1

                                                                       EXHIBIT 1
                                2,000,000 SHARES
                            R&G FINANCIAL CORPORATION
     ___% NONCUMULATIVE PERPETUAL MONTHLY INCOME PREFERRED STOCK, SERIES C
                             UNDERWRITING AGREEMENT
                                                    ____________ __, 2001

PAINEWEBBER INCORPORATED OF PUERTO RICO
As lead underwriter of the several Underwriters
named in Schedule 1
American International Plaza, Penthouse Floor
250 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Ladies and Gentlemen:

         R&G FINANCIAL CORPORATION, a Puerto Rico corporation (the "Company"),
proposes to sell an aggregate of 2,000,000 Shares (the "Firm Shares") of the
Company's ___% Noncumulative Perpetual Monthly Income Preferred Stock, Series C
(the "Preferred Stock"), which are to be issued and sold by the Company to you
and the other underwriters named in Schedule 1 hereto (collectively, the
"Underwriters"), for whom you are acting as representative (the
"Representative"). The Company also has agreed to grant to you and the other
Underwriters an option (the "Option") to purchase up to an additional 300,000
Shares of Preferred Stock (the "Option Shares") on the terms and for the
purposes set forth in Section 1(b) hereto. The Firm Shares and the Option Shares
are hereinafter collectively referred to as the "Shares."

         The Company hereby confirms as follows its agreements with the
Representative and the several other Underwriters.

         1.       AGREEMENT TO SELL AND PURCHASE.

                  (a)      On the basis of the representations, warranties, and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, the Company agrees to sell to each Underwriter and
each Underwriter, severally and not jointly, agrees to purchase from the Company
at a purchase price of $24.2125 per Share, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule 1 hereto, plus such additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to Section 9 hereof.

                  (b)      Subject to all the terms and conditions of this
Agreement, the Company grants the Option to the several Underwriters to
purchase, severally and not jointly, the Option Shares at the same price per
Share as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover overallotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time and from time
to time on or before the thirtieth (30th) day after the date of this Agreement
(or on the next business day if the thirtieth (30th) day is not a business day),
upon notice (the "Option Shares Notice") in writing or by telephone (confirmed
in writing) by the Representative to the Company no later than 5:00 p.m., New
York City time, at least two (2) and no more than five (5) business days before
the date specified for closing in the Option Shares Notice (the "Option Closing
Date") setting forth the aggregate number of Option Shares to be purchased and
the time and date for such purchase. On the Option Closing Date, the Company
will issue and sell to the Underwriters the number of Option Shares set forth in
the Option Shares Notice and each Underwriter will purchase such percentage of
the Option Shares as is equal to the percentage of Firm Shares that such
Underwriter is purchasing hereunder, as adjusted by the Representative in such
manner as it deems advisable to avoid fractional Shares.

   2

         2.       DELIVERY AND PAYMENT. Delivery of the Firm Shares shall be
made to the Representative for the accounts of the Underwriters at the office of
Fiddler Gonzalez & Rodriguez, LLP, counsel to the Underwriters, Torre BBVA, #254
Munoz Rivera Avenue, 6th Floor, San Juan, Puerto Rico 00918, against payment of
the purchase price by wire transfer of immediately available funds to the bank
account designated by the Company. Such payment shall be made at 10:00 a.m., New
York City time, on the third full business day following the date of this
Agreement, or at such other time on such other date, not later than seven (7)
business days after the date of this Agreement, as may be agreed upon by the
Company and the Representative (such date is hereinafter referred to as the
"Closing Date"). Time shall be of the essence and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder. The Firm Shares to be purchased by each Underwriter
hereunder will be represented by one or more definitive certificates registered
in the name of Cede & Co., which will be deposited by or on behalf of the
Company with the Depository Trust Company ("DTC") or its designated custodian.

         To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.

         Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representative shall request at least two (2) business days prior to the Closing
Date or the Option Closing Date, as the case may be, by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least twenty-four (24) hours prior to the Closing
Date or the Option Closing Date, as the case may be, at the office of DTC or its
designated custodian.

         The cost of original issue tax stamps, if any, in connection with the
issuance, sale, and delivery of the Firm Shares and Option Shares by the Company
to the respective Underwriters shall be borne by the Company. The Company will
pay and save each Underwriter and any subsequent holder of the Shares harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal, state, or Commonwealth of Puerto Rico stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the original issuance, sale, or delivery to such Underwriter of
the Firm Shares and Option Shares.

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants, and covenants to each Underwriter that:

                  (a)      A registration statement on Form S-3 (Registration
No. 333-_____) relating to the Shares, including a preliminary prospectus
relating to the Shares and such amendments to such registration statement as may
have been required to the date of this Agreement, has been prepared by the
Company under the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. The Commission has not
issued any order preventing or suspending the use of the Prospectus (as defined
below) or any Preliminary Prospectus (as defined below) or instituted or, to the
knowledge of the Company, threatened any proceeding for that purpose. The term
"Preliminary Prospectus" as used herein means a preliminary prospectus relating
to the Shares included at any time as part of the foregoing registration
statement or any amendment thereto before it became effective under the Act and
any prospectus filed with the Commission by the Company pursuant to Rule 424(a)
of the Rules and Regulations. Copies of such registration statement and
amendments and of each related Preliminary Prospectus have been delivered to the
Representative. If such registration statement has not become effective, a
further amendment to such


                                       2
   3

registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective will be filed promptly by
the Company with the Commission. If such registration statement has become
effective, a final prospectus relating to the Shares containing information
permitted to be omitted at the time of effectiveness by Rule 430A will be filed
by the Company with the Commission in accordance with Rule 424(b) of the Rules
and Regulations promptly after execution and delivery of this Agreement. The
term "Registration Statement" means the registration statement as amended at the
time it becomes or became effective, including all financial statements and
schedules and all exhibits, documents incorporated therein by reference, and all
information contained in any final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations or in a term sheet described in Rule
434 of the Rules and Regulations in accordance with Section 4 hereof and deemed
to be included therein as of the effective date by Rule 430A of the Rules and
Regulations and including any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations (a "Rule 462 Registration Statement")
increasing the size of the offering. The term "Prospectus" means the prospectus
relating to the Shares as first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations or, if no such filing is required, the form
of final prospectus relating to the Shares included in the Registration
Statement at the effective date. References herein to any document or other
information incorporated by reference in the Registration Statement shall
include documents or other information incorporated by reference in the
Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus). References herein to any Preliminary Prospectus or the
Prospectus shall be deemed to include all documents and information incorporated
by reference therein and shall be deemed to refer to and include any documents
and information filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, and so incorporated by reference, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

                  (b)      At the respective times the Registration Statement,
any Rule 462 Registration Statement and any post-effective amendments thereto
became effective and at the Closing Date (and, if any Option Shares are
purchased, at the Option Closing Date), the Registration Statement, the Rule 462
Registration Statement and any amendments and supplements thereto complied and
will comply in all material respects with the requirements of the Act and the
Rules and Act Regulations and did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the Prospectus
or any such amendment or supplement was issued and at the Closing Date (and, if
any Option Shares are purchased, at the Option Closing Date), included or will
include an untrue statement of a material fact or omitted or will omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
representations and warranties in this subsection shall not apply to statements
in or omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing by
any Underwriter through the Representatives expressly for use in the
Registration Statement or Prospectus.

