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): March 17, 2006 (March 16, 2006)

R&G Financial Corporation

(Exact name of registrant as specified in its charter)

Puerto Rico

(State or other jurisdiction of incorporation)

001-31381	66-0532217
(Commission File Number)	(I.R.S. Employer Identification No.)

280 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:

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

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

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

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

Item 8.01 Other Events

On March 14, 2006, the Board of Directors of R&G Financial Corporation (the “Company”), consented to the issuance of a Cease and Desist Order (the “FRB Order”) by the Board of Governors of the Federal Reserve System (the “FRB”). The FRB Order became effective on March 16, 2006. On the same date, the Board of Directors of R-G Premier Bank of Puerto Rico (the “Bank”), the Company’s wholly owned Puerto Rico banking subsidiary, entered into a Stipulation and Consent to the Issuance of an Order to Cease and Desist with the Federal Deposit Insurance Corporation (the “FDIC”). The FDIC Order to Cease and Desist (the “FDIC Order”) was issued and became effective on March 16, 2006. The Commissioner of Financial Institutions for the Commonwealth of Puerto Rico (the “Commissioner”) and the Bank have also agreed as of the same date that the issuance of the FDIC Order shall be binding upon the Commissioner and the Bank with the same legal effect as if the Commissioner had issued a separate order (the “Commissioner’s Order” and, along with the FRB Order and the FDIC Order, the “Orders”).

The Orders require the Company and the Bank to, among other things, file with the FRB and the FDIC within proscribed time periods updated plans with respect to capital and liquidity and to engage an independent consultant to report to it on specified matters related to mortgage loans in its loan portfolio, and to act on recommendations resulting therefrom. In addition, the Orders require that the Company and its banking subsidiaries receive the prior permission of its applicable regulator prior to making or declaring any dividends or payments on their outstanding securities. In requesting approval for such payments, the Company and the Bank must demonstrate that the proposed payment will not have an unacceptable impact on capital, cash flow, concentrations of credit, asset quality and allowances for loan losses. Both the FRB and the FDIC have expressed in the Orders their willingness to approve such requests for payment provided that they determine, in their discretion, that such payments will not have an unacceptable impact on the factors referenced above. While the Company cannot give assurances that it will receive the required regulatory permissions to make dividend payments, the Company does believe that it and its subsidiary banks remain well capitalized at December 31, 2005, after taking anticipated adjustments related to its ongoing financial restatement project into consideration. Finally, the Orders required the Company and its affiliates to only engage in transactions with each other which comply with applicable federal affiliate transactions regulations. Under the Orders, the Company and its affiliates are permitted to continue to conduct business with each other as they have done in the past.

A copy of each of the Orders is attached as an exhibit to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits

a) Not applicable.

b) Not applicable.

c) Not Applicable.

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d) Exhibits.

99.1 FRB Order to Cease and Desist dated March 16, 2006

99.2 FDIC Order to Cease and Desist dated March 16, 2006.

99.3 Commissioner’s Order dated March 16, 2006.

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SIGNATURE

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: March 17, 2006
	By:	/s/ VICENTE GREGORIO
		Vicente Gregorio
		Chief Financial Officer

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EX-99.1

Exhibit 99.1

UNITED STATES OF AMERICA

BEFORE

THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

	)
In the Matter of	)	Docket No. 06- -B-HC
	)
R&G FINANCIAL CORPORATION	)	Cease and Desist Order Issued
Hato Rey, San Juan, Puerto Rico	)	Upon Consent Pursuant to the
	)	Federal Deposit Insurance Act,
	)	as Amended

WHEREAS, R&G Financial Corporation, Hato Rey, San Juan, Puerto Rico (“R&G”), a registered bank holding company, owns and controls R-G Premier Bank of Puerto Rico, Hato Rey, San Juan, Puerto Rico, a state nonmember bank, and indirectly owns and controls R-G Crown Bank, Casselberry, Florida, a federal savings bank (collectively, the “Subsidiary Banks”), and directly owns and controls R&G Mortgage Corporation, San Juan, Puerto Rico, a non-bank mortgage corporation, and indirectly owns and controls The Mortgage Store of Puerto Rico, San Juan, Puerto Rico, a non-bank mortgage corporation, and several other non-bank entities (collectively, the “Non-Bank Affiliates”);

WHEREAS, R&G determined in April 2005 to review the independent market valuations R&G used to value residual interests retained from its securitization transactions, estimated that the fair value of its residual interests will be reduced if alternative valuation methodologies are used, determined that its previously filed interim and audited consolidated financial statements for the period from January 1, 2003 through December 31, 2004 should no longer be relied upon, and determined that the financial statements for such periods should be restated;

