SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
         
                                       OR

[   ]    TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
         _________________.

                        Commission file number: 000-21137


                            R&G FINANCIAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

   Puerto Rico                                                66-0532217
--------------------------------------------------------------------------------
(State of incorporation                                   (I.R.S. Employer
 or organization)                                        Identification No.)

     280 Jesus T. Pinero Avenue
     Hato Rey, San Juan, Puerto Rico                            00918
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

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


Indicate by checkmark  whether  Registrant (a) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  report(s)  and  (b) has  been  subject  to such  filing
requirements for at least 90 days.

                              YES [ X ]    NO [   ]

Number of  shares  of Class B Common  Stock  outstanding  as of March 31,  1999:
10,185,691.  (Does not include  18,440,556  Class A Shares of Common Stock which
are  exchangeable  into  Class B Shares  of  Common  Stock at the  option of the
holder.)
<PAGE>
                            R&G FINANCIAL CORPORATION

                                      INDEX



Part I  -  Financial Information
--------------------------------     
                                                                            Page

Item 1.  Consolidated Financial Statements .................................   3

            Consolidated Statement of Financial Condition as of
                     March 31, 1999 (Unaudited) and December 31, 1998.......   3

            Consolidated Statements of Income for the Three
                     Months Ended March 31, 1999 and 1998 (Unaudited).......   4

            Consolidated Statements of Comprehensive Income for the Three
                     Months Ended March 31, 1999 and 1998 (Unaudited).......   5

            Consolidated Statements of Cash Flows for the Three Months
                     Ended March 31, 1999 and 1998 (Unaudited) .............   6

            Notes to Unaudited Consolidated Financial Statements ...........   7


Item 2...Management's Discussion and Analysis...............................  14

Item 3...Quantitative and Qualitative Disclosures about Market Risk.........  17


Part II  - Other Information
-------  -------------------

Item 1.  Legal Proceedings .................................................  17

Item 2.  Changes in Securities .............................................  17

Item 3.  Defaults upon Senior Securities ...................................  17

Item 4.  Submission of Matters .............................................  17

Item 5.  Other Information .................................................  17

Item 6.  Exhibits and Reports on Form 8-K ..................................  18

                  Signatures ...............................................  18


                                      -2-
<PAGE>
                         PART 1 - FINANCIAL INFORMATION
                         ------------------------------

Item 1:  Consolidated Financial Statements
-------  ---------------------------------
<TABLE>
<CAPTION>
R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                    March 31,         December 31,
                                                                                      1999                1998
                                                                                 --------------     --------------
                                                                                   (Unaudited)
<S>                                                                              <C>                <C>           
ASSETS
Cash and due from banks                                                         $   35,700,762     $   51,804,750   
Money market investments:                                                                                            
    Securities purchased under agreements to resell                                  7,501,490         11,544,123   
    Time deposits with other banks                                                   5,171,966         30,361,527    
    Federal funds sold                                                                    --           10,018,048    
Mortgage loans held for sale, at lower of cost or market                           109,990,674        117,126,040    
Mortgage-backed securities held for trading, at fair value                          25,216,189        450,546,034    
Mortgage-backed securities available for sale, at fair value                       528,757,067         95,040,331    
Mortgage-backed securities held to maturity, at amortized cost                                                       
(estimated market value: 1999 - $26,829,846; 1998 - $28,260,925)                    26,834,199         28,255,518   
Investment securities available for sale, at fair value                             71,572,197         59,502,140    
Investment securities held to maturity, at amortized cost                                                            
(estimated market value: 1999- $ 6,367,577; 1998- $6,378,634)                        6,348,172          6,343,929   
Loans receivable, net                                                            1,167,240,530      1,073,668,278    
Accounts receivable, including advances to investors, net                           12,233,705          9,665,290    
Accrued interest receivable                                                         13,748,392         12,505,431    
Servicing Asset                                                                     61,944,250         58,221,052    
Premises and equipment                                                              13,549,816         12,962,435    
Other assets                                                                        16,736,038         17,216,602  
                                                                                --------------     --------------  
                                                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY                                            $2,102,545,447     $2,044,781,528  
Liabilities:                                                                    ==============     ==============  
                                                                                                                   