                  Each Preliminary Prospectus and the Prospectus filed as part
of the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in
all material respects with the Rules and Regulations and each Preliminary
Prospectus and the Prospectus delivered to the Underwriters for use in
connection with this offering was identical to the electronically transmitted
copies thereof filed with the Commission pursuant to the Commission's Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR"), except to the extent
permitted by Regulation S-T.

                  There are no contracts or other documents required to be filed
as exhibits to the Registration Statement by the Act or the Rules and
Regulations that have not been so filed. The documents which are incorporated by
reference in any Preliminary Prospectus or the Prospectus or from


                                       3
   4

which information is so incorporated by reference, when they became effective or
were filed with the Commission, as the case may be, complied in all material
respects with the requirements of the Act and the Rules and Regulations or the
Exchange Act and the rules and regulations thereunder, as applicable, and did
not, when such documents were so filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and any documents so filed and
incorporated by reference subsequent to the effective date of the Registration
Statement shall, when they are filed with the Commission, conform in all
material respects with the requirements of the Act and the Rules and Regulations
and the Exchange Act and the rules and regulations thereunder, as applicable.

                  (c)      The accountants who certified the financial
statements and supporting schedules included in the Registration Statement are
independent public accountants as required by the Act and the Rules and
Regulations.

                  (d)      The consolidated financial statements of the Company
included or incorporated by reference in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus), together with the related schedules and notes, present
fairly the financial position of the Company and its Subsidiaries (as defined in
Section 3(g) hereof) at the dates indicated and the consolidated statement of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The supporting
schedules, if any, included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in the Prospectus
present fairly the information shown and have been compiled on a basis
consistent with that of the audited financial statements included or
incorporated by reference in the Registration Statement.

                  (e)      Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company or any
of its Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the Company's
Class A common stock, par value $.01 per share (the "Class A common stock"), for
regular quarterly dividends on the Company's Class B common stock, par value
$.01 per share (the "Class B common stock", and collectively with the Class A
common stock, the "common stock") and for the regular monthly dividends on the
Company's 7.4% Noncumulative Monthly Income Preferred Stock, Series A ("Series A
Preferred Stock") and 7.75% Noncumulative Monthly Income Preferred Stock, Series
B ("Series B Preferred Stock"); since December 31, 1999, there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.

                  (f)      The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the Commonwealth of
Puerto Rico with full corporate power and authority to own, lease and operate
its properties and conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement; and the Company is
duly qualified to transact business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the conduct of its
business or ownership or leasing of its properties requires such qualification
and where the failure to be so qualified would, individually or in the
aggregate, have a Material Adverse Effect. The Company is registered as a
financial holding company under the Bank Holding Company Act


                                       4
   5

of 1956, as amended (the "BHCA") in good standing with the Board of Governors
of the Federal Reserve System (the "Federal Reserve").

                  (g)      The only subsidiaries of the Company (each a
"Subsidiary and collectively the "Subsidiaries") are those listed on Exhibit A
hereto. Except as set forth in the Prospectus (or if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or as required in
connection with the exercise of its rights as a creditor, or pursuant to a bona
fide collateral pledge arrangement, neither the Company nor any Subsidiary owns,
nor at the Closing Date or the Option Closing Date (if any Option Shares are
purchased), will own an interest in any corporation, partnership, trust, joint
venture or other business entity. Each Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate power
and authority to own, lease and operate its properties and conduct its business
as described in the Prospectus, and is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which the conduct of its business or ownership or leasing of its properties
requires such qualification and where the failure to be so qualified would,
individually or in the aggregate, have a Material Adverse Effect. Except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
Shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.

                  (h)      The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
described therein and the issuance of the Shares pursuant to this Agreement).
The shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; none of the
outstanding Shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company. The
description of the securities of the Company in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most recent
preliminary prospectus) is, and at the Closing Date and, if later, as of each
Option Closing Date, will be, complete and accurate in all material respects.

                  (i)      This Agreement has been duly authorized, executed and
delivered by the Company.

                  (j)      The description of the common stock of the Company
contained in the Prospectus conforms in all material respects to the rights set
forth in the instruments defining the same.

                  (k)      The Shares have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement, and, when issued and
delivered by the Company pursuant to this Agreement against payment of the
consideration set forth herein will be validly issued and fully paid and
non-assessable Shares of capital stock of the Company; the description of the
Shares contained in the Prospectus conforms in all material respects to the
rights set forth in the instruments defining the same; no holder of the Shares
will be subject to personal liability solely by reason of being such a holder;
and the issuance of the Shares is not subject to the preemptive or other similar
rights of any security holder of the Company.

                  (l)      Neither the Company nor any of its Subsidiaries is in
violation of its articles of incorporation, charter or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan or


                                       5
   6

credit agreement, note, lease or other agreement or instrument to which the
Company or any of its Shares is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any
Subsidiary is subject (collectively, "Agreements and Instruments") except for
such defaults that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Shares and the use of the proceeds from
the sale of the Shares as described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Company with its obligations hereunder have
been duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
Subsidiary or any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any Subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any Subsidiary.

                  (m)      No labor dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company, is imminent. Neither
the Company nor any Subsidiary is a party to a collective bargaining agreement.

                  (n)      There is no action, suit, proceeding, inquiry or
investigation before or brought by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any Subsidiary, which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any Subsidiary is a party or of which any of
their respective property or assets is the subject which are not described in
the Registration Statement, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material Adverse
Effect.

                  (o)      There are no contracts or documents which are
required to be described in the Registration Statement or the Prospectus (or if
the Prospectus is not in existence, in the most recent Preliminary Prospectus)
or to be filed as exhibits thereto which have not been so described and filed as
required.

                  (p)      The Company and its Subsidiaries own or possess, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of its
Subsidiaries has received any actual notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its Subsidiaries therein, and which infringement or conflict
(if the subject of any unfavorable


                                       6
   7

decision, ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.

                  (q)      No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the performance by
the Company of its obligations hereunder, in connection with the offering,
issuance or sale of the Shares hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already obtained or as
may be required under the Act or the Rules and Regulations, state securities
laws or the bylaws and rules of the National Association of Securities Dealers,
Inc. (the "NASD") in connection with the purchase and distribution by the
Underwriters of the Shares to be sold hereby and the filing of the Certificate
of Designation (as defined below) with respect to the Shares with the Secretary
of State of the Commonwealth of Puerto Rico.

                  (r)      The Company and its Subsidiaries possess such
permits, licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies ("Governmental Bodies") necessary go
conduct the business now operated by them, except where the lack of such
Governmental Licenses would not, singly or in the aggregate, have a Material
Adverse Effect; the Company and its Subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a Material
Adverse Effect; and neither the Company nor any of its Subsidiaries has received
any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.

                  (s)      The Company and its Subsidiaries have good and
marketable title to all real property owned by the Company and its Subsidiaries
and good title to all other properties and assets owned by them, in each case,
free and clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described in the
Prospectus or (b) would not, singly or in the aggregate, have a Material Adverse
Effect; and all of the leases and subleases material to the business of the
Company and its Subsidiaries, considered as one enterprise, and under which the
Company or any of its Subsidiaries holds properties described in the Prospectus,
are in full force and effect, and neither the Company nor any Subsidiary has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any Subsidiary under any of the leases
or subleases mentioned above, or affecting or questioning the rights of the
Company or such Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.