WHEREAS, R&G determined in July 2005 that the audited consolidated financial statements for the year 2002 should also be restated, that R&G had a material weakness in its internal controls over financial reporting as of December 31, 2004, and that its previously filed Management’s Report on Internal Controls over Financial Reporting should be restated;

WHEREAS, R&G is in the process of restating its audited consolidated financial statements for the period January 1, 2002 through December 31, 2004 (the “Restatement”) and of issuing audited consolidated financial statements for 2005 (the “2005 Issuance”);

WHEREAS, R&G is taking steps to implement corrective actions to address accounting and other concerns in the consolidated organization;

WHEREAS, the Board of Governors of the Federal Reserve System (the “Board of Governors”) is continuing its review of various issues relating to the Restatement and the 2005 Issuance and is coordinating its review, as appropriate, with the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the U.S. Securities and Exchange Commission, the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico, and other government authorities;

WHEREAS, the Board of Governors has determined that supervisory action is appropriate to address certain safety and soundness issues regarding R&G in the absence of current financial statements for 2005, and the Board of Governors and R&G have mutually agreed to enter into this consent Cease and Desist Order (the “Order”); and

WHEREAS, on March 14, 2006, the board of directors of R&G at a duly constituted meeting adopted a resolution authorizing and directing Victor J. Galan, Chairman of R&G’s Board of Directors and Chief Executive Officer, to enter into this Order on behalf of R&G, and consenting to compliance with each and every applicable provision of this Order by

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R&G and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (12 U.S.C. 1813(u) and 1818(b)(3)) (the “FDI Act”)), waiving any and all rights that R&G may have pursuant to section 8 of the FDIC Act (12 U.S.C. 1818) to (i) a hearing for the purpose of taking evidence on any matters set forth in this Order; (ii) judicial review of this Order; and (iii) challenge or contest, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provisions hereof.

NOW, THEREFORE, before the taking of any testimony or adjudication of, or finding on any issue of fact or law herein, and without this Order constituting an admission of any allegation made or implied by the Board of Governors in connection with this proceeding;

IT IS HEREBY ORDERED that, pursuant to sections 8(b)(1) and (3) of the FDI Act (12 U.S.C. 1818(b)(1) and (3)), R&G and its institution-affiliated parties cease and desist and take the following affirmative actions:

Mortgage Portfolios

1. Within 30 days of this Order, R&G’s board of directors shall engage an independent consultant acceptable to the Federal Reserve Bank of New York (the “Reserve Bank”) to conduct a review, to the extent applicable, of (i) the portfolios of mortgage loans on the balance sheets of R&G or the Non-Bank Affiliates as of the effective date of this Order; (ii) mortgage loans sold by R&G or the Non-Bank Affiliates with recourse as of the effective date of this Order, except for conforming loans sold to FNMA, FHLMC, and GNMA; and (iii) all mortgage loans that, as a result of a change in the accounting treatment of R&G’s or the Non-Bank Affiliates’ mortgage sale transactions with other financial institutions, are subsequently included as assets on the balance sheets of R&G or the Non-Bank Affiliates (collectively, the “Mortgage Portfolio”); and to prepare a written report that includes findings and

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recommendations (the “Mortgage Portfolio Review”). Prior to the commencement of the Mortgage Portfolio Review, R&G shall submit an engagement letter with the independent consultant to the Reserve Bank for approval. The terms of the engagement letter shall provide that the independent consultant will submit its written report within 60 days of its engagement and will provide a copy of its report to the Reserve Bank at the same time that it is provided to R&G.

2. Within 30 days after R&G’s receipt of the Mortgage Portfolio Review report, R&G shall submit an acceptable written plan, to the extent applicable, to the Reserve Bank describing specific actions that the board of directors proposes to take, with timeframes for completion, to fully address the findings and recommendations of the Mortgage Portfolio Review report.

3. R&G shall identify any mortgage portfolio transaction with another financial institution or entity that was originally accounted for as a purchase of the portfolio by R&G and was subsequently reclassified as a commercial loan to the other financial institution or entity (for which the mortgage loan portfolio serves as collateral). With respect to each such mortgage portfolio transaction, R&G shall submit to the Reserve Bank a report that:

(a) Demonstrates that R&G possesses complete, accurate and legally enforceable documentation that describes in detail the true nature of the underlying transactions (including the institution or entity’s legal claim to the underlying collateral);

(b) includes an assessment of the overall asset quality of the underlying collateral; and

(c) explains the expected cash flows associated with the reclassified transactions (including servicing fees and repayments of principal on the mortgages in the portfolios).

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R&G shall submit a report for each reclassified mortgage portfolio to the Reserve Bank within 15 days of this Order or within 15 days after the reclassification of such portfolio, whichever occurs later. With respect to the information called for in subparagraph (b), the report shall be supplemented within 30 days after submission of the initial report with any additional information received from the owner or servicer of the mortgage portfolio, which R&G has promptly and diligently requested.

