adjustable rate loans resulting from greater emphasis in commercial and construction lending as well as to the extension during 2001 and 2002 of the maturity dates of certain borrowings of the Company into longer-term maturities at very attractive rates, taking advantage of consecutive reductions in interest rates during such years. Even though the emphasis in commercial lending continues, R&G Financial’s one year negative gap as of September 30, 2003 is due to an increase in the amount of prepayments on its investments securities portfolio with call options, as a result of a relatively low interest rate environment. In addition, in light of the recent steepening of the yield curve, the Company opted to fund a larger proportion of its growth during the quarter through shorter term funding sources in an attempt to maximize its net interest income. Nonetheless, management continues the active management of its gap position in an attempt to maintain a positive gap. The Company estimates that as of September 30, 2003, close to 44.7% of all borrowings of the Company had maturity dates longer than one year.

While the above table presents the Company’s loans receivable portfolio held for investment purposes according to its maturity date, from time to time the Company may negotiate special transactions with FHLMC and/or FNMA or other third party investors for the sale of such loans. There can be no assurance, however, that the Company will be successful in consummating any such transactions.

The following table presents for the periods indicated R&G Financial’s total dollar amount of interest from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes. All average balances are based on the average of month-end balances for non-banking subsidiaries and average daily balances for banking subsidiaries in each case during the periods presented.


	For the three month period ended September 30,
	2003							2002

	Average				Yield /			Average				Yield /
(Dollars in thousands)	Balance		Interest		Rate			Balance		Interest		Rate

Interest-Earning Assets:
Cash and cash equivalents(1)	$	145,879	$	510		1.40	%	$	164,721	$	306		0.74	%
Investment securities held for trading		4,998		24		1.92	%		—		—		—
Investment securities available for sale		587,195		5,836		3.98	%		586,240		8,029		5.48	%
Investment securities held to maturity		31,549		374		4.74	%		27,414		369		5.38	%
Mortgage-backed securities held for trading		49,189		800		6.51	%		77,719		1,106		5.69	%
Mortgage-backed securities available for sale		2,248,109		26,478		4.71	%		1,795,230		27,547		6.14	%
Mortgage-backed securities held to maturity		38,527		540		5.61	%		48,520		693		5.71	%
Loans receivable, net (2)		3,808,755		59,528		6.25	%		2,784,689		50,086		7.19	%
FHLB Stock		103,460		1,257		4.86	%		93,066		776		3.34	%

Total interest-earning assets		7,017,661	$	95,347		5.43	%		5,577,599	$	88,912		6.38	%

Non-interest-earning assets		527,905							203,668

Total assets	$	7,545,566						$	5,781,267

Interest-Bearing Liabilities:
Deposits	$	3,414,109	$	23,362		2.74	%	$	2,698,319	$	23,826		3.53	%
Securities sold under agreements to repurchase (3)		1,931,273		12,144		2.52	%		1,376,646		12,708		3.69	%
Notes payable		224,238		1,519		2.71	%		232,472		1,795		3.09	%
Other borrowings(4)		1,034,100		10,579		4.09	%		827,888		9,273		4.48	%

Total interest-bearing liabilities		6,603,720	$	47,604		2.88	%		5,135,325	$	47,602		3.71	%

Non-interest-bearing liabilities		228,914							40,993

Total liabilities		6,832,634							5,176,318

Stockholders’ equity		712,932							604,949

Total liabilities and stockholders’ equity	$	7,545,566						$	5,781,267

Net interest income; interest rate spread (5)			$	47,743		2.55	%			$	41,310		2.67	%

Net interest margin						2.72	%						2.96	%

Average interest-earning assets to average interest-bearing liabilities						106.27	%						108.61	%

(footnotes on page 27)


	For the nine month period ended September 30,
	2003							2002

	Average				Yield /			Average				Yield /
(Dollars in thousands)	Balance		Interest		Rate			Balance		Interest		Rate

