8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 30, 2010 (April 27, 2010)

R&G Financial Corporation

(Exact name of registrant as specified in its charter)

Puerto Rico	001-31381	66-0532217
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

290 Jesús T. Piñero Ave.
Hato Rey, San Juan, Puerto Rico 00918
(Address of principal executive offices and zip code)

(787) 758-2424
(Registrant’s telephone number, including area code)

Not applicable.
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into a Material Definitive Agreement.

On April 28, 2010, R&G Financial Corporation (the “Company”), R-G Premier Bank of Puerto Rico (the “Bank”), the Company’s wholly-owned banking subsidiary, and R&G Mortgage Corporation, the Company’s wholly-owned mortgage subsidiary (“R&G Mortgage”), entered into a Stock Transfer, Release and Waiver Agreement (the “Transfer Agreement”), pursuant to which the Company agreed to transfer all of the issued and outstanding shares of capital stock of R&G Mortgage to the Bank in consideration for the full satisfaction and extinguishment of an intercompany account receivable, owed by R&G Mortgage to the Bank, in the amount of approximately $42 million (the “Intercompany Receivable”). The Intercompany Receivable was recognized by the Bank as a result of the restatement of the accounting treatment of the transactions made under the Master Purchase, Servicing and Collection Agreement, dated February 16, 1990, between the Bank and R&G Mortgage. Pursuant to the Transfer Agreement, the Bank (i) accepted the transfer of shares of capital stock of R&G Mortgage from the Company as payment in full satisfaction of the Intercompany Receivable, (ii) released the Company and R&G Mortgage from any and all liability related to the Intercompany Receivable, and (iii) waived any claims that the Bank may have had against the Company or R&G Mortgage related to the Intercompany Receivable. As a result of this internal reorganization, R&G Mortgage became a direct subsidiary of the Bank, and an indirect subsidiary of the Company. Solely as a result of the accounting associated with the cancellation of indebtedness, on a consolidated basis, the transaction will increase the equity of the Bank by an estimated $51 million. The Company and the Bank received the written approval to engage in the transactions contemplated by the Transfer Agreement from the Federal Deposit Insurance Corporation (“FDIC”), the Board of Governors of the Federal Reserve System, and the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the “Commissioner”).

A copy of the Transfer Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated by reference as though fully set forth herein. The foregoing summary description of the Transfer Agreement and the transactions contemplated therein is not intended to be complete and is qualified in its entirety by the complete text of the Transfer Agreement.

Item 1.03 Bankruptcy or Receivership.

On April 30, 2010, the Bank was closed by the Commissioner, and the FDIC was named receiver. On the same date, the FDIC entered into a purchase and assumption agreement with Scotiabank de Puerto Rico, which provides for the acquisition of most of the assets and liabilities of the Bank including the assumption of all of the deposits of the Bank.

As a result of the closure of the Bank, the capital stock of which is the Company’s primary asset, the Company will likely be forced to seek protection under the United States Bankruptcy Code.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

As of April 30, 2010, the Company had an aggregate of approximately $335 million of its 6.95% Junior Subordinated Debentures, 6.52% Junior Subordinated Debentures and 6.62% Junior Subordinated Deferrable Interest Debentures (collectively, the “Debentures”) outstanding pursuant to Indentures dated as of October 6, 2003, March 31, 2004 and November 30, 2004, respectively (collectively, the “Indentures”), between the Company and Wilmington Trust Company, a Delaware banking corporation, as indenture trustee. The April 30, 2010 appointment of the FDIC as receiver constitutes a triggering event, also termed an “Event of Default,” under the Indentures. Under the Indentures, an Event of Default occurs if, among other things, the Company or any substantial part of its property, including the Bank, is taken into possession by a receiver. Upon such Event of Default, the principal amount of the debentures, together with any premium and interest accrued but unpaid, becomes due only after the trustee or holders of not less than 25% in aggregate principal amount of the debentures then outstanding, by notice in writing to the Company (and to the trustee if given by the holders of the debentures), declare such principle and accrued interest immediately due and payable.