Policies and Procedures Report

4. Within 30 days of this Order, R&G shall submit to the Reserve Bank a report summarizing recommendations made by independent consultants or counsel or by internal audit since April 2005 to revise R&G’s policies, procedures, plans, and programs. The report shall, at a minimum, indicate the status of recommended policies, procedures, plans, and programs, including but not limited to, approval by R&G’s board of directors, plans for approval by R&G’s board of directors, implementation, schedule for implementation, and, if applicable, basis for rejecting any recommendations by management or the board of directors.

Capital Plan

5. Within 45 days of this Order, R&G shall submit to the Reserve Bank an acceptable written capital plan. The plan shall be designed to ensure that the consolidated organization maintains an adequate capital position in light of the Restatement and 2005 Issuance. The plan shall, at a minimum, address, consider, and include:

(a) The consolidated organization’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measures and Tier 1 Leverage Measures, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

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(b) the adequacy of capital at each Subsidiary Bank, taking into account the volume of adversely classified credits, concentrations of credit, adequacy of loan loss reserves, current and projected growth of assets, and projected retained earning;

(c) the volume of problem or volatile assets held by the consolidated organization that could require the maintenance of higher capital levels;

(d) the source and timing of additional funds to fulfill the consolidated organization’s future capital requirements;

(e) federal or commonwealth supervisory requests for additional capital at R&G or a Subsidiary Bank or the requirements of any supervisory action imposed on R&G or a Subsidiary Bank by any federal or commonwealth regulator;

(f) the requirement of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. 225.4(a)) that R&G serve as a source of strength to the Subsidiary Banks; and

(g) procedures for R&G to notify the Reserve Bank and the federal and commonwealth regulators of the Subsidiary Banks, in writing, within ten days of the end of any calendar quarter that R&G’s consolidated capital ratios or a Subsidiary Bank’s capital ratios (tier 1 leverage, tier 1 risk-based, or total risk based) fall below the plan’s minimum and to submit to the Reserve Bank an acceptable written plan that details the steps R&G will take to increase its capital ratios above the plan’s minimum within 30 days of such calendar quarter-end date.

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Liquidity Contingency Plan

6. Within 45 days of this Order, R&G shall submit to the Reserve Bank an acceptable, updated written plan to provide for the maintenance of an adequate liquidity position. The plan shall, at a minimum, address, consider, and include:

(a) Maintenance of sufficient liquidity to meet current contractual liability maturities without incurring any additional unsecured debt and to meet unanticipated demands;

(b) appropriate measures for monitoring R&G’s liquidity position, including quantitative guidelines to establish adequate coverage of volatile liabilities by liquid assets; and

(c) submission to the board of directors of periodic written reports documenting R&G’s progress in complying with the plan; such reports shall include, but not be limited to, (i) a complete review of R&G’s then-current position in meeting targeted liquidity thresholds; (ii) a schedule of anticipated sources and uses of funds projected for the future; (iii) an analysis of strategies or steps taken during the reporting period to address deviations from the plan; and (iv) a discussion of contingency plans if actual sources or uses of funds vary materially from projections.

Debt and Stock Redemption

7. (a) R&G shall continue to provide advance informational notice to the Reserve Bank before R&G directly or indirectly increases, restructures, or repurchases its senior or subordinated notes or debentures. All notices shall contain, but not be limited to, a written statement regarding the purpose of the debt or other transaction, the terms of the transaction, the planned source(s) for repayment, and an analysis of the cash flow resources available to meet repayment obligations. Notices shall be provided as soon as practicable but not less than 10 days prior to the transaction.

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(b) R&G shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the “Director”).

Dividend Payment

8. (a) R&G shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from a Subsidiary Bank without the prior written approval of the Subsidiary Bank’s federal regulator.

(b) During the term of this Order, R&G shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director; however, no approval is required for R&G to pay dividends which its board of directors declared prior to the effective date of this Order.

(c) During the term of this Order, R&G and its Non-Bank Affiliates shall not make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director (see, Appendix A to Part 225 – Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure, section II.A.1.c.iv. (12 C.F.R. Part 225 App. A)); however, no approval is required for R&G to make distributions on trust preferred securities if the date for notice of deferral has expired prior to the effective date of this Order.