                  (t)      The Company is not, and upon the issuance and sale of
the Shares as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus will not be, an "investment company" or
an entity "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").

                  (u)      The Company meets the requirements for use of Form
S-3 under the Rules and Regulations.

                  (v)      To the knowledge of the Company, except as described
in the Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor any
of its Subsidiaries is in violation of any federal, state, local or foreign


                                       7
   8

statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and
its Subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its Subsidiaries and (D) there
are no events or circumstances known to the Company that might reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its Subsidiaries relating to
Hazardous Materials or any Environmental Laws.

                  (w)      There are no persons with registration rights or
other similar rights to have any securities included in the offering described
in the Registration Statement.

                  (x)      No court, supervisory or regulatory authority or
arbitrator has, by order or otherwise, prohibited or suspended, or, to the
knowledge of the Company, threatened to prohibit or suspend, the use of the
Prospectus.

                  (y)      The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.

                  (z)      Except as set forth in the Registration Statement and
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and prior
to Closing Date and, if later, each Option Closing Date, (i) there has not been,
and will not have been, any Material Adverse Effect, (ii) neither the Company
nor any of its Subsidiaries has entered into, or will have entered into any
material transactions other than pursuant to this Agreement or in the ordinary
course of its business, and (iii) the Company has not, and will not have, paid
or declared any dividends or other distributions of any kind on any class of its
capital stock, except for the payment or declaration of quarterly dividends, on
the Company's common stock and its Series A Preferred Stock and Series B
Preferred Stock, each in the ordinary course of its business.

                  (aa)     No statement, representation, or warranty made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representative was or will be, when made,
inaccurate, untrue or incorrect in any material respect. Each certificate signed
by an officer of the Company and delivered to the Representative or counsel for
the Underwriters shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.


                                       8
   9

                  (bb)     Neither the Company, its Subsidiaries nor any of
their respective directors or officers has taken, nor will he, she or it take,
directly or indirectly, any action designed, or which might reasonably be
expected in the future, to cause or result in, under the Act or otherwise, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or
otherwise.

                  (cc)     The Shares have been approved for quotation on the
Nasdaq Stock Market, subject only to notice of issuance.

                  (dd)     Neither the Company nor any of its Subsidiaries nor,
to the Company's best knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds of the Company or any Subsidiary in violation of
any law, rule or regulation which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus (or, if the Prospectus is
not in existence, in the most recent Preliminary Prospectus).

                  (ee)     Each of the Company and its Subsidiaries has filed
all foreign, federal, Puerto Rico and local tax returns that are required to be
filed or has requested extensions thereof and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable.

                  (ff)     The deposit accounts of R-G Premier Bank of Puerto
Rico, a Subsidiary of the Company (the "Bank") are insured by the Federal
Deposit Insurance Corporation ("FDIC") to the legal maximum, and no proceeding
for the termination or revocation of such insurance is pending or threatened.
The Bank is a member in good standing of the Federal Home Loan Bank of New York.

                  (gg)     None of the Company or its Subsidiaries or any of
their respective directors or officers is subject to any order or directive of,
or party to any agreement with, any regulatory agency having jurisdiction with
respect to its business or operations except as disclosed in the Prospectus (or
if the Prospectus is not in existence, in the most recent Preliminary
Prospectus).

         4.       AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with each of the several Underwriters as follows:

                  (a)      The Company will not, either prior to the effective
date or thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representative within a reasonable period of time prior to the filing thereof
and the Representative shall not have objected thereto in good faith.

                  (b)      If the Registration Statement is not yet effective,
the Company will use its best efforts to cause the Registration Statement to
become effective not later than the time indicated in Section 6(a) hereof. The
Company will notify the Representative promptly, and will confirm such advice in
writing, (i) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective; (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof; (iv) of the happening of any event during the period mentioned in the
first sentence of Section 4(g) that in the judgment of the Company makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order


                                       9
   10

to make the statements therein, in light of the circumstances in which they are
made, not misleading; and (v) of receipt by the Company or any representative or
attorney of the Company of any other communication from the Commission relating
to the Company, the Registration Statement, any Preliminary Prospectus, or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. The Company will prepare the Prospectus in a form approved by
the Representative and will file such Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the Act. If the
Company has omitted any information from the Registration Statement pursuant to
Rule 430A, the Company will use its best efforts to comply with the provisions
of and make all requisite filings with the Commission pursuant to said Rule 430A
and to notify the Representative promptly of all such filings.

                  (c)      If the Company elects to rely upon Rule 462(b) of the
Rules and Regulations, the Company shall file the Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) of the Rules and
Regulations by 10:00 p.m., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing, either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) of the Rules
and Regulations.

                  (d)      If, at any time when a Prospectus relating to the
Shares is required to be delivered under the Act, any event occurs as a result
of which, in the judgment of the Company or in the opinion of counsel for the
Underwriters, the Registration Statement or the Prospectus, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if for
any other reason it is necessary at any time to amend or supplement the
Registration Statement or the Prospectus to comply with the Act or the Rules and
Regulations, the Company will promptly notify the Representative thereof and,
subject to Section 4(b) hereof, will prepare and file with the Commission, at
the Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance.

                  (e)      The Company will furnish to the Representative,
without charge, two (2) signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representative, without charge,
for transmittal to each of the other Underwriters, copies of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules but without exhibits.

                  (f)      The Company will comply with all the provisions of
all undertakings contained in the Registration Statement.

                  (g)      On the effective date, and thereafter from time to
time for such period as the Prospectus is required by the Act to be delivered,
the Company will deliver to each of the Underwriters, without charge, as many
copies of the Prospectus or any amendment or supplement thereto as the
Representative may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the several Underwriters
and by all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment of the
Company or counsel to the Underwriters should be set forth in the Registration
Statement or the Prospectus in order to make any


                                       10
   11

statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Registration
Statement or the Prospectus to comply with law, the Company will forthwith
prepare and duly file with the Commission an appropriate supplement or amendment
thereto, and deliver to each of the Underwriters, without charge, such number of
copies thereof as the Representative may reasonably request.

                  (h)      Prior to any public offering of the Shares by the
Underwriters, the Company will cooperate with the Representative and its counsel
in connection with the registration or qualification of the Shares for offer and
sale under the securities or blue sky laws of such jurisdictions as the
Representative may reasonably request; provided, however, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.

                  (i)      During the period of five (5) years commencing on the
effective date, the Company will furnish to the Representative and each other
Underwriter who may so request copies of such financial statements and other
periodic and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will furnish to
the Representative and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.

                  (j)      The Company will make generally available to holders
of its securities, as soon as may be practicable, but in no event later than the
last day of the fifteenth (15th) full calendar month following the calendar
quarter in which the effective date falls, a consolidated earnings statement
(which need not be audited but shall be in reasonable detail) for a period of
twelve (12) months commencing after the effective date, and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 of the Rules and
Regulations).

                  (k)      The Company will apply the net proceeds from the
offering and sale of the Shares in the manner set forth in the Prospectus under
"Use of Proceeds."

                  (l)      The Company will not at any time, directly or
indirectly, take any action intended, or which might reasonably be expected, to
cause or result in, or which will constitute, stabilization of the price of the
shares of common stock to facilitate the sale or resale of any of the Shares.