Item 8.01 Other Events.

On April 27, 2010, FirstBank Puerto Rico (“FBPR”) filed a verified complaint against the Company in the Commonwealth of Puerto Rico’s Court of First Instance, San Juan Part. The Company was served with process on April 29, 2010. The complaint alleges that Company has defaulted on its payment obligations under a Credit Agreement entered into by and between the Company and FirstBank International Branch, a division of FBPR, as amended, on June 24, 2005. FBPR claims that payment on the sum of $5.9 million is currently in default and, as a result it accelerated the debt and is now owed $31.7 million in the aggregate. The complaint requests that judgment be entered for the aggregate amount owed plus $6.3 million in attorney’s fees. FBPR has also filed a motion to secure the effectiveness of a future judgment, requesting the attachment of funds of the Company up to the sum of $14.8 million, which FBPR alleges is the amount of the deficiency in collateral it holds to secure repayment. FBPR has requested that the motion be granted without hearing, claiming to fall within the limited exceptions which authorize attachments without a hearing. The Court has not yet ruled on the motion. The Company intends to defend this action.

Item 9.01 Financial Statements and Exhibits

a)	Not applicable.
b)	Not applicable.
c)	Not Applicable.
d)	Exhibits.

10.1 Stock Transfer, Release and Waiver Agreement, dated April 28, 2010, by and among R&G Financial Corporation, R-G Premier Bank of Puerto Rico, and R&G Mortgage Corporation.

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 hereunto duly authorized.

	R&G FINANCIAL CORPORATION
Date: April 30, 2010	By:	/s/ ROLANDO RODRIGUEZ
		Rolando Rodriguez
		President and Chief Executive Officer

EX-10.1

Exhibit 10.1

Execution Version

STOCK TRANSFER, RELEASE AND WAIVER AGREEMENT

This STOCK TRANSFER, RELEASE AND WAIVER AGREEMENT (the “Agreement”), dated as of April 28, 2010, is entered into by and among, R&G Financial Corporation, a corporation organized and existing under the laws of the Commonwealth of Puerto Rico (hereinafter, “RGF”), R-G Premier Bank of Puerto Rico, a commercial bank organized and existing under the laws of the Commonwealth of Puerto Rico (hereinafter, “RGP” or the “Bank”), and R&G Mortgage Corp., a corporation organized and existing under the laws of the Commonwealth of Puerto Rico (hereinafter, “RGM”, and together with RGF and RGP, collectively, the “Parties”).

WITNESSETH:

WHEREAS, on February 16, 1990, Guaynabo Federal Savings Bank, the predecessor bank to RGP, entered into a Master Purchase, Servicing and Collection Agreement with RGM, as amended (the “MPSCA”), which established that RGP would sell to RGM all the rights, title and interest of RGP in and to the servicing rights (“MSRs”) with respect to mortgage loans RGP held in its loan portfolio in exchange for cash consideration;

WHEREAS, pursuant to an amendment made to the MPSCA on July 1, 1994, the MPSCA provided that RGM’s obligation to pay for the sale of the MSRs would only be payable when and if RGP sold the mortgage loans to a third party;

WHEREAS, between 2001 and 2005, RGM did not to make payments to RGP as to the loans sold to third parties;

WHEREAS, on November 2, 2007, the Parties restated the accounting treatment of the transactions made under the MPSCA which led to the recognition by RGP of an intercompany account receivable (the “Intercompany Receivable”) from RGM in the original amount of $50,509,000, and the Parties executed an Amended and First Restated Master Loan Servicing Agreement on January 1, 2006;

WHEREAS, the original amount of the Intercompany Receivable was reduced on December 23, 2009 to $42,109,847 after deducting the amount of $8,399,153 in tax overpayments made by RGM from the original amount of the Intercompany Receivable;

WHEREAS, RGM and RGP are both wholly-owned subsidiaries of RGF;

WHEREAS, the outstanding capital stock of RGM is accounted for in the books of RGF at $45,299,051, after satisfaction of the Intercompany Receivable;