(d) All requests for prior approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities (at least 5 days with respect to any request filed within the first 30 days after the date of this Order). All requests shall contain, but not be limited to, current and projected information on consolidated earnings; cash flow, capital, asset

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quality and allowance for loan and lease loss needs of the Subsidiary Banks; identification of the sources of funds for the proposed payment or distribution; and, to the extent that the proposed payment or distribution will be made with dividends paid by a Subsidiary Bank, whether the Subsidiary Bank’s federal regulator has approved the dividend payment to R&G. The Reserve Bank and the Director will determine whether to approve a request to pay dividends or distributions pursuant to Federal Reserve policy, including but not limited to, the proposed payment’s impact on R&G’s continued ability to serve as a source of financial strength to the Subsidiary Banks (see, November 14, 1985, Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, Federal Reserve Regulatory Service, 4-877 at page 4-323).

Restricted Transactions

9. (a) R&G and its Non-Bank Affiliates shall not, directly or indirectly, enter into, participate, or in any other manner engage in any covered transaction with the Subsidiary Banks, except as permitted by section 23A of the Federal Reserve Act (12 U.S.C. 371c(b) and Regulation W (12 C.F.R. Part 223)).

(b) Within 10 days following the end of each month, R&G shall submit a report to the Reserve Bank and the Director summarizing all covered transactions, as defined in section 23A of the Federal Reserve Act, between R&G, the Non-Bank Affiliates, and the Subsidiary Banks within the month.

(c) R&G and its Non-Bank Affiliates shall not, directly or indirectly, enter into, participate, or in any other manner engage in any transaction with any Insider without the prior written approval of the Reserve Bank and the Director.

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(d) For the purposes of paragraph 9(c): (i) “Insider” shall include any of R&G’s, the Subsidiary Banks’, or the Non-Bank Affiliates’ current or former executive officers, directors, principal shareholders, members of their immediate families, related interests thereof, or persons acting on their behalf; (ii) “immediate family” shall be defined as set forth in section 225.41(b)(3) of Regulation Y of the Board of Governors (12 C.F.R 225.41(b)(3)); (iii) “related interest” shall be defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. 215.2(n)); (iv) “transaction” shall include, but not be limited to, the transfer or payment of cash, the transfer, contribution, sale or purchase of any other asset, the direct or indirect payment of any expense or obligation, the direct or indirect assumption of any liability, the provision of any service, the payment of a management or service fee of any nature, any extension of credit, any overdraft, or any advance; and (v) “extension of credit” shall be defined as set forth in section 215.3 of Regulation O of the Board of Governors (12 C.F.R. 215.3). Notwithstanding the foregoing definition of “transaction,” for the purposes of paragraph 9(c), “transaction” shall not include: (i) the payment of fees and salaries to directors and officers and the reimbursement of expenses, including but not limited to the expenses of legal counsel paid pursuant to approval by R&G’s board of directors in accordance with R&G’s bylaws and in compliance with 12 U.S.C. 1828k and 12 C.F.R. Part 359.5, provided that similar types and amounts of payments and reimbursements have previously been made and fully documented in R&G’s, the Subsidiary Banks’, or the Non-Bank Affiliates’ books and records; (ii) the provision of any unpaid services to R&G by any officer, director, or employee of R&G, the Subsidiary Banks, or the Non-Bank Affiliates; (iii) banking transactions between directors and officers and members of their immediate families on the one hand and Subsidiary Banks or Non-Bank Affiliates on the other hand which are in the normal course of business and are consistent with banking transactions which are offered by the Subsidiary Banks and Non-Bank

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Affiliates to members of the general public; (iv) lease payments made between the Subsidiary Banks and Non-Bank Affiliates and VIG Leasing Corporation, provided that similar payments have previously been made and are fully documented in the Subsidiary Banks’ and Non-Bank Affiliates’ books and records and the lease payments are in compliance with section 23A of the Federal Reserve Act (12 U.S.C. 371c(b)) and Regulation W (12 C.F.R. Part 223); and (v) the sale of any common or preferred stock of R&G in whole or in part to Victor Galan in a private placement transaction.

(e) Any request for prior approval pursuant to paragraph 9(c) shall be submitted in writing to the Reserve Bank and the Director at least 15 days prior to the proposed transaction, and shall include a complete and detailed description of the proposed transaction.

Regulatory Reports

10. R&G shall continue to file regulatory reports and shall promptly file amended regulatory reports to correct any reports that do not comply with GAAP or regulatory reporting requirements following its completion of the Restatement and 2005 Issuance, respectively. R&G shall maintain sufficient records to indicate how each report, whether filed before or after the Restatement and 2005 Issuance, was prepared and shall retain such records for subsequent supervisory review.

11. R&G shall take steps to ensure that all balance sheet and income statements and general ledger and subsidiary ledger accounts are reconciled on at least a monthly basis and that internal audit periodically reviews R&G’s procedures for the preparation of regulatory reports to monitor adherence to company policy, GAAP, and regulatory guidance.