                  (m)      The Company will use its best efforts to effect and
maintain the quotation of the Shares on the Nasdaq National Market and will file
with the Nasdaq Stock Market all documents and notices required by the Nasdaq
Stock Market of companies that have securities that are traded in the
over-the-counter market and quotations which are reported by the Nasdaq National
Market.

                  (n)      The Company, during the period when the Prospectus is
required to be delivered under the Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to the 1934 Act within the
periods required by the 1934 Act and the rules and regulations of the Commission
thereunder.

         5.       EXPENSES.

                  (a)      Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse if paid by the Representative, all costs and expenses incidental to
the performance of the obligations of the Company


                                       11
   12
under this Agreement, including, but not limited to, costs and expenses of or
relating to (i) the preparation, printing, and filing by the Company of the
Registration Statement and amendments and exhibits thereto, each Preliminary
Prospectus prior to or during the period specified in the first sentence of
Section 4(g) but not exceeding nine (9) months after the effective date, the
Prospectus and amendments or supplements; (ii) the preparation and delivery of
certificates representing the Shares; (iii) the furnishing (including costs of
shipping and mailing) of such copies of the Registration Statement, the
Prospectus, and any Preliminary Prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold; (iv)
the filing fees incident to, and the disbursements of counsel to the
Underwriters in connection with, the review by the NASD of the terms of the sale
of the Shares and the fees and expenses incurred in connection with the
inclusion of the Shares in the Nasdaq Stock Market; (v) the fees and
disbursements of the Company's counsel, accountants and other advisers (vi) the
registration or qualification of the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions designated pursuant to Section
4(h) and the preparation and printing of preliminary, supplemental, and final
blue sky memoranda; and (vii) the fees and expenses of any transfer agent or
registrar for the Shares.

                  (b)      If the transactions contemplated by this Agreement
are not consummated or if this Agreement is terminated by the Company pursuant
to any of the provisions hereof, the Company will reimburse the Representative
for all of their accountable out-of-pocket fees and expenses (including the
fees, disbursements, and other charges of their counsel) incurred by them in
connection herewith.

         6.       CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of each Underwriter hereunder are subject to the following
conditions:

                  (a)      Notification that the Registration Statement has
become effective shall be received by the Representative not later than 3:00
p.m., New York City time, on the date of this Agreement or at such later date
and time as shall be consented to in writing by the Representative and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made. If the Company has elected to rely upon Rule 462(b) of the Rules
and Regulations, the Company has filed the Rule 462(b) Registration Statement by
10:00 p.m., Washington D.C. time, on the date of this Agreement.

                  (b)      (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission; (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or blue sky laws of any
jurisdiction shall be in effect, and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction; (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities; and (iv) after the date hereof no amendment or supplement
to the Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to the Representative and the Representative
did not object thereto in good faith.

                  (c)      Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not have
been a Material Adverse Effect, and (ii) the Company shall not have sustained
any material loss or interference with its business, assets, or properties from
fire, explosion, flood, or other casualty, or from any labor dispute or any
court or legislative or other governmental action, order, or decree, which is
not set forth in the Registration Statement, including the documents
incorporated be reference therein, and the Prospectus.


                                       12
   13

                  (d)      Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers, directors, or Shareholders in their capacities as such, or any of its
assets or properties, before or by any Governmental Body in which litigation or
proceeding an unfavorable ruling, decision, or finding would have a Material
Adverse Effect.

                  (e)      Each of the representations and warranties of the
Company contained herein shall be true and correct at the Closing Date and, with
respect to the Option Shares, at the Option Closing Date, as if made on such
date, and all covenants and agreements herein contained to be performed on the
part of the Company and all conditions herein contained to be fulfilled or
complied with by the Company at or prior to the Closing Date and, with respect
to the Option Shares, at or prior to the Option Closing Date, shall have been
fully performed, fulfilled, or complied with.

                  (f)      The Representative shall have received an opinion,
dated the Closing Date and Option Closing Date, from Kelley Drye & Warren LLP,
special counsel for the Company, to the following effect:

                           (i)      The Company is registered as a financial
holding company under the BHCA.

                           (ii)     The Company has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus.

                           (iii)    The Company is duly qualified as a foreign
corporation to transact business in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
would not result in a Material Adverse Effect.

                           (iv)     The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to the Agreement or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or pursuant
to the exercise of options referred to in the Prospectus); the Shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-accessible; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any security holder of the Company
granted by applicable law or the Company's Certificate of Incorporation.

                           (v)      The Shares have been duly authorized for
issuance and sale to the Underwriters pursuant to the Agreement and, when issued
and delivered by the Company pursuant to the Agreement against payment of the
consideration set forth in the Agreement, will be validly issued and fully paid
and non-assessable; no holder of the Shares is or will be subject to personal
liability for obligations of the Company solely by reason of being such a
holder; the Shares conform to the provisions of the certificate of designation
of the Company creating the Shares (the "Certificate of Designation") and the
rights, preferences and other terms of the Shares are as set forth in the
Certificate of Designation relating thereto, and all such provisions are valid
under the laws of the Commonwealth of Puerto Rico.

                           (vi)     the issuance of the Shares is not subject to
the preemptive or other similar rights of any security holder of the Company.

                           (vii)    Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws of its
jurisdiction of incorporation, each of the Subsidiaries is


                                       13
   14

duly qualified as a foreign corporation to transact business in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify would not result in a Material Adverse Effect; to the best
of such counsel's knowledge, all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company, directly or through a Subsidiary, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity; and none of the outstanding Shares of capital stock of any Subsidiary
was issued in violation of the preemptive or similar rights of any security
holder of any Subsidiary granted by applicable law or such Subsidiary's articles
of incorporation.

                           (viii)   The Company has full legal right, power, and
authority to enter into the Agreement and to consummate the transactions
provided for therein; the Agreement has been duly authorized, executed and
delivered by the Company, and assuming due authorization, execution and delivery
by each other party thereto, is a valid and binding agreement of the Company,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to or affecting
creditors' rights generally or by general principles of equity relating to the
availability of remedies and except as rights to indemnify and contribution may
be limited by federal or state securities laws or the public policy underlying
such laws.

                           (ix)     The Registration Statement has been declared
effective under the Act; any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement, or any amendment thereto, and
no order directed at any document incorporated by reference in the Registration
Statement has been issued under the Act and no proceedings for that purpose have
been instituted or are pending or threatened by the Commission.

                           (x)      The Registration Statement, the Prospectus
and each amendment or supplement to the Registration Statement and Prospectus,
and the documents incorporated therein by reference, as of their respective
effective or issue dates (other than the financial statements, notes to the
financial statements, financial tables and other financial information and
supporting schedules included therein or omitted therefrom or contained in the
documents incorporated by reference therein, as to which such counsel need
express no opinion) complied in all materials respects with the requirements of
the Act and the Rules and Regulations.

                           (xi)     The form of certificate used to evidence the
Shares complies in all material respects with all applicable Commonwealth of
Puerto Rico statutory requirements and with any applicable requirements of the
Certificate of Incorporation and Bylaws of the Company. The Shares have been
duly authorized for quotation on the Nasdaq Stock Market.

                           (xii)    To the best of such counsel's knowledge,
there is not pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or any Subsidiary is a party, or to which
the property or assets of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or foreign of a
character required to be disclosed in the Registration Statement or in the
Prospectus which is not so disclosed therein, which might reasonably be expected
to result in a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in the Agreement or the
performance by the Company of its obligations thereunder.