     Deposits                                                                   $1,094,290,510     $1,007,297,304 
     Securities sold under agreements to repurchase                                423,340,922        471,421,726 
     Notes payable                                                                 172,469,029        182,747,956 
     Advances from FHLB                                                            141,000,000        121,000,000 
     Other borrowings                                                                9,000,000          9,000,000 
     Accounts payable and accrued liabilities                                       26,674,448         28,020,080 
     Other liabilities                                                               5,816,186          4,132,603 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                    March 31,         December 31,
                                                                                      1999                1998
                                                                                 --------------     --------------
                                                                                   (Unaudited)
<S>                                                                              <C>                <C>  
     Preferred stock, $.01 par value, 10,000,000 shares authorized, 7.40%        1,872,591,095      1,823,619,669   
         Monthly Income                                                         --------------     --------------    
                                                                                                                     
          Preferred Stock, Series A, $25 liquidation value, 2,000,000 shares     
             authorized, issued and outstanding                                     50,000,000         50,000,000  
     Common stock:                                                                                                  
          Class A - $.01 par value, 40,000,000 shares authorized, 18,440,556       
             issued  and Outstanding                                                   184,406            184,406  
          Class B - $.01 par value, 20,000,000 shares authorized, 10,185,691     
             issued and outstanding in 1999 and 10,146,091 in 1998                     101,857            101,461    
     Additional paid-in capital                                                     41,703,482         41,544,378    
     Retained earnings                                                             133,700,796        124,418,278    
     Capital reserves of the Bank                                                    3,547,798          3,547,798  
     Accumulated other comprehensive income                                            716,013          1,365,538   
                                                                                --------------     --------------  
                                                                                   229,954,352        221,161,859  
                                                                                --------------     --------------  
                                                                                $2,102,545,447     $2,044,781,528  
                                                                                ==============     ============== 
</TABLE>
        The accompanying notes are an integral part of these statements.        

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

                                                                     Three month
                                                                    period ended
                                                                      March 31,
                                                             ------------------------------
                                                                 1999              1998
                                                             ------------      ------------
                                                                       (Unaudited)
<S>                                                          <C>               <C>         
Interest income:
     Loans                                                   $ 26,616,509      $ 18,656,942
     Money market and other investments                           733,461         1,428,203
     Mortgage-backed securities                                 8,035,385         7,691,106
                                                             ------------      ------------
          Total interest income                                35,385,355        27,776,251
                                                             ------------      ------------

Interest expense:
     Deposits                                                  11,460,159         8,345,253
     Securities sold under agreements to repurchase             5,374,542         5,693,530
     Notes payable                                              3,729,187         2,969,761
          Other                                                 1,587,320           781,866
                                                             ------------      ------------
          Total interest expense                               22,151,208        17,790,410
                                                             ------------      ------------
Net interest income                                            13,234,147         9,985,841
Provision for loan losses                                      (1,300,000)       (1,500,000)
                                                             ------------      ------------
Net interest income after provision for loan losses            11,934,147         8,485,841
                                                             ------------      ------------
Other income:
     Net gain on origination and sale of loans                 10,478,205         7,392,555
     Net profit on trading account                                   --              14,580
     Net gain on sales of investments available for sale           19,531           149,468
                                                                5,760,770         3,687,057
     Loan administration and servicing fees
     Service charges, fees and other                            1,485,172         1,184,384
                                                             ------------      ------------
                                                               17,743,678        12,428,044
                                                             ------------      ------------

        Total revenues                                         29,677,825        20,913,885
                                                             ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
R&G FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

                                                                     Three month
                                                                    period ended
                                                                      March 31,
                                                             ------------------------------
                                                                 1999              1998
                                                             ------------      ------------
                                                                       (Unaudited)
<S>                                                          <C>               <C>         
Operating expenses:
     Employee compensation and benefits                         4,770,004         3,558,222
     Office occupancy and equipment                             2,389,800         1,824,971
     Other administrative and general                           7,677,815         4,794,354
                                                             ------------      ------------
                                                               14,837,619        10,177,547
                                                             ------------      ------------
Income before income taxes                                     14,840,206        10,736,338
                                                             ------------      ------------
Income tax expense:
     Current                                                    1,924,408         1,860,651
     Deferred                                                   1,764,920         1,395,852
                                                             ------------      ------------
                                                                3,689,328         3,256,503
                                                             ------------      ------------
          Net income                                         $ 11,150,878      $  7,479,835
                                                             ============      ============


Earnings per common share - Basic                            $       0.36      $       0.26
                                                             ------------      ------------
                          - Diluted                          $       0.35      $       0.26
                                                             ------------      ------------