Interest-Earning Assets:
Cash and cash equivalents(1)	$	123,614	$	1,093		1.18	%	$	91,933	$	902		1.31	%
Investment securities held for trading		2,117		24		1.51	%		—		—		—
Investment securities available for sale		581,096		18,746		4.30	%		563,497		23,950		5.67	%
Investment securities held to maturity		30,798		1,142		4.94	%		25,093		1,020		5.42	%
Mortgage-backed securities held for trading		53,833		2,731		6.76	%		84,241		3,480		5.51	%
Mortgage-backed securities available for sale		2,135,204		80,559		5.03	%		1,677,697		77,901		6.19	%
Mortgage-backed securities held to maturity		41,731		1,788		5.71	%		49,982		2,183		5.82	%
Loans receivable, net (2)		3,444,204		166,490		6.45	%		2,354,631		127,569		7.22	%
FHLB Stock		98,917		3,588		4.84	%		79,151		2,241		3.77	%

Total interest-earning assets		6,511,514	$	276,161		5.65	%		4,926,225	$	239,246		6.48	%

Non-interest-earning assets		553,114							338,364

Total assets	$	7,064,628						$	5,264,589

Interest-Bearing Liabilities:
Deposits	$	3,129,486	$	68,023		2.90	%	$	2,340,924	$	65,416		3.73	%
Securities sold under agreements to repurchase (3)		1,801,577		37,729		2.79	%		1,399,763		37,764		3.60	%
Notes payable		228,706		5,528		3.22	%		252,815		5,152		2.72	%
Other borrowings(4)		1,008,906		30,348		4.01	%		643,326		21,550		4.47	%

Total interest-bearing liabilities		6,168,675	$	141,628		3.06	%		4,636,828	$	129,882		3.73	%

Non-interest-bearing liabilities		203,559							112,911

Total liabilites		6,372,234							4,749,739

Stockholders’ equity		692,394							514,850

Total liabilities and stockholders’ equity	$	7,064,628						$	5,264,589

Net interest income; interest rate spread (5)			$	134,533		2.59	%			$	109,364		2.75	%

Net interest margin						2.75	%						2.96	%

Average interest-earning assets to average interest-bearing liabilities						105.56	%						106.24	%

(footnotes on following page)

(1)		Comprised of cash and due from banks, securities purchased under agreements to resell, time deposits with other banks and other short term investments.

(2)		Includes mortgage loans held for sale and non-accrual loans.

(3)		Includes federal funds purchased, if any.

(4)		Comprised of long-term debt, advances from the FHLB and other borrowings.

(5)		Interest rate spread represents the difference between R&G Financial’s weighted average yield on interest-earning assets and the weighted average rate on interest-bearing liabilities. Net interest margin represents net interest income as a percent of average interest-earning assets.

Mortgage Loan Servicing

The following table sets forth certain information regarding the mortgage loan servicing portfolio of R&G Financial for the periods indicated.


				At or for the nine month period ended
				September 30,

				2003			2002

				(Dollars in thousands)
Composition of Servicing Portfolio at period end:
		GNMA		$	2,385,047		$	2,721,221
		FNMA/FHLMC			5,147,685			5,926,375
		Other mortgage loans (4)			3,391,531			2,602,507

Total servicing portfolio (4)				$	10,924,263		$	11,250,103

Activity in the Servicing Portfolio:
	Beginning servicing portfolio			$	10,991,945		$	7,224,571
	Add: Loan originations and purchases				2,216,772			1,529,819
			Servicing of portfolio loans acquired (3)		1,007,374			4,168,844
	Less: Sale of servicing rights (1)				(209,560	)		(176,644	)
			Run-offs (2)		(3,082,268	)		(1,496,487	)

	Ending servicing portfolio (4)			$	10,924,263		$	11,250,103

	Number of loans serviced				150,159			162,823
	Average loan size			$	73		$	69
	Average servicing fee rate				0.49	%		0.51	%

(1)

Corresponds to loans sold, servicing released, by Continental Capital.

(2)		Run-off refers to regular amortization of loans, prepayments and foreclosures.

(3)		Includes $2.6 billion in June 2002 acquired in connection with the acquisition of Crown Bank.