                           (xiii)   The information in the Prospectus under
"Risk Factors -- Banking Regulations May Restrict R&G Financials Ability to Pay
Dividends; "Risk-Factors - Payment of


                                       14
   15

Dividends May be Restricted by the Ability of R&G Financials Subsidiaries to Pay
Dividends to R&G Financial," "Summary of Certain Terms of the Series C Preferred
Stock," "Description of Capital Stock", "Taxation-United States Taxation" and in
the Registration Statement under Item 15, to the extent that it constitutes a
discussion of federal law, summaries of legal matters involving federal law, the
Company's Certificate of Incorporation and Bylaws or legal proceedings, or legal
conclusions, has been reviewed by such counsel and is accurate and complete in
all material respects.

                           (xiv)    To the best of such counsel's knowledge,
there are no statutes or regulations that are required to be described in the
Prospectus that are not described as required.

                           (xv)     All descriptions in the Registration
Statement of contracts and other documents to which the Company or its
subsidiaries are a party are accurate in all material respects; to the best of
such counsel's knowledge, there are no franchises, contracts, indentures,
mortgages, loan agreements, notes, leases, or other instruments required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto.

                           (xvi)    To the best of such counsel's knowledge,
neither the Company nor any Subsidiary is in violation of its articles of
incorporation or by-laws and no default by the Company or any Subsidiary exists
in the due performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is described or
referred to in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement.

                           (xvii)   No filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than under the Act
and the Rules and Regulations, which have been obtained, the filing of the
Certificate of Designation with the Puerto Rico Department of State which has
been made, or as may be required under the securities or blue sky laws of the
various states, as to which such counsel need express no opinion) is necessary
or required in connection with the due authorization, execution and delivery of
the Agreement or for the offering, issuance, sale or delivery of the Shares.

                           (xviii)  The execution, delivery and performance of
the Agreement and the consummation of the transactions contemplated in the
Agreement and in the Registration Statement (including the issuance and sale of
the Shares and the use of the proceeds from the sale of the Shares as described
in the Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations under the Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
3(l) of the Agreement) under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreements or instrument, known to
such counsel to which the Company or any Subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any Subsidiary is subject (except for such conflicts, breaches, or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the articles of incorporation or by-laws of the Company or any Subsidiary, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to such counsel, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any Subsidiary or
any of their respective properties, assets or operations.


                                       15
   16

                           (xix)    To the best of such counsel's knowledge,
there are no persons with registration rights or other similar rights to have
any securities registered pursuant to the Registration Statement or otherwise
registered by the Company under the Act.

                           (xx)     The Company is not, and upon the issuance
and sale of the Shares as contemplated in the Agreement and the application of
the net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in 1940 Act.

                           (xxi)    The deposit accounts of the Bank are insured
by the FDIC to the legal maximum, and to the best of such counsel's knowledge,
no proceeding for the termination or revocation of such insurance is pending or
threatened. The Bank is a member of the Federal Home Loan Bank of New York.

                           (xxii)   To the best of such counsel's knowledge,
none of the Company, its Subsidiaries, or any of their respective directors or
officers is subject to any order or directive of, or is a party to any agreement
with, any federal banking or mortgage banking regulatory agency having
jurisdiction with respect to its business or operations, except as disclosed in
the Registration Statement or the Prospectus or which would not have a Material
Adverse Effect.

                           (xxiii)  To the best of such counsel's knowledge, the
conduct of the respective businesses of the Company and its Subsidiaries is not
in violation of any federal banking, mortgage banking or securities laws, which
violation is likely to have a Material Adverse Effect. Each of the Company and
the Subsidiaries has obtained and, to such counsel's knowledge, is operating in
compliance with, all authorizations, licenses, orders and directives required by
federal banking, mortgage banking or securities laws which are material to the
conduct of their respective businesses. To such counsel's knowledge, all such
authorizations, licenses, orders or directives are valid and in full force and
effect and neither the Company nor the Subsidiaries have received any notice of
any proceeding relating to the revocation or modification of any such license,
authorization or order.

                           Nothing has come to such counsel's attention that
would lead such counsel to believe that the Registration Statement or any
amendment thereto, including the documents incorporated therein by reference
(except for financial statements notes to the financial statements, financial
tables and other financial information and schedules and other financial data
included therein or omitted therefrom or contained in the documents incorporated
therein by reference, as to which such counsel need make no statement), at the
time of such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statement therein
not misleading or that the Prospectus or any amendment or supplement thereto
(except for financial statements, notes to the financial statements, financial
tables and other financial information and schedules and other financial data
included therein or omitted therefrom or contained in the documents therein
incorporated by reference, as to which such counsel need make no statement, at
the time the Prospectus was issued, at the time any such amended or supplemented
prospectus was issued or at the Closing Date, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

                           In rendering such opinion, such counsel may rely (A)
as to the matters et forth in paragraph (v), the first clause of paragraph
(vii), paragraph (viii), the first sentence of paragraph (xi), and as to matters
involving the application of the laws of the Commonwealth of Puerto Rico in
paragraphs (xiv), (xvii), (xviii) and (xxiii), upon the opinion of the McConnell
Valdez, special Puerto Rico counsel to the Company and its Subsidiaries (which
opinion shall be dated and furnished to the Representatives at


                                       16
   17

the Closing Date, shall be satisfactory in form and substance to counsel for the
Underwriters and shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them), provided that Kelley Dry and Warren
LLP shall state in their opinion that they believe that they and the
Underwriters are justified in relying upon such opinion of special Puerto Rico
counsel, and (B), as to matters of fact (but not as to legal conclusions), to
the extent they deem proper, on certificates of responsible officers of the
Company and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treaties,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

                  (g)      The Representative shall have received an opinion,
dated the Closing Date and the Option Closing Date, from the McConnell Valdes,
special Puerto Rico counsel for the Company and its Subsidiaries to the
following effect:

                           (i)      The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
Commonwealth of Puerto Rico, and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus.

                           (ii)     The Shares have been duly authorized for
issuance and sale to the Underwriters pursuant to the Agreement and, when issued
and delivered by the Company pursuant to the Agreement against payment of the
consideration set forth in the Underwriting Agreement, will be validly issued
and fully paid and non-assessable. No holder of the Shares is or will be subject
to personal liability for obligations of the Company solely by reason of being
such a holder. The Shares conform to the provisions of the Certificate of
Designation. The rights, preferences and other terms of the Shares are as set
forth in the Certificate of Designation, and all such provisions are valid under
the laws of the Commonwealth of Puerto Rico.

                           (iii)    Each of the Subsidiaries (other than
Continental Capital Corporation, as to which no opinion need be given) has been
duly incorporated and is validly existing as a corporation (and in the case of
the Bank as a commercial bank) in good standing under the laws of the
Commonwealth of Puerto Rico, and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus.

                           (iv)     Except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of the
Company has been duly authorized and validly issued. To the best of such
counsel's knowledge, all of the issued and outstanding capital stock of the
Subsidiaries (other than Continental Capital Corporation, as to which no opinion
need be given) is owned by the Company, directly or through a Subsidiary, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity. None of the outstanding Shares of capital stock of the Company or any
Subsidiary (other than Continental Capital Corporation, as to which no opinion
need be given) were issued in violation of the preemptive or similar rights of
any security holder of the Company or such Subsidiary granted by applicable law
or the Company's or such Subsidiary's Certificate or Articles of Incorporation.