WHEREAS, in consideration of the full satisfaction and extinguishment of the Intercompany Receivable, the Release and Waiver provided in Section 5 hereon, and other good and valuable consideration, RGF has agreed to transfer 3,150,000 shares of common stock and 500,000 shares of preferred stock (the “Shares”) of RGM (which represent all of the issued and outstanding shares of capital stock of RGM) to the Bank; and,

WHEREAS, as a further benefit of the transfer of the Shares to RGP, RGM has an additional intercompany receivable of $6,331,024, which was written off by RGP following the 2008 Report

of Examination, that upon transfer of the Shares, will increase RGP’s capital when RGM is consolidated with RGP, with the aggregate result being that RGP’s equity will increase by approximately $51 million on a consolidated basis.

NOW, THEREFORE, the Parties hereby agree as follows:

     1. Incorporation of Preamble.

          The preamble to this Agreement is hereby incorporated and made a part hereof.

     2. Assumption of Indebtedness; Waiver of Right of Reimbursement.

          (a) RGF hereby assumes the indebtedness of RGM related to the Intercompany Receivable as paid in capital contributed by RGF to RGM.

          (b) RGF hereby waives and agrees not to enforce against RGM or RGP any right of reimbursement or subrogation that it may have under Article 1112 of the Puerto Rico Civil Code, 31 L.P.R.A. Sec. 3162, as a result of the full satisfaction of the Intercompany Receivable.

     3. Full Satisfaction and Extinguishment of Intercompany Receivable.

          (a) RGP hereby accepts the transfer of the Shares of RGM from RGF as payment in full satisfaction of the Intercompany Receivable.

          (b) The Parties provide the Release and Waiver set forth in Section 5 hereof. RGF hereby transfers and conveys title to the Shares of RGM to RGP in consideration of the full satisfaction and extinguishment of the Intercompany Receivable and the Release and Waiver.

     4. Delivery of Stock Certificate.

          RGF hereby delivers to RGP the certificates evidencing ownership of the Shares of RGM, duly endorsed to the order of RGP.

     5. Release and Waiver.

          In consideration of the transfer of the Shares of RGM by RGF and the full satisfaction and extinguishment of the Intercompany Receivable, the Parties hereby release and forever discharge each other, of and from any and all past, present or future claims, demands, obligations, actions, suits, causes of action, rights, defenses or counterclaims it may have or have had, damages, losses, costs, expenses, attorneys’ fees, and compensation of any nature whatsoever, which such Party now has, or which may hereafter accrue or otherwise be acquired, on account of, or in connection with any acts or omissions growing out or related to the Intercompany Receivable, including, without limitation, any and all known or unknown claims and resulting damages and losses, and the consequences thereof, sustained by such Party and any and all persons or entities whose rights to claim for such damages and losses have been fully vested upon such Party by way of subrogation, which have resulted or may result from the Intercompany Receivable.

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     6. Representations, Warranties and Covenants.

          (a) RGF’s Representations and Warranties. RGF represents and warrants to RGP as follows:

               (i) Organization of RGF. RGF is a corporation duly organized and validly existing under the laws of the Commonwealth of Puerto Rico.

               (ii) Authorization of Transaction. RGF has full power and authority (including full corporate or other entity power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of RGF, enforceable in accordance with its terms and conditions. The Board of Directors of RGF has approved the transactions contemplated in this Agreement and RGF has obtained or received any and all approvals to the transactions contemplated in this Agreement from any applicable department, agency, instrumentality, or other entity exercising executive, legislative, judicial, regulatory, or administrative functions of, or pertaining to, the government of the Commonwealth of Puerto Rico or the United States of America, including, but not limited to, any and all approvals from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Commissioner of Financial Institutions of Puerto Rico.

               (iii) No contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) to RGF’s knowledge, violate any constitution, statute, regulation or rule to which RGF is subject, (B) violate any injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which RGF is subject or any provision of its charter, bylaws, or other governing documents, (C) conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which the RGF is a party or by which it is bound or to which any of its assets is subject, or (D) result in the imposition or creation of a lien upon or with respect to the Shares.