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Approval, Implementation, and Progress Reports

12. (a) R&G shall submit an engagement letter and written plans, programs, policies, and procedures that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 1, 2, 5, and 6 of this Order. R&G shall adopt the approved plans, programs, policies, and procedures within 10 days of approval by the Reserve Bank. During the term of this Order, the approved plans, programs, policies, and procedures shall not be amended or rescinded without the prior written approval of the Reserve Bank.

(b) Once adopted, R&G shall take immediate steps to implement the approved plans, programs, policies, and procedures and thereafter shall continue to fully comply with the approved plans, programs, policies, and procedures.

13. Within 30 days after the end of each calendar quarter following the date of this Order, the board of directors shall furnish to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with this Order and the results thereof. Such reports may be discontinued when the corrections required by this Order have been accomplished and the Reserve Bank has, in writing, released R&G from making further reports.

Communications

14. All communications regarding this Order shall be sent to:

(a) Homer C. Hill, III

Vice President

Federal Reserve Bank of New York

33 Liberty Street

New York, New York 10045

(b) Victor J. Galan

Chairman and Chief Executive Officer

R&G Financial Corporation

280 Jesus T. Pinero Avenue

Hato Rey, San Juan, Puerto Rico 00918

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Miscellaneous

15. Notwithstanding any provision of this Order to the contrary, the Reserve Bank may, in its sole discretion, grant written extensions of time to R&G to comply with any provision of this Order.

16. The provisions of this Order shall be binding upon R&G and its institution-affiliated parties, in their capacities as such, and their successors and assigns.

17. Each provision of this Order shall remain effective and enforceable until stayed, modified, terminated or suspended in writing by the Reserve Bank.

18. The provisions of this Order shall not bar, estop or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal, state, or commonwealth agency from taking any other action affecting R&G, the Subsidiary Banks, or the Non-Bank Affiliates or any of their current or former institution-affiliated parties and their successors and assigns.

By order of the Board of Governors of the Federal Reserve System, effective this 16th day of March, 2006.

R&G FINANCIAL CORPORATION		BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
By:	/s/ VICTOR J. GALAN	By:	/s/ JENNIFER J. JOHNSON
	Victor J. Galan		Jennifer J. Johnson
			Secretary of the Board

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EX-99.2

Exhibit 99.2

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

	)
In the Matter of	)	ORDER TO CEASE AND DESIST
	)
R-G PREMIER BANK OF PUERTO RICO	)	FDIC-06-045b
HATO REY, PUERTO RICO	)
	)
(INSURED STATE NONMEMBER BANK)	)
	)

R-G PREMIER OF PUERTO RICO, HATO REY, PUERTO RICO(“Insured Institution”), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices alleged to have been committed by the Insured Institution and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”) with counsel for the Federal Deposit Insurance Corporation (“FDIC”), dated March 16, 2006, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices, the Insured Institution consented to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC.

The FDIC considered the matter and determined that it had reason to believe that the Insured Institution failed to properly account for and document certain mortgage loan transactions and thereby had engaged in unsafe or unsound banking practices. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

IT IS HEREBY ORDERED that the Insured Institution, its directors, officers, employees, agents, and other institution-affiliated parties (as that term is defined in Section 3(u) of the Act, 12 U.S.C. § 1813(u)), and its successors and assigns cease and desist from operating in contravention of certain provisions of the Interagency Guidelines Establishing Standards for Safety and Soundness set forth at Appendix A to Part 364 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 364, Appendix A.

IT IS FURTHER ORDERED that the Insured Institution, its institution-affiliated parties, and its successors and assigns take affirmative action as follows:

Mortgage Portfolios

1. Within 30 days of this ORDER, the Insured Institution’s board of directors shall engage an independent consultant acceptable to the Regional Director of the FDIC’s New York Regional Office (“Regional Director”) to conduct a review of

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the (i) mortgage loans on the balance sheet of the Insured Institution as of the effective date of this ORDER; (ii) mortgage loans sold by the Insured Institution with recourse, if any, as of the effective date of this ORDER, except for conforming loans sold to FNMA, FHLMC, and GNMA; and (iii) any mortgage loans that, as a result of a change in the accounting treatment of the Insured Institution’s mortgage sale transactions with other financial institutions or entities, are subsequently included as assets on the balance sheet of the Insured Institution (collectively, the “Mortgage Portfolio”); and to prepare a written report that includes findings and recommendations (the “Mortgage Portfolio Review”). Prior to the commencement of the Mortgage Portfolio Review, the Insured Institution shall submit an engagement letter with the independent consultant to the Regional Director for approval. The terms of the engagement letter shall provide that the independent consultant will submit its written report within 60 days of its engagement and will provide a copy of its report to the Regional Director at the same time that it is provided to the Insured Institution.