                           (v)      The form of certificate used to evidence the
Shares complies in all material respects with all applicable Commonwealth of
Puerto Rico statutory requirements and with any applicable requirements of the
Certificate of Incorporation and By-laws of the Company.

                           (vi)     The information in the Prospectus under
"Risk Factors -- Banking Regulations May Restrict R&G Financial's Ability to Pay
Dividends; "Risk-Factors - Payment of


                                       17
   18

Dividends May be Restricted by the Ability of R&G Financial's Subsidiaries to
Pay Dividends to R&G Financial," "Summary of Certain Terms of the Series C
Preferred Stock," "Description of Capital Stock", "Taxation-Puerto Rico
Taxation" and in the Registration Statement under Item 15, to the extent that it
constitutes a discussion of Puerto Rico law, summaries of legal matters
involving Puerto Rico law, the Company's Certificate of Incorporation and Bylaws
or legal proceedings, or legal conclusions, has been reviewed by such counsel
and is accurate and complete in all material respects.

                           (vii)    To the best of such counsel's knowledge,
none of the Company or its Subsidiaries ( other than Continental Capital
Corporation, as to which no opinion need be given) or any of their respective
directors or officers is subject to any order or directive of, or is a party to
any agreement with, any Commonwealth of Puerto Rico securities, banking or
mortgage banking regulatory agency having jurisdiction with respect to the
business or operations of the Company or the Subsidiaries, except as disclosed
in the Registration Statement or the Prospectus, and except for any such order,
directive or agreement which would not have a Material Adverse Effect.

                           (viii)   Each of the Company and the Subsidiaries
(other than Continental Capital Corporation, as to which no opinion need be
given) has obtained and, to the best of such counsel's knowledge, is operating
in compliance with all authorizations, licenses, directives and orders required
by Puerto Rico banking, mortgage banking or securities laws which are material
to the conduct of their respective businesses. All of such authorizations,
licenses, directives and orders are valid and in full force and effect. To the
best of such counsel's knowledge, neither the Company nor the Subsidiaries
(other than Continental Capital Corporation, as to which no opinion need be
given) have received any notice of proceeding relating to the revocation or
modification of any such license, authorization, directive or order.

                           (ix)     The Company has full legal right, power, and
authority to enter into the Agreement and to consummate the transactions
provided for therein. The Agreement has been duly authorized, executed and
delivered by the Company, and assuming due authorization, execution and delivery
by each other party thereto, is a valid and binding agreement of the Company,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws now or hereafter in effect
relating to or affecting creditors; rights generally or by general principles of
equity relating to the availability of remedies and except as rights to
indemnity and contribution may be limited by federal, state or Puerto Rico
securities laws or the public policy underlying such laws.

                           (x)      No filing with or authorization, approval,
consent, license, order, registration, qualification or decree of, any Puerto
Rico court or governmental authority or agency is necessary or required in
connection with the due authorization, execution and delivery of the Agreement
for the offering, issuance, sale or delivery of the Shares, other than the
filing of the Certificate of Designation with the Secretary of State of the
Commonwealth of Puerto Rico which has been made.

                           (xi)     The execution, delivery and performance of
the Agreement and the consummation of the transactions contemplated in the
Agreement and in the Registration Statement (including the issuance and sale of
the Shares and the use of the proceeds from the sale of the Shares as described
in the Prospectus under the caption "Use of Proceeds") and compliance with the
Company with its obligations under the Agreement do not and will not result in
any violation of the provisions of the Certificate of Articles of Incorporation
or By-laws of the Company or any Subsidiary (other than Continental Capital
Corporation, as to which no opinion need be given), or any applicable law,
statute, rule, regulations, judgment, order, directive, writ or decree known to
such counsel, of any Puerto Rico government, government instrumentality or court
having jurisdiction over the Company or any Subsidiary (other than Continental
Capital Corporation, as to which no opinion need be given) or any of their
respective properties, assets or operations.


                                       18
   19

                           (xii)    To the best of such counsel's knowledge,
there are no statutes or regulations that are required to be described in the
Prospectus that are not described as required.

                  (h)      The Representative shall have received an opinion,
dated the Closing Date and Option Closing Date, from Fiddler Gonzalez &
Rodriguez, LLP, counsel to the Underwriters, which opinion shall be satisfactory
in all respects to the Representative.

                  (i)      Concurrently with the execution and delivery of this
Agreement, or, if the Company elects to rely on Rule 430A, on the date of the
Prospectus, the Company's independent financial accountants shall have furnished
to the Representative a letter, dated the date of its delivery (the "Original
Letter"), addressed to the Representative and in form and substance satisfactory
to the Representative to the following effect:

                           (i)      They are independent accountants within the
meaning of the Act and the applicable published rules and regulations
thereunder;

                           (ii)     In their opinion, the consolidated financial
statements of the Company and its Subsidiaries audited by them and incorporated
by reference in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act, the Exchange
Act, and the published rules and regulations thereunder with respect to
registration statements on Form S-3;

                           (iii)    On the basis of procedures (but not an audit
in accordance with generally accepted auditing standards) consisting of (A)
reading the minutes of meetings of the stockholders and the Board of Directors
of the Company and its Subsidiaries since December 31, 1999 as set forth in the
minute books through a specified date not more than five (5) business days prior
to the date of delivery of the Original Letter; (B) performing the procedures
specified by the American Institute of Certified Public Accountants for a review
of interim financial information as described in SAS No. 71, "Interim Financial
Information," on the unaudited consolidated interim financial statements of the
Company and its Subsidiaries included in the Registration Statement and reading
the unaudited interim financial data for the period from the date of the latest
balance sheet incorporated by reference in the Registration Statement to the
date of the latest available interim financial data; and (C) making inquiries of
certain officials of the Company who have responsibility for financial and
accounting matters regarding the specific items for which representations are
requested below; nothing has come to their attention (as of a date not more than
five (5) business days prior to the date of the delivery of such letter) as a
result of the foregoing procedures that caused them to believe that: (1) the
unaudited consolidated interim financial statements, if any, incorporated by
reference in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Exchange Act and the
published rules and regulations thereunder; (2) any material modifications
should be made to the unaudited consolidated interim financial statements, if
any, incorporated by reference in the Registration Statement for them to be in
conformity with GAAP; (3) (i) at the date of the latest available interim
financial data and at a specified date not more than five (5) business days
prior to the date of delivery of the Original Letter there was any change in the
capital stock, notes payable, advances from the Federal Home Loan Bank, Federal
Funds purchased and securities sold under repurchase agreements, and other short
term borrowings or any decreases in the consolidated stockholders' equity (only
as to the latest interim financial data) of the Company and its Subsidiaries as
compared with amounts shown in the September 30, 2000 statement of financial
condition incorporated by reference in the Registration Statement and (ii) for
the period from the latest interim financial statements incorporated by
reference in the Registration Statement, to the latest interim financial data
available which should be no later than forty (40) days prior to the date of
delivery of the Original Letter, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated net interest income,
non-interest


                                       19
   20

income, income before taxes, or in the total or per share amounts of net income,
except in all instances for changes or decreases which the Registration
Statement discloses have occurred or may occur, or they shall state any specific
changes or decreases; and

                           (iv)     The information set forth under the captions
"Summary - Summary Consolidated Financial and Other Data," "Summary - Ratios of
Earnings to Fixed Charges and Preferred Stock Dividends," "Recent Developments,"
"Capitalization," "Selected Consolidated Financial and Other Data," and
"Description of Capital Stock," which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from accounting records
which are subject to the internal controls of the Company's accounting system or
which has been derived directly from such accounting records and analysis or
computations, is in agreement with such records or computations made therefrom.