Weighted average number of shares outstanding - Basic          28,600,647        28,289,504
                                              - Diluted        29,342,647        29,045,504
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -4-
<PAGE>
<TABLE>
<CAPTION>
R&G Financial Corporation
Consolidated Statements of Comprehensive Income

                                                                                Three Month
                                                                               period ended
                                                                                 March 31,
                                                                      ------------------------------
                                                                          1999               1998
                                                                      ------------      ------------
                                                                               (Unaudited)

 
<S>                                                                   <C>               <C>         
Net Income                                                            $ 11,150,878      $  7,479,835
                                                                      ------------      ------------
Other comprehensive income, before tax:

Unrealized gains (losses) on securities:

     Arising during period                                              (1,045,264)         (238,609)
     Less:  Reclassification adjustments for gains included in
                 net income                                                (19,531)         (149,468)
                                                                      ------------      ------------
                                                                        (1,064,795)         (388,077)
                                                                      ------------      ------------

Income tax benefit related to items of other comprehensive income          415,270           151,350
                                                                      ------------      ------------

Other comprehensive (loss)  income, net of tax                            (649,525)         (236,727)
                                                                      ------------      ------------

Comprehensive income, net of tax                                      $ 10,501,353      $  7,243,108
                                                                      ============      ============

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>
<TABLE>
<CAPTION>
R&G  FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                             Three month
                                                                                                            period ended
                                                                                                              March, 31
                                                                                                ------------------------------------
                                                                                                     1999                  1998
                                                                                                -------------         -------------

                                                                                                         (Unaudited)
<S>                                                                                             <C>                   <C>          
Cash flows from operating activities:
     Net income                                                                                 $  11,150,878         $   7,479,835
                                                                                                -------------         -------------
           Adjustments to reconcile net income to net cash provided by operating activities:
           Depreciation and amortization                                                              891,342               644,587
           Amortization of premium (accretion of discount) on investments and
               mortgage-backed securities, net                                                         13,141               (21,695)
           Amortization of deferred loan origination  (fees) costs, net                              (391,574)               71,678
           Amortization of servicing rights                                                         1,634,426               614,327
           Provision for loan losses                                                                1,300,000             1,500,000
           Provision for bad debts in accounts  receivable                                            100,000                75,000
           Gain on sales of  loans                                                                 (2,578,960)           (1,089,913)
           Loss (gain) on sales of mortgage-backed and investment securities
              available for sale                                                                      136,102              (149,468)
           Unrealized loss (profit) on trading securities                                             181,718              (743,970)
           Increase in mortgage loans held for sale                                               (42,955,011)           (9,311,286)
           Net increase in mortgage-backed  securities held for trading                            (2,260,268)           (8,690,211)
           (Increase) decrease in receivables                                                      (3,911,376)              508,360
           Decrease in other assets                                                                   310,741             2,200,838
           (Decrease) increase in notes payable                                                   (10,278,927)           15,191,328
           (Decrease) increase in accounts payable and accrued liabilities                           (381,350)            1,225,264
                                                                                                    1,683,583               163,602
                                                                                                -------------         -------------
               Total adjustments                                                                  (56,506,413)            2,188,441
                                                                                                -------------         -------------
               Net cash (used in) provided by operating activities                                (45,355,535)            9,668,276
                                                                                                -------------         -------------
Cash flows from investing activities:
      Purchases of investment securities                                                          (29,600,000)          (23,842,120)
      Proceeds from sales and maturities of securities available for sale                          63,415,018            25,553,791
      Proceeds from maturities of securities held to maturity                                            --               4,405,420
      Proceeds from sales of loans                                                                 49,660,184            24,399,022
      Net originations of loans                                                                  (143,461,903)         (107,919,577)
      Purchases of  FHLB stock, net                                                                      --              (1,693,500)
      Acquisition of premises and equipment                                                        (1,308,900)           (1,246,796)
      Acquisition of servicing rights                                                              (5,357,624)           (3,126,207)
                                                                                                -------------         -------------
               Net cash used by investing activities                                              (66,653,225)          (83,469,967)
                                                                                                -------------         -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
R&G  FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                             Three month
                                                                                                            period ended
                                                                                                              March, 31
                                                                                                ------------------------------------
                                                                                                     1999                  1998
                                                                                                -------------         -------------