2. Within 30 days after the Insured Institution’s receipt of the Mortgage Portfolio Review report, the Insured Institution shall submit an acceptable written plan to the Regional Director describing specific actions that the board of directors proposes to take, with timeframes for completion, to fully address the findings and recommendations of the Mortgage Portfolio Review report.

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3. The Insured Institution shall identify any mortgage portfolio transaction with another financial institution or entity that was originally accounted for as a purchase of the mortgage portfolio by the Insured Institution and was subsequently reclassified as a commercial loan to the other financial institution or entity (for which the mortgage portfolio serves as collateral). With respect to each such mortgage portfolio transaction, the Insured Institution shall submit to the Regional Director a report that:

(a) Demonstrates that the Insured Institution possesses complete, accurate and legally enforceable documentation that describes in detail the true nature of the underlying transactions (including the Insured Institution’s or entity’s legal claim to the underlying collateral);

(b) Includes an assessment of the overall asset quality of the underlying collateral; and

(c) Explains the expected cash flows associated with the reclassified transactions (including servicing fees and repayments of principal on the mortgages in the mortgage portfolio).

The Insured Institution shall submit a report for each reclassified mortgage portfolio to the Regional Director within 15 days of this ORDER or within 15 days after the

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reclassification of such mortgage portfolio, whichever occurs later. With respect to the information called for in subparagraph (b), the report shall be supplemented within 30 days after submission of the initial report with any additional information received from the owner or servicer of the mortgage portfolio, which the Insured Institution has promptly and diligently requested.

Policies and Procedures Report

4. Within 30 days of this ORDER, the Insured Institution shall submit to the Regional Director a report summarizing recommendations made by independent consultants or counsel or by internal audit since April 2005 to revise the Insured Institution’s policies, procedures, plans, and programs. The report shall, at a minimum, indicate the status of recommended policies, procedures, plans, and programs, including but not limited to, approval by the Insured Institution’s board of directors, plans for approval by the Insured Institution’s board of directors, implementation, schedule for implementation, and, if applicable, the basis for rejecting any recommendations by management or the board of directors.

Capital Plan

5. Within 45 days of this ORDER, the Insured Institution shall submit to the Regional Director an acceptable written

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capital plan. The plan shall be designed to ensure that an adequate capital position is maintained by the Insured Institution in light of the reclassification of any mortgage portfolio. The plan shall, at a minimum, address, consider, and include:

(a) The Insured Institution’s current and future capital requirements, including compliance with the Capital Maintenance Requirement set forth in Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 325, and the Statement of Policy on Risk-Based Capital as set forth in Appendix A to Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 325, Appendix A;

(b) The adequacy of capital at the Insured Institution, taking into account the volume of adversely classified credits, concentrations of credit, adequacy of loan loss reserves, current and projected growth of assets, and projected retained earnings;

(c) The volume of problem or volatile assets held by the Insured Institution that could require the maintenance of higher capital levels;

(d) The source and timing of additional funds to fulfill the Insured Institution’s future capital requirements;

(e) Procedures for the Insured Institution to notify the Regional Director, in writing, within ten (10) days of the end of any calendar quarter that the Insured Institution’s capital ratios (Tier 1 leverage, Tier 1 risk-based, or total risk based) fall below the plan’s minimum capital requirements

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and to submit to the Regional Director an acceptable written plan that details the steps the Insured Institution will take to increase its capital ratios above the plan’s minimum capital requirements within thirty (30) days of such calendar quarter-end date.

(f) The Insured Institution may comply with the requirements of this Paragraph 5 by submitting a copy of a capital plan prepared by its parent holding company for the consolidated enterprise provided that the plan includes a separate and distinct plan for the Insured Institution.

Liquidity Contingency Plan

6. Within 45 days of this ORDER, the Insured Institution shall submit to the Regional Director an acceptable, updated written plan to provide for the maintenance of an adequate liquidity position. The plan shall, at a minimum, address, consider, and include:

(a) Maintenance of sufficient liquidity to meet current contractual liability maturities without incurring any additional unsecured debt and to meet unanticipated demands;

(b) Appropriate measures for monitoring the Insured Institution’s liquidity position, including quantitative guidelines to establish adequate coverage of volatile liabilities by liquid assets; and

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(c) Submission to the board of directors of periodic written reports documenting the Insured Institution’s progress in complying with the plan; such reports shall include, but not be limited to, (i) a complete review of the Insured Institution’s then-current position in meeting targeted liquidity thresholds; (ii) a schedule of anticipated sources and uses of funds projected for the future; (iii) an analysis of strategies or steps taken during the reporting period to address deviations from the plan; and (iv) a discussion of contingency plans if actual sources or uses of funds vary materially from projections.