                           At the Closing Date and, as to the Option Shares, the
Option Closing Date, the Company's independent financial accountants shall have
furnished to the Representative a letter, dated the date of its delivery, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the Original Letter, that nothing has come to their attention during
the period from the date of the Original Letter referred to in the prior
sentence to a date (specified in the letter) not more than five (5) business
days prior to the Closing Date or Option Closing Date, as the case may be, which
would require any change in the Original Letter if it were required to be dated
and delivered at the Closing Date or the Option Closing Date, as the case may
be.

                           In the event that the letters referred to above set
forth any such changes, decreases, or increases, it shall be a further condition
to the obligations of the Underwriters that (A) such letters shall be
accompanied by a written explanation of the Company as to the significance
thereof, unless the Representative deems such explanation unnecessary, and (B)
such changes, decreases, or increases do not, in the sole judgment of the
Representative, make it impractical or inadvisable to proceed with the purchase
and delivery of the Shares as contemplated by the Registration Statement, as
amended as of the date hereof.

                  (j)      At the Closing Date and, as to the Option Shares, the
Option Closing Date, there shall be furnished to the Representative an accurate
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, in form and
substance satisfactory to the Representative, to the effect that to the best of
their knowledge:

                           (i)      Each signer of such certificate has
carefully examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, (x) the Registration Statement does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (y) the Prospectus does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (B) since the
effective date no event has occurred as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein not
untrue or misleading, in any material respect;

                           (ii)     Each of the representations and warranties
of the Company contained in this Agreement were, when originally made, and are,
at the time such certificate is delivered, true and correct in all respects;
each of the covenants required herein to be performed by the Company on or prior
to the date of such certificate has been duly, timely, and fully performed and
each condition herein required to be complied with by the Company on or prior to
the delivery of such certificate has been duly, timely, and fully complied with;
and


                                       20
   21

                           (iii)    No stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto and no
order directed at any document incorporated by reference in the Registration
Statement or any amendment thereto or the Prospectus has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the best
of the Company's knowledge, are contemplated by the Commission.

                  (k)      The Shares shall be qualified for sale in such states
and jurisdictions as the Representative may reasonably request, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date and the Option Closing Date.

                  (l)      Prior to the Closing Date, the Shares shall have been
accepted for listing on the Nasdaq Stock Market.

                  (m)      All filings required to be made with the NASD shall
have been made and the NASD shall have raised no objections to the terms and
arrangements presented in such filings.

                  (n)      The Company shall have furnished to the
Representative such certificates, letters, and other documents, in addition to
those specifically mentioned herein, as the Representative may have reasonably
requested as to the accuracy and completeness at the Closing Date and Option
Closing Date of any statement in the Registration Statement or the Prospectus,
as to the accuracy at the Closing Date and Option Closing Date of the
representations and warranties of the Company, as to the performance by the
Company of its obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Underwriters.

                  All such opinions, certificates, letters, and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you. The Company will furnish you with such conformed
copies of such opinions, certificates, letters, and other documents as you shall
reasonably request.

         7.       INDEMNIFICATION AND CONTRIBUTION.

                  (a)      The Company agrees to indemnify and hold harmless
each Underwriter, the directors, officers, and employees of each Underwriter,
and each person, if any, who controls each Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, or liabilities, joint or several (and actions
in respect thereof), to which they, or any of them, may become subject under the
Act or other federal, state, or Commonwealth of Puerto Rico statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement made by the Company in
Section 3 of this Agreement; (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) any Preliminary Prospectus, the
Registration Statement, the Prospectus, or any amendment or supplement to the
Registration Statement or the Prospectus, or (B) any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application"); or (iii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement, the
Prospectus, any amendment or supplement to the Registration Statement or the
Prospectus, or any Application a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse, as
incurred, each Underwriter and each such other person for any legal or other
expenses reasonably incurred by such Underwriter or such other person in
connection with investigating defending or appearing as a third-party witness in
connection with any such


                                       21
   22
loss, claim, damage, liability, or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability based solely upon an untrue statement or omission or
alleged untrue statement or omission in any of such documents made in reliance
upon and in conformity with information relating to any Underwriter furnished in
writing to the Company by the Representative on behalf of any Underwriter
expressly for inclusion therein; and provided, further, that such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or any such other person) from whom the person asserting any such
loss, claim, damage, liability, or action purchased Shares which are the subject
thereof to the extent that any such loss, claim, damage, or liability (A)
results from the fact that such Underwriter failed to send or give a copy of the
Prospectus (as amended or supplemented) to such person at or prior to the
confirmation of the sale of such Shares to such person in any case where such
delivery is required by the Act, and (B) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (or any amendment or supplement
thereto), unless such failure to deliver the Prospectus (as amended or
supplemented) was the result of noncompliance by the Company with Section 4(g)
of this Agreement. This indemnity agreement will be in addition to any liability
that the Company might otherwise have. The Company will not, without the prior
written consent of each Underwriter, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit, or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to
each claim, action, suit, or proceeding), unless such settlement, compromise, or
consent includes an unconditional release of each Underwriter and each such
other person from all liability arising out of such claim, action, suit, or
proceeding.

                  (b)      Each Underwriter will indemnify and hold harmless the
Company, and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company who signed the Registration Statement
against any losses, claims, damages, or liabilities (or actions in respect
thereof) to which the Company and any such director, officer, or controlling
person may become subject under the Act or other federal, state, or Commonwealth
of Puerto Rico statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any amendment or supplement to the
Registration Statement or the Prospectus, or any Application, or material fact
required to be stated therein, or (ii) the omission or the alleged omission to
state in the Registration Statement, any Preliminary Prospectus, the Prospectus,
any amendment or supplement to the Registration Statement or the Prospectus, or
any Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through the
Representative expressly for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company and any such director,
officer, or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or any action in respect thereof. The
Company acknowledges that, for all purposes under this Agreement, the statements
set forth under the heading "Underwriting" constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representative on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any Preliminary Prospectus, or the Prospectus. This
indemnity agreement will be in addition to any liability that each Underwriter
might otherwise have.

                  (c)      Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made


                                       22
   23

against an indemnifying party or parties under this Section 7, notify such
indemnifying party or parties of the commencement thereof, but the omission so
to notify the indemnifying party or parties will not relieve it or them from any
liability which it or they may have to any indemnified party under the foregoing
provisions of this Section 7 or otherwise unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against an indemnified party
and it notifies an indemnifying party or parties of its commencement, the
indemnifying party or parties against which a claim is made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 7 for any
legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
reasonable fees and expenses of more than one separate counsel (in addition to
the fees and expenses of local counsel necessary in connection with any such
proceedings) in any one action or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Representative in the case of paragraph (a) of
this Section 7, representing the indemnified parties under paragraph (a) who are
parties to such action or actions), or (ii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the written consent of the indemnifying party, unless such
indemnified party waived its rights under this Section 7 in which case the
indemnified party may effect such a settlement without such consent.

