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restatement of our financial statements. The Board of Directors has also hired a third party valuation firm to validate management’s new retained residual interests valuations. While this process is ongoing and good progress is being made on the restatement of our consolidated financial statements, due to the complex nature of the review, we are unable to specifically indicate when this process will be completed. We wish to provide assurances that we are dedicated to achieving the completion of the restatement process and the filing of our quarterly financial reports for the current year as promptly as possible, and we are working diligently toward that end. However, given the time involved to complete the restatement process, we expect that we will not be in a position to timely file our quarterly report on Form 10-Q for the quarter ended June 30, 2005.

     On the basis of the valuation method which is now being utilized, we now believe that the Company will also need to restate its audited consolidated financial statements for the year ended December 31, 2002, and the Audit Committee of our Board of Directors has determined that the interim and audited consolidated financial statements for the year ended December 31, 2002 should no longer be relied upon. While the Company engaged in a limited number of mortgage loan sales transactions in the fourth quarter of 2002 which resulted in the recognition of residual interests, based on the current valuation methodology being utilized, management now believes that the required adjustment to previously reported net income dictates restating such consolidated financial statements.

     As part of this restatement process, we are also reviewing certain other matters in our audited consolidated financial statements to evaluate whether any adjustments are required. These areas include, among others, the accounting for the deferral and recognition of mortgage origination fees and expenses, revenue recognition related to specific loan sales transactions, and the amortization process used in connection with mortgage servicing rights. Our analysis is not yet complete and will necessarily be subject to further review.

     In our April 25, 2005 press release, management indicated that on a preliminary basis, based on the valuation methodology ultimately utilized, the fair value of the Company’s retained residual interests as of December 31, 2004 could be reduced by an amount equal to between approximately $55 million to $90 million after taxes ($90 million and $150 million before taxes, respectively). While still preliminary and therefore subject to further change, based on the valuation method now being utilized for valuing our retained residual interests as well as further adjustments we believe will be necessary with respect to other areas of our audited consolidated financial statements, management now believes that in connection with the restatement of the Company’s audited financial statements for the period from January 1, 2002 to December 31, 2004, stockholders’ equity will be adjusted by an aggregate of between $116 million to $134 million after taxes ($190 million and $220 million before tax, respectively), of which approximately $160 million (pre tax) relates to the adjustments for our retained residual interests. Management is not able to provide at this time more information as to how much of an adjustment to stockholders’ equity is to be applied to any particular calendar year. Assuming an aggregate adjustment to stockholders’ equity of $134 million (after taxes) as of December 31, 2004, the Company expects that it would remain a well-capitalized bank holding company in accordance with federal banking regulatory standards. As of such date, the Company further expects that its Puerto Rico bank subsidiary, R-G Premier Bank of Puerto Rico, would remain well-capitalized and its Florida thrift subsidiary, RG Crown Bank, would be adequately capitalized. As a result of additional capital contributions from the Company, RG Crown Bank is also well capitalized at March 31, 2005 and June 30, 2005.

     All estimates contained in this Form 8-K are necessarily subject to change as we complete the preparation of our restated consolidated financial statements. These estimates represent our best judgment as of the date of this Form 8-K and our actual results could differ materially. We disclaim any obligation to update or alter these estimates going forward, whether as a result of new information, future events or otherwise.

	R&G FINANCIAL CORPORATION
Date: July 27, 2005
	By:	/s/ JOSEPH R. SANDOVAL
		Joseph R. Sandoval
		Executive Vice President and Chief Financial Officer

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