Fitch Ratings Upgrades R&G Financial Corp. to 'BBB'.

CHICAGO -- Fitch Ratings upgrades R&G Financial Corporation's (RGFC) senior unsecured rating to 'BBB' from 'BBB-'. The Rating Outlook is Stable. A list of ratings is provided at the end of this release.

The rating upgrade largely reflects the progress the company has made in improving its profitability, capitalization, and funding over the past few years. In addition, the company has demonstrated its ability to defend its market position in a highly competitive environment. The strengths are balanced by the high level of geographic and product concentration in Puerto Rico.

Profitability metrics have improved over the past few years. Annualized return on managed assets was at a historical high of 0.92% for the three months ended March 31, 2004 versus 0.73% for the year ending Dec. 31, 2001. Annualized return on average equity was at a historical high of 21.17% for the three moths ended March 31, 2004 versus 18.19% for the year ending Dec. 31, 2001. The driving factors for improved profitability over the past three years have been an improved net interest margin coupled with robust mortgage origination growth. RGFC's net interest margin is expected to see some pressure in the near term but less than they have historically as the company has taken advantage of the low interest rate environment and locked in longer term funding. In addition, R-G Crown Bank (the bank) and the insurance division should continue to add to the profitability of RGFC over time. The bank's profitability dynamics are expected to shift from a high percentage of gain-on-sale revenue to net interest income as the bank increases its asset base over the near term.

RGFC has posted consistently good asset quality results. Net charge offs-to-average loans outstanding for the year ending Dec. 31, 2003 declined to 0.32% from 0.41% in the comparable period in 2002. Net charge-offs continued to show improvement to 0.23% for the first three months of 2004. Net charge-offs have historically been in the 0.18%-0.55% range over the past five years. The consistency in net charge-offs over the past few years is mainly due to the resilience of home values in Puerto Rico. Home values over the near term are expected to continue to increase slightly as housing demand continues to be greater than supply. Reserves for loan losses as a percentage of loans outstanding were 1.04% at March 31, 2004, well above charge-offs for the current period.

Capitalization, measured by debt-to-equity or by using Fitch's risk-adjusted capital model, is adequate for the rating category. Over the past few years, management has strengthened the company's capital structure through earnings retention and preferred stock issuances. The continued strengthening improves the company's ability to withstand risk-related shocks. The assigned ratings incorporate an expectation that RGFC will maintain its capitalization at or above the current levels.

R&G Financial Corporation:

-- Long-term senior unsecured to 'BBB' from 'BBB-';

-- Preferred stock to 'BB+' from 'BB';

-- Individual 'B/C' affirmed;

-- Support '5' affirmed.

-- Long-term Rating Outlook affirmed at Stable.

R&G Mortgage:

-- Long-term senior unsecured to 'BBB' from 'BBB-'.

R-G Premier Bank:

-- Long-term deposit obligations to 'BBB+' from 'BBB';

-- Long-term nondeposit obligations to 'BBB' from 'BBB-';

-- Short-term deposit obligations 'F2' affirmed;

-- Short-term nondeposit obligations 'F3' affirmed.