(4)		At the dates shown, included $1.8 billion and $981.1 million, respectively, serviced for Premier Bank, which constituted 16.3% and 8.7% of the total servicing portfolio, and $120.6 million and $120.8 million, respectively, serviced for Crown Bank, which constituted 1.1% and 1.1%, respectively, of the total servicing portfolio at such dates.

Substantially all of the mortgage loans in R&G Financial’s servicing portfolio are secured by single (one-to-four) family residences secured by real estate located in Puerto Rico. At September 30, 2003, approximately 29.6% of the Company’s mortgage servicing portfolio was related to mortgages secured by real property located outside Puerto Rico.

The Company reduces the sensitivity of its servicing income to increases in prepayment rates through a strong retail origination network that has increased or maintained the size of R&G Financial’s servicing portfolio even during periods of high prepayments. In addition, a substantial portion of the Company’s servicing portfolio consists of tax-exempt FHA/VA mortgage loans which carry lower interest rates than those on conventional loans, which tends to reduce risks related to R&G Financial’s servicing portfolio. During the nine month periods ended September 30, 2003 and 2002, the Company recognized $19.0 million and $7.2 million, respectively, of unscheduled amortization on mortgage servicing rights.

Liquidity and Capital Resources

Liquidity - Liquidity refers to the Company’s ability to generate sufficient cash to meet the funding needs of current loan demand, savings deposit withdrawals, principal and interest payments with respect to outstanding borrowings and to pay operating expenses. It is management’s policy to maintain greater liquidity than required in order to be in a position to fund loan purchases and originations, to meet withdrawals from deposit accounts, to make principal and interest payments with respect to outstanding borrowings and to make investments that take advantage of interest rate spreads. The Company monitors its liquidity in accordance with guidelines established by the Company and applicable regulatory requirements. The Company’s need for liquidity is affected by loan demand, net changes in deposit levels and the scheduled maturities of its borrowings. The Company can minimize the cash required during the times of heavy loan demand by modifying its credit policies or reducing its marketing efforts. Liquidity demand caused by net reductions in deposits are usually caused by factors over which the Company has limited control. The Company derives its liquidity from both its assets and liabilities. Liquidity is derived from assets by receipt of interest and principal payments and prepayments, by the ability to sell assets at market prices and by utilizing unpledged assets as collateral for borrowings. Liquidity is derived from liabilities by maintaining a variety of funding sources, including deposits, advances from the FHLB of New York and Atlanta (the “FHLB”) and other short and long-term borrowings.

The Company’s liquidity management is both a daily and long-term function of funds management. Liquid assets are generally invested in short-term investments such as securities purchased under agreements to resell, federal funds sold and certificates of deposit in other financial institutions. If the Company requires funds beyond its ability to generate them internally, various forms of both short and long-term borrowings provide an additional source of funds. At September 30, 2003, the Company had $143.9 million in borrowing capacity under unused warehousing and other lines of credit and $1.0 billion in borrowings capacity under unused lines of credit with the FHLB.

At September 30, 2003, the Company had outstanding commitments to originate and/or purchase mortgage and non-mortgage loans of $596.5 million (including unused lines of credit). Certificates of deposit which are scheduled to mature within one year totaled $978.7 million at September 30, 2003, and borrowings that are scheduled to mature within the same period amounted to $1.9 billion. The Company anticipates that it will have sufficient funds available to meet its current loan commitments.

Capital Resources - The FDIC’s capital regulations establish a minimum 3.0 % Tier I leverage capital requirement for the most highly-rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively will increase the minimum Tier 1 leverage ratio for such other banks from 4.0% to 5.0% or more. Under the FDIC’s regulations, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and, in general, which are considered a strong banking organization and are rated composite 1 under the Uniform Financial Institutions Rating System. Leverage or core capital is defined as the sum of common stockholders’ equity (including retained earnings), noncumulative perpetual preferred stock and related surplus, and minority interests in consolidated subsidiaries, minus all intangible assets other than certain qualifying supervisory goodwill and certain purchased mortgage servicing rights.