Debt and Stock Redemption

7. (a) The Insured Institution shall provide advance informational notice to the Regional Director before the Insured Institution directly or indirectly increases, restructures, or repurchases its unsecured capital debt, if any, including but not limited to its senior notes or bonds, if any. All notices shall contain, but not be limited to, a written statement regarding the purpose of the debt or other transaction, the terms of the transaction, the planned source(s) for repayment, and an analysis of the cash flow resources available to meet repayment obligations. Notices shall be provided as soon as practicable, but not less than 10 days prior to the transaction.

(b) The Insured Institution shall not, directly or indirectly, purchase or redeem any shares of its stock without

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the prior written approval of the Regional Director pursuant to Section 18(i) of the Act, 12 U.S.C. § 1828(i).

Dividend Payment

8. (a) While this ORDER is in effect, the Insured Institution shall not declare or pay dividends or any other form of payment representing a reduction in capital without the prior written approval of the Regional Director. All requests for prior approval shall be received at least 30 days prior to the proposed dividend declaration date (at least 5 days with respect to any request filed within the first 30 days after the date of this ORDER) and shall contain, but not be limited to, an analysis of the impact such dividend or other payment would have on the Insured Institution’s capital position, cash flow, concentrations of credit, asset quality and allowance for loan and lease loss needs. The Regional Director will approve a dividend or any other form of payment representing a reduction in capital provided that the Regional Director determines that such dividend or payment will not have an unacceptable impact on the Insured Institution’s capital position, cash flow, concentrations of credit, asset quality and allowance for loan and lease loss needs.

(b) During the term of this ORDER, the Insured Institution shall not make any distributions of interest, principal or other sums on subordinated debentures, if any, without the prior written approval of the Regional Director.

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Restricted Transactions

9. (a) The Insured Institution shall not, directly or indirectly, enter into, participate, or in any other manner engage in any of the following transactions with any affiliate without the prior written approval of the Regional Director: (i) a loan or extension of credit to the affiliate; (ii) a purchase of or an investment in securities issued by the affiliate; (iii) a purchase of assets, including assets subject to an agreement to repurchase, from the affiliate; (iv) the acceptance of securities issued by the affiliate as collateral security for a loan or extension of credit to any person or company; (v) the issuance of a guarantee, acceptance, or letter of credit, including an endorsement or standby letter of credit, on behalf of an affiliate; (vi) the sale of securities or other assets to an affiliate, including assets subject to an agreement to repurchase; (vii) the payment of money or furnishing of services to an affiliate under contract, lease or otherwise; (viii) any transaction in which an affiliate acts as agent or broker or receives a fee for its services to the Insured Institution; (ix) any transaction or series of transactions with a third party (a) if an affiliate has a financial interest in the third party, or (b) an affiliate is a participant in such transaction or series of transactions. For purposes of this paragraph 9(a), any

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transaction by the Insured Institution with any person or entity shall be deemed to be a transaction with an affiliate of the Insured Institution if any of the proceeds of the transaction are used for the benefit of, or transferred to such affiliate.

(b) Within ten (10) days following the end of each month, the Insured Institution shall submit a report to the Regional Director summarizing all transactions of the type described in subparagraph (a)(i)-(ix) above between and among the Insured Institution, its holding company, and any of its affiliates within the month.

(c) The Insured Institution shall not, directly or indirectly, enter into, participate, or in any other manner engage in any transaction with any Insider without the prior written approval of the Regional Director.

(d) For the purposes of this paragraph 9: (i) “affiliate” shall be defined as set forth in section 23A(b)(1) of the Federal Reserve Act (12 U.S.C. § 371c(b)(1)); (ii) “Insider” shall include any of the Insured Institution’s current or former executive officers, directors, principal shareholders, members of their immediate families, related interests thereof, or persons acting on their behalf; (iii) “immediate family” shall be defined as set forth in section 225.41(b)(3) of Regulation Y of the Board of Governors (12 C.F.R. 225.41(b)(3)); (iv) “related interest” shall be defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. 215.2(n)); (v) “transaction” shall include, but not be limited to, the transfer or payment of

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cash, the transfer, contribution, sale or purchase of any other asset, the direct or indirect payment of any expense or obligation, the direct or indirect assumption of any liability, the provision of any service, the payment of a management or service fee of any nature, any extension of credit, any overdraft, or any advance; and (vi) “extension of credit” shall be defined as set forth in section 215.3 of Regulation O of the Board of Governors (12 C.F.R. 215.3). Notwithstanding the foregoing definition of “transaction,” for the purposes of paragraph 9(c), “transaction” shall not include: (1) the payment of fees and salaries to directors and officers and the reimbursement of expenses, including but not limited to the expenses of legal counsel paid pursuant to approval by the Insured Institution’s board of directors in accordance with the Insured Institution’s bylaws and in compliance with 12 U.S.C. § 1828k and 12 C.F.R. section 359.5, provided that similar types and amounts of payments and reimbursements have previously been made and fully documented in the Insured Institution’s books and records; (2) the provision of any unpaid services to the Insured Institution by any officer, director, or employee of the Insured Institution; and (3) banking transactions between directors and officers and members of their immediate families on the one hand and the Insured Institution on the other hand which are in the normal course of business and are consistent with banking transactions offered by the Insured Institution to members of the general public.

