R&G Financial Derivative Litigation

The Action that is the subject of this Notice is brought by plaintiffs who are stockholders of R&G Financial. It seeks to recover damages on behalf of R&G Financial based on certain claims plaintiffs have asserted against certain present or former officers and directors of R&G Financial and PricewaterhouseCoopers LLP, R&G Financial’s independent registered public accountants.

R&G Financial is a bank holding company incorporated under the laws of Puerto Rico with its principal place of business in Hato Rey, Puerto Rico. On April 25, 2005, R&G Financial announced that it would restate its previously reported interim and year-end financial statements for the years ended December 31, 2003 and 2004 based on a reexamination of the valuation assumptions used in accounting for residual interests retained in securitization transactions of the Company. On July 27, 2005, R&G Financial announced that it would also restate its previously reported interim and audited financial statements for the year ended December 31, 2002.

Beginning on June 13, 2005, a total of five separate stockholder derivative complaints were filed in the United States District Court for the Southern District of New York (the "Court") and the United States District Court for the District of Puerto Rico, putatively on behalf of R&G Financial. The original actions were styled Asbestos Workers Local 24 Pension Fund v. Galán, et al., No. 05 Civ. 5547 (JES) (S.D.N.Y.); Okimi v. Carús Abarca, et al., No. 05-CV-1623 (HL) (D.P.R.), Glassburn v. Carús Abarca, et al., No. 05-CV-1624 (HL) (D.P.R.); Kendall Trust v. Galán, et al., No. 05 Civ. 5817 (JES) (S.D.N.Y.); and Roussey v. Galán, No. 06-CV-4955 (HL) (D.P.R.). The actions that were initially filed in Puerto Rico were transferred to New York. The actions were consolidated under the caption In re R&G Financial Corp. Derivative Litigation, Master File No. 05 Civ. 5547 (JES).

The complaints in the constituent actions asserted claims derivatively on behalf of R&G Financial against a number of defendants. The defendants who were named in one or more of the constituent complaints included Laureno Carús Abarca, Ileana Colón-Carlo, Benigno Fernández, Melba Figueroa, Victor J. Galán, Victor L. Galán, Roberto Gorbea, Eduardo McCormack, Ivan Mendez, Rafael Nin, Jose L. Ortiz, Ramón Prats, Gilberto Rivera Arreaga, Joseph R. Sandoval, Enrique Umpierre Suarez, Steven Velez and PricewaterhouseCoopers LLP ("PwC"). R&G Financial was named as a nominal defendant.

Plaintiffs alleged in the complaints that the Company’s financial statements issued between 2003 and March 25, 2005 were false or misleading because of the Company’s alleged use of aggressive assumptions to generate gain on sale income, the Company’s alleged use of an incorrect methodology to calculate the fair value of interest only ("IO") residuals in securitization transactions, the Company’s failure to prepare its financial statements in accordance with generally accepted accounting principles and the Company’s alleged failure to maintain adequate internal controls.

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