The FDIC also requires that banks meet a risk-based capital standard. The risk-based capital standard for banks requires the maintenance of total capital (which is defined as Tier I capital and supplementary (Tier 2) capital) to risk weighted assets of 8%. In determining the amount of risk-weighted assets, all assets, plus certain off-balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item. The components of Tier 1 capital are equivalent to those discussed above under the 3% leverage capital standard. The components of supplementary capital include certain perpetual preferred stock, certain mandatory convertible securities, certain subordinated debt and intermediate preferred stock and general allowances for loan and lease losses. Allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of capital counted toward supplementary capital cannot exceed 100% of core capital. At September 30, 2003, Premier Bank met each of its capital requirements, with Tier 1 leverage capital, Tier 1 risk-based capital and total risk-based capital ratios of 6.52%, 11.49% and 12.43%, respectively. At September 30, 2003 Crown Bank also met each of its capital requirements, with Tier 1 leverage capital, Tier 1 risk-based capital and total risk-based capital ratios of 6.57%, 9.99% and 10.66%, respectively. Thus, at September 30, 2003 both Premier Bank and Crown Bank were “well capitalized” institutions under the capital adequacy regulatory guidelines.

In addition, the Federal Reserve Board has promulgated capital adequacy guidelines for bank holding companies which are substantially similar to those adopted by FDIC regarding state-chartered banks, as described above. R&G Financial is currently in compliance with such regulatory capital requirements.

Inflation and Changing Prices

The unaudited consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars (except with respect to securities which are carried at market value), without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, substantially all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risks at December 31, 2002 are presented in Item 7A of the Company’s Annual report on Form 10-K. Information at September 30, 2003 is presented on page 23 of this Report. Management believes there have been no material changes in the Company’s market risk since December 31, 2002.

Item 4: Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) Rule 13a-15(b). Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic Securities and Exchange Commission (“SEC”) filings. There has not been any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures are Company controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1: Legal Proceedings

The Registrant is involved in routine legal proceedings occurring in the ordinary course of business which, in the aggregate, are believed by management to be immaterial to the financial condition and results of operations of the Registrant.

Item 2: Changes in Securities

Not applicable

Item 3: Defaults Upon Senior Securities

Not applicable

Item 4: Submission of Matters to a Vote of Security Holders

Not applicable

Item 5: Other Information

Not applicable.

Item 6: Exhibits and Reports on Form 8-K.

(a)

Item 601 Exhibits.


No.		Description

2.1		Amended and Restated Agreement and Plan of Merger by and between R&G Financial Corporation, R-G Premier Bank of Puerto Rico and R-G Interim Premier Bank, dated as of September 27, 1996 (1)

2.2.0		Agreement and Plan of Reorganization among R&G Financial Corporation, R&G Acquisition Holdings Corporation, The Crown Group, Inc. and Crown Bank, a Federal Savings Bank dated as of December 19, 2001 (2)

2.2.1		Amendment No. 2 to Agreement and Plan of Reorganization among R&G Financial Corporation, R&G Acquisition Holdings Corporation, The Crown Group, Inc. and Crown Bank, a Federal Savings Bank dated as of February 27, 2002 (3)

3.1.0		Certificate of Incorporation of R&G Financial Corporation (4)

3.1.1		Certificate of Amendment to Certificate of Incorporation of R&G Financial Corporation (4)

3.1.2		Amended and Restated Certificate of Incorporation of R&G Financial Corporation (5)

3.1.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation of R&G Financial Corporation (6)

3.1.4		Second Certificate of Amendment to Amended and Restated Certificate of Incorporation of R&G Financial Corporation (15)