               (iv) Shares of RGM. RGF holds of record and owns beneficially all the Shares of RGM, free and clear of any restrictions on transfer, taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. RGF is not a party to any option, subscriptions, warrant, capital or equity appreciation rights agreements, preemptive right, right of first refusal, buy-sell, purchase right, or other contract, right or commitment of whatever kind, whether or not vested or contingent that could require the RGF to sell, transfer, or otherwise dispose of the Shares of RGM or any other shares or securities evidencing any capital stock of RGM (other than this Agreement). RGF is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares of RGM or any other shares or securities evidencing any capital stock of RGM.

          (b) RGP’s Representations and Warranties. RGP represents and warrants to RGF as follows:

               (i) Organization of RGP. RGP is a commercial bank duly organized and validly existing under the laws of the Commonwealth of Puerto Rico.

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               (ii) Authorization of Transaction. RGP has full power and authority (including full corporate or other entity power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of RGP, enforceable in accordance with its terms and conditions. The Board of Directors of RGP has approved the transactions contemplated in this Agreement and RGP has obtained or received any and all approvals to the transactions contemplated in this Agreement from any applicable department, agency, instrumentality, or other entity exercising executive, legislative, judicial, regulatory, or administrative functions of, or pertaining to, the government of the Commonwealth of Puerto Rico or the United States of America, including, but not limited to, any and all approvals from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Commissioner of Financial Institutions of Puerto Rico.

               (iii) No contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which RGP is subject or any provision of its charter, bylaws, or other governing documents or (B) conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which RGP is a party or by which it is bound or to which any of its assets is subject.

          (c) RGM Representations and Warranties. RGM represents to RGP as follows:

               (i) Organization of RGM. RGM is a corporation duly organized and validly existing under the laws of the Commonwealth of Puerto Rico.

               (ii) Financial Condition. RGM has delivered to RGP its unaudited balance sheet as of March 31, 2010, copy of which is attached hereto as Exhibit A, and hereby certifies and represents that such financial statement is true and accurate in all respects and fairly present the financial position of RGM as of the dates and for the periods therein set forth.

               (iii) Authorization of Transaction. RGM has full power and authority (including full corporate or other entity power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of RGM, enforceable in accordance with its terms and conditions. The Board of Directors of RGM has approved the transactions contemplated in this Agreement and RGM has obtained or received any and all approvals to the transactions contemplated in this Agreement from any applicable department, agency, instrumentality, or other entity exercising executive, legislative, judicial, regulatory, or administrative functions of, or pertaining to, the government of the Commonwealth of Puerto Rico or the United States of America, including, but not limited to, any and all approvals from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Commissioner of Financial Institutions of Puerto Rico.

               (iv) No contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other

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restriction of any government, governmental agency, or court to which RGM is subject or any provision of the charter or bylaws of RGM or (ii) conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which RGM is a party or by which it is bound or to which any of its assets is subject.

     7. Confidentiality.

          (a) The Parties shall maintain confidential (i) all provisions of this Agreement, (ii) all the information acquired with respect to the other parties during the negotiations conducted prior to the execution of this Agreement, and (iii) all information acquired with respect to the other parties or exchanged between the parties in connection with the provisions of this Agreement or related to the transactions contemplated under this Agreement, and none of the Parties shall reveal or publicly disclose any part of such information nor the terms and conditions of this Agreement, without prior authorization from the other Parties, except for:

               (i) any disclosure that is required as part of any notification or request for approval that must be made to the any governmental authority; and

               (ii) any other disclosures required contractually or by applicable law.

          (b) Each of the Parties shall also require its respective directors, officers, employees, agents and any other person that obtains access to information with respect to this Agreement to honor and comply with the confidentiality obligations herein established.