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(e) Any request for prior approval pursuant to paragraph 9(a) and (c) shall be submitted in writing to the Regional Director at least fifteen (15) days prior to the proposed transaction, and shall include a complete and detailed description of the proposed transaction.

Regulatory Reports

10. The Insured Institution shall continue to file regulatory reports and shall promptly file amended regulatory reports to correct any reports filed in 2002, 2003, 2004 and 2005 that are determined to contain material errors. For purposes of this paragraph, “material” means a qualitative characteristic of accounting information which is defined in Financial Accounting Standards Board Concepts Statement No. 2 as “the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.” The Insured Institution shall maintain sufficient records to indicate how each report was prepared and shall retain such records for subsequent supervisory review.

11. The Insured Institution shall take steps to ensure that all balance sheet and income statements and general ledger and subsidiary ledger accounts are reconciled on at least a monthly basis and that the Insured Institution’s internal audit unit

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periodically reviews the Insured Institution’s procedures for the preparation of regulatory reports to monitor adherence to the Insured Institution’s policies, GAAP, and regulatory guidance.

Approval, Implementation, and Progress Reports

12. (a) The Insured Institution shall submit an engagement letter and written plans, programs, policies, and procedures that are acceptable to the Regional Director within the applicable time periods set forth in paragraphs 1, 2, 5 and 6 of this ORDER. The Insured Institution shall adopt the approved plans, programs, policies, and procedures within 10 days of approval by the Regional Director. During the term of this ORDER, the approved plans, programs, policies, and procedures shall not be amended or rescinded without the prior written approval of the Regional Director.

(b) Once adopted, the Insured Institution shall take immediate steps to implement the approved plans, programs, policies, and procedures and thereafter shall continue to fully comply with the approved plans, programs, policies, and procedures.

13. Within 30 days after the end of each calendar quarter following the date of this ORDER, the board of directors shall furnish to the Regional Director written progress reports detailing the form and manner of all actions taken to secure compliance with this ORDER and the results thereof. Such reports

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may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has, in writing, released the Insured Institution from making further reports.

Miscellaneous

The provisions of this ORDER shall be binding upon the Insured Institution, its directors, officers, employees, agents, successors, assigns, and other institution-affiliated parties of the Insured Institution.

The provisions of this ORDER shall not bar, estop or otherwise prevent the FDIC, or any other federal or state or commonwealth agency from taking any other action affecting the Insured Institution or any of their current or former institution-affiliated parties and their successors and assigns.

This ORDER shall become effective upon its issuance.

The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.

Pursuant to delegated authority.

Dated: March 16, 2006

/s/ DOREEN R. EBERLEY

Doreen R. Eberley

Deputy Regional Director

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EX-99.3

Exhibit 99.3

ADOPTION AND APPROVAL BY THE COMMISSIONER OF FINANCIAL INSTITUTIONS

The Commissioner of Financial Institutions for the Commonwealth of Puerto Rico (the “Commissioner”), in the exercise of his powers under the Puerto Rico Banking Act and under the Financial Institutions Commissioner’s Office Act, hereby adopts and approves the foregoing ORDER.

The Commissioner and R-G Premier Bank of Puerto Rico, Hato Rey, Puerto Rico (the “Bank”), agree that upon issuance of the said ORDER by the Federal Deposit Insurance Corporation such ORDER shall be binding as between the Bank and the Commissioner with the same legal effect and to the same degree that such ORDER would be binding on the Bank if the Commissioner had issued a separate ORDER, pursuant to the provisions of Section 28 of the Banking Act, Title 7 of the Laws of Puerto Rico Annotated Section 151, that included and incorporated all of the provisions of the foregoing ORDER.

The Commissioner and the Bank further agree that the provisions of this ORDER shall remain effective and enforceable by the Commissioner against the Bank except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the Commissioner.

In San Juan, Puerto Rico, on March 16, 2006.

/s/ ALFREDO PADILLA

Alfredo Padilla

Commissioner of Financial Institutions

Acknowledged: R-G Premier Bank of Puerto Rico
By:	/s/ VICTOR J. GALAN
	Title: Chairman and Chief Executive Officer

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