3.1.5		Certificate of Resolution designating the terms of the Series A Preferred Stock (7)

3.1.6		Certificate of Resolution designating the terms of the Series B Preferred Stock (8)

3.1.7		Certificate of Designation for Series C Preferred Stock (12)

3.1.8		Certificate of Designation for Series D Preferred Stock (13)

3.2		Bylaws of R&G Financial Corporation (4)

4.0		Form of Stock Certificate of R&G Financial Corporation (4)

4.1		Form of Series A Preferred Stock Certificate of R&G Financial Corporation (9)

4.2		Form of Series B Preferred Stock Certificate of R&G Financial Corporation (10)


No.		Description

4.3		Form of Series C Preferred Stock Certificate of R&G Financial Corporation (11)

4.4		Form of Series D Preferred Stock Certificate of R&G Financial Corporation (14)

10.1		Master Purchase, Servicing and Collection Agreement between R&G Mortgage Corporation and R-G Premier Bank of Puerto Rico dated February 16, 1990, as amended on April 1, 1991, December 1, 1991, February 1, 1994 and July 1, 1994 (4)

10.2		Master Custodian Agreement between R&G Mortgage Corporation and R-G Premier Bank of Puerto Rico dated February 16, 1990, as amended on June 27, 1996 (4)

10.3		Master Production Agreement between R&G Mortgage and R-G Premier Bank of Puerto Rico dated February 16, 1990, as amended on August 30, 1991 and March 31, 1995 (4)

10.4		Data Processing Computer Service Agreement between R&G Mortgage and R-G Premier Bank of Puerto Rico dated December 1, 1994 (4)

10.5		Securitization Agreement by and between R&G Mortgage and R-G Premier Bank of Puerto Rico, dated as of July 1, 1995 (4)

10.6		R&G Financial Corporation Stock Option Plan (4)(*)

10.7		Guarantee Agreement between R&G Financial Corporation, R&G Acquisition Holdings Corporation and Wilmington Trust as Guarantee Trustee with respect to the Capital Securities issued by R&G Capital Trust I, dated as of April 10, 2002 (16)

10.8		Guarantee Agreement between R&G Financial Corporation and U.S. Bank National Association as Guarantee Trustee with respect to the Capital Securities issued by R&G Capital Trust IV, LLT, dated as of August 8, 2003

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act

(1)		Incorporated by reference from the Registration Statement on Form S-4 (Registration No. 333-13199) filed by the Registrant with the Securities and Exchange Commission (“SEC”) on October 1, 1996.

(2)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on December 20, 2001.

(3)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on February 28, 2002.

(4)		Incorporated by reference from the Registration Statement on Form S-1 (Registration No. 333-06245) filed by the Registrant with the SEC on September 18, 1996, as amended.

(5)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on November 19, 1999.

(6)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on June 12, 2001.

(7)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on August 31, 1998.

(8)		Incorporated by reference from the Registrant’s Form 10-K filed with the SEC on April 13, 2000.

(9)		Incorporated by reference from the Registrant’s Registration Statement on Form S-3 (Registration No. 333-60923) filed with the SEC on August 7, 1998.

(10)		Incorporated by reference from the Registrant’s Registration Statement on Form S-3 (Registration No. 333-90463) filed with the SEC on November 5, 1999.

(11)		Incorporated by reference from the Registrant’s Registration Statement on Form S-3 (File No. 333-55834) filed with the SEC on February 16, 2001.

(12)		Incorporated by reference from the Registrant’s Form 10-K filed with the SEC on April 2, 2001.

(13)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on March 7, 2002.

(14)		Incorporated by reference from the Registrant’s Registration Statement on Form S-3 (File No. 333-81214) filed with the SEC on January 22, 2002.

(15)		Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on June 18, 2002.

(16)		Incorporated by reference from the Registrant’s Form 10-Q filed with the SEC on November 14, 2002.

(*)		Management contract or compensatory plan or arrangement.

(b)		Reports on Form 8-K.

The Registrant filed the following Reports on Form 8-K during the quarter ended September 30, 2003:

(1)

Form 8-K filed on July 17, 2003 with an attached press release announcing the Registrant’s earnings for the quarter ended June 30, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	R&G FINANCIAL CORPORATION

Date: November 14, 2003	By:	/S/ VICTOR J. GALAN Víctor J. Galán, Chairman and Chief Executive Officer
		(Principal Executive Officer)

	By:	/S/ JOSEPH R. SANDOVAL Joseph R. Sandoval
		Executive Vice President and Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

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