     8. Exclusive Benefit of Parties; Assignment. This Agreement is for the exclusive benefit of the Parties hereto and their respective successors and permitted assigns and shall not be deemed to give any legal or equitable right to any other person. Except as expressly provided herein, this Agreement and the rights or obligations of the Parties hereunder may not be assigned by either Party hereto without the prior written consent of the other Party, which consent shall not be unreasonably withheld.

     9. Amendment; Waivers. This Agreement may be amended only by written agreement of the Parties. Any forbearance, failure, or delay by a Party in exercising any right, power, or remedy hereunder shall not be deemed to be a waiver thereof, and any single or partial exercise by such Party of any right, power or remedy hereunder shall not preclude the further exercise thereof. Every right, power and remedy of a Party shall continue in full force and effect until specifically waived by each Party in writing.

     10. Effect of Invalidity of Provisions. In case any one or more or part thereof of the provisions contained in this Agreement should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.

     11. Governing Law; Waiver of Jury Trial. All matters relating to this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Puerto Rico. The Parties irrevocably agree to waive any rights it may have to a jury trial in any action or proceeding against it arising out of or relating in any manner to this Agreement.

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     12. Notices. All demands, notices, instructions and communications hereunder shall be in writing and shall be sent to the Parties at the addresses listed below (or such other address as may hereafter be furnished to the other Party by notice given hereunder): (a) by hand delivery, with receipt of delivery acknowledged; (b) by registered or certified mail, return receipt requested; (c) by reputable overnight courier service, with receipt of delivery acknowledged; or (d) by facsimile communication, with the original forwarded as provided in (a), (b) or (c). Any such demand, notice, instruction or communication hereunder shall be deemed to have been given on the date received or on the date delivered and refused; provided, however, that a facsimile transmission shall be deemed to be received when transmitted so long as the transmitting machine has provided an electronic confirmation of such transmission.

If to RGF:	R&G Financial Corporation 290 Jesús T. Piñero, Hyde Park San Juan, Puerto Rico 00918 Attention: Rolando Rodríguez, President and CEO Fax: 787-625-5570
If to RGP:	R-G Premier Bank of Puerto Rico 290 Jesús T. Piñero, Hyde Park San Juan, Puerto Rico 00918 Attention: José A. Díaz, President Fax: 787-766-8370
If to RGM:	R&G Mortgage Corp. 290 Jesús T. Piñero, Hyde Park San Juan, Puerto Rico 00918 Attention: Rolando Rodríguez, President Fax: 787-625-5570

     13. Effectiveness. The transfer of the Shares of RGM to RGP shall be made by RGF upon receipt of all regulatory approvals or non-objections. This Agreement shall be deemed to be effective as of the date hereof upon signature of the Parties.

     14. Entire Agreement. This Agreement together with all exhibits and schedules hereto, contain the entire agreement between the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements between the Parties, oral or written, of any nature whatsoever with respect to the subject matter hereof.

     15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first above written.

R&G FINANCIAL CORPORATION			R-G PREMIER BANK OF PUERTO RICO
By:	/s/ ROLANDO RODRÍGUEZ		By:	/s/ JOSÉ A. DÍAZ
	Name:	Rolando Rodríguez		Name:	José A. Díaz
	Title:	President and Chief Executive Officer		Title:	President
R&G MORTGAGE CORP.
By:	/s/ ROLANDO RODRÍGUEZ
	Name:	Rolando Rodríguez
	Title:	President

Affidavit Number 696

     Acknowledged and subscribed before me by Rolando Rodríguez, of legal age, married, executive and resident of San Juan, Puerto Rico, as President and Chief Executive Officer of R&G Financial Corporation and as President of R&G Mortgage Corp.; and by José A. Díaz, of legal age, married, executive and resident of San Juan, Puerto Rico, as President of R-G Premier Bank of Puerto Rico, both of whom are personally known to me, in San Juan, Puerto Rico, this 28^th day of April, 2010.

/s/ MARIA CRISTINA MENA IRIZARRY  

Notary Public 

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Exhibit A

Unaudited Balance Sheet of RGM as of March 31, 2009

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