         (d)      If the indemnification provided for in the foregoing
paragraphs of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above in respect of any losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
or liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties, on the one hand, and the indemnified party, on the other, from the
offering of the Shares, or (ii) if, but only if, the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand, and the indemnified party, on the other, in connection with the
statements or omissions or alleged statements or omissions that resulted in such
losses, claims, damages, or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company, on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Shares (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. Relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material


                                       23
   24

fact relates to information supplied by the Company or the Representative on
behalf of the Underwriters, the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, and liabilities
(or actions in respect thereof) referred to above in this Section 7(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7(d), no Underwriter
shall be required to contribute any amount in excess of the total underwriting
discounts received by it with respect to the Shares purchased by such
Underwriter under this Agreement, less the aggregate amount of any damages that
such Underwriter has otherwise been required to pay in respect of the same or
any substantially similar claim. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7(d), each person, if
any, who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act will have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, will have the same rights to contribution as the Company, subject
in each case to the provisions of this paragraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit, or proceeding against such party in respect of which a claim for
contribution may be made under this Section 7(d), notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation(s) it or they may have hereunder or otherwise than under this
paragraph (d) or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may otherwise have.
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).

                  (e)      The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Underwriters,
(ii) acceptance of any of the Shares and payment therefor, or (iii) any
termination of this Agreement.

         8.       TERMINATION. The obligations of the several Underwriters under
this Agreement may be terminated at any time prior to the Closing Date (or, with
respect to the Option Shares, on or prior to the Option Closing Date), by notice
to the Company from the Representative, without liability on the part of any
Underwriter to the Company if, prior to delivery and payment for the Firm Shares
(or the Option Shares, as the case may be), in the sole judgment of the
Representative, (i) trading in the Common Stock or the Preferred Stock shall
have been suspended or materially limited by the Commission or by the Nasdaq
Stock Market, or if trading on the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "AMEX") generally has been suspended or
materially limited; (ii) minimum or maximum prices shall have been established
for the Common Stock or the Preferred Stock on the Nasdaq Stock Market or
securities generally on the NYSE or AMEX, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by any of such market or exchange
or by order of the Commission or any court or other Governmental Body; (iii) a
general banking moratorium shall have been declared by the United States, State
of New York, or Commonwealth of Puerto Rico authorities; (iv) any material
adverse change in


                                       24
   25

the financial or securities markets in the United States or any outbreak or
material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall have occurred, the
effect of any of which is such as to make it, in the sole judgment of the
Representative, impracticable or inadvisable to market the Shares on the terms
and in the manner contemplated by the Prospectus; or (v) if there has been,
since the date of execution of this Agreement or since the respective dates as
of which information is given in the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business. Any
termination pursuant to Section 8 shall be without liability of any party to any
other party except as provided in Sections 5(a) and 7.

         9.       DEFAULT OF UNDERWRITERS. If one or more Underwriters default
in their obligations to purchase Firm Shares or Option Shares hereunder and the
aggregate number of such Shares that such defaulting Underwriter or Underwriters
agreed but failed to purchase is ten percent (10%) or less of the aggregate
number of Firm Shares or Option Shares to be purchased by all of the
Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representative for the purchase of such Shares
by other persons (who may include one or more of the nondefaulting Underwriters,
including the Representative), but if no such arrangements are made by the
Closing Date or the related Option Closing Date, as the case may be, the other
Underwriters shall be obligated severally in proportion to their respective
commitments hereunder to purchase the Firm Shares or Option Shares that such
defaulting Underwriter or Underwriters agreed but failed to purchase. If one or
more Underwriters so default with respect to an aggregate number of Shares that
is more than ten percent (10%) of the aggregate number of Firm Shares or Option
Shares, as the case may be, to be purchased by all of the Underwriters at such
time hereunder, and if arrangements satisfactory to the Representative are not
made within thirty-six (36) hours after such default for the purchase by other
persons (who may include one or more of the nondefaulting Underwriters,
including the Representative) of the Shares with respect to which such default
occurs, this Agreement will terminate without liability on the part of any
nondefaulting Underwriter and the Company other than as provided in Section 10
hereof. In the event of any default by one or more Underwriters as described in
this Section 9, the Representative shall have the right to postpone the Closing
Date or Option Closing Date, as the case may be, established as provided in
Section 9 hereof for not more than seven (7) business days in order that any
necessary changes may be made in the arrangements or documents for the purchase
and delivery of the Firm Shares or Option Shares, as the case may be. As used in
this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9. Nothing herein shall relieve any defaulting
Underwriter from liability for its default.

         10.      SURVIVAL. The respective representations, warranties,
agreements, covenants, indemnities, and other statements of the Company, its
officers, and the several Underwriters set forth in this Agreement or made by or
on behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect regardless of (i) any investigation made by or on behalf of the
Company, any of its officers or directors, any Underwriter, or any controlling
person referred to in Section 7 hereof, and (ii) delivery of and payment for the
Shares. The respective agreements, covenants, indemnities, and other statements
set forth in Sections 5 and 7 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.

         11.      NOTICES. Notices given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered:


                                       25
   26

                  (a)      if to the Company, to:

                           R&G Financial Corporation
                           280 Jesus T. Pinero Avenue
                           San Juan, Puerto Rico 00918
                           Attention: Victor J. Galan
                           Chairman and Chief Executive Officer

                  (b)      if to the Underwriters, to:

                           Paine Webber Incorporated of Puerto Rico
                           American International Plaza, Penthouse Floor
                           250 Munoz Rivera Avenue
                           Hato Rey, Puerto Rico 00918
                           Attention: Jose G. Arias, First Vice President

         Any such notice shall be effective only upon receipt. Any notice under
Section 7 or 8 may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.

         12.      SUCCESSORS. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy, or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (a) the indemnities of the Company contained in Section 7 of this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and (b) the indemnities of the Underwriters contained in Section 7
of this Agreement shall also be for the benefit of the directors of the Company,
the officers of the Company who have signed the Registration Statement, and any
person or persons who control the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of Shares from any
Underwriter shall be deemed a successor because of such purchase. This Agreement
shall not be assignable by either party hereto without the prior written consent
of the other party.

         13.      APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.

         14.      COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


                                       26
   27

         Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.


                                     Very truly yours,

                                     R&G Financial Corporation



                                     By:
                                        ----------------------------------------
                                     Name:
                                          --------------------------------------
                                     Title:
                                           -------------------------------------

Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED OF
PUERTO RICO

By:
   ------------------------------
Name:
     ----------------------------
Title:
      ---------------------------

Acting on its behalf and as lead
underwriter of the several Underwriters
named in Schedule 1 hereof.


                                       27
   28

                                   SCHEDULE 1

                                  UNDERWRITERS



                                                                                        Aggregate Number of
                                                                                      Shares to be Purchased
                                                                                   
PaineWebber Incorporated of Puerto Rico........................................
Keefe, Bruyette & Woods, Inc...................................................
Popular Securities, Inc........................................................
Santander Securities Corporation...............................................
                                                                                      ----------------------
                                                               Total
                                                                                      ======================



                                       28
   29

                                    EXHIBIT A

                              LIST OF SUBSIDIARIES

1.       R&G Mortgage Corp.

2.       R-G Premier Bank of Puerto Rico

3.       Money Store of Puerto Rico, Inc.

4.       Continental Capital Corporation

5.       Home and Property Insurance Corporation


                                       29