                                                                                                         (Unaudited)
<S>                                                                                             <C>                   <C>          
Cash flows from financing activities:
     Increase in deposits - net                                                                    86,444,194            40,912,577
     Decrease in federal funds purchased                                                                 --             (10,000,000)
     (Decrease) increase in securities sold under agreements to repurchase - net                  (48,080,804)           10,603,178
     Advances from FHLB                                                                            20,000,000            20,000,000
     Proceeds from issuance of common stock                                                           159,500                  --   
     Cash dividends on common stock                                                                (1,868,360)             (707,238)
                                                                                                -------------         -------------
               Net cash provided by financing activities                                           56,654,530            60,808,517
                                                                                                -------------         -------------
Net decrease in cash and cash equivalents                                                         (55,354,230)          (12,993,174)
Cash and cash equivalents at  beginning of  period                                                103,728,448            68,365,723 
                                                                                                -------------         -------------
Cash and cash equivalents at end of period                                                      $  48,374,218         $  55,372,549
                                                                                                =============         =============

Cash and cash equivalents include:
     Cash and due from banks                                                                    $  35,700,762         $  21,371,646
     Securities purchased under agreements to resell                                                7,501,490            21,292,213
     Time deposits with other banks                                                                 5,171,966            12,708,690
     Federal funds sold                                                                                  --                    --  
                                                                                                -------------         -------------
                                                                                                $  48,374,218         $  55,372,549
                                                                                                =============         =============

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>
R&G FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1  -         REPORTING ENTITY AND BASIS OF PRESENTATION


Reporting entity

         The accompanying  unaudited  consolidated  financial statements include
the accounts of R&G  Financial  Corporation  (the  Company) and its wholly owned
subsidiaries,  R&G Mortgage Corp. ("R&G  Mortgage"),  a Puerto Rico corporation,
and R-G Premier Bank of Puerto Rico (the "Bank"),  a commercial  bank  chartered
under the laws of the Commonwealth of Puerto Rico.

         R&G  Mortgage  is engaged  primarily  in the  business  of  originating
FHA-insured,  VA-guaranteed,  and privately  insured  first and second  mortgage
loans on residential real estate. R&G Mortgage pools loans into  mortgage-backed
securities  and  collateralized  mortgage  obligation  certificates  for sale to
investors.  After  selling the loans,  it retains the  servicing  function.  R&G
Mortgage  is also a  seller-servicer  of  conventional  loans.  R&G  Mortgage is
licensed by the  Secretary of the Treasury of Puerto Rico as a mortgage  company
and is duly authorized to do business in the Commonwealth of Puerto Rico.

         The  Bank  provides  a  full  range  of  banking  services,   including
residential,  commercial and personal  loans and a diversified  range of deposit
products  through  twenty  branches  located  mainly in the northern part of the
Commonwealth  of Puerto Rico. The Bank also provides  private  banking and trust
and other  financial  services  to its  customers.  The Bank is  subject  to the
regulations  of certain  federal  and local  agencies,  and  undergoes  periodic
examinations by those regulatory agencies.

Basis of presentation

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q. Accordingly, they do
not include all of the information and footnotes  required by generally accepted
accounting principles.  However, in the opinion of management,  the accompanying
unaudited consolidated financial statements contain all adjustments (principally
consisting of normal recurring  accruals)  necessary for a fair  presentation of
the  Company's  financial  condition  as of March 31,  1999 and the  results  of
operations  and changes in its cash flows for the three  months  ended March 31,
1999 and 1998.

         The results of  operations  for the three month  period ended March 31,
1999 are not  necessarily  indicative of the results to be expected for the year
ending December 31, 1999. The unaudited  consolidated  financial  statements and
notes  thereto  should  be  read  in  conjunction  with  the  audited  financial
statements and notes thereto for the year ended December 31, 1998.

         Certain  reclassifications (not affecting income before income taxes or
net  income)  have been made to the  consolidated  statements  of income for the
quarter  ended  March 31,  1998 to conform to the  presentation  for the quarter
ended March 31, 1999.

                                      -7-
<PAGE>
Basis of consolidation

         All  significant  intercompany  balances  and  transactions  have  been
eliminated in the accompanying unaudited financial statements.

Accounting for Derivative Instruments and Hedging Activities

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 133- "Accounting for Derivative Instruments and Hedging Activities."

         This  Statement  requires that an entity  recognize all  derivatives as
either assets or liabilities in the statement of financial  position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be  specifically  accounted as a hedge.  The  accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use of
the derivative and the resulting designation.

         This  Statement  is effective  for all fiscal  quarters of fiscal years
beginning after June 15, 1999.  Management is evaluating its hedging strategy in
light of this new  pronouncement  to establish  the initial  designation  of its
hedging activities and determine the effect and timing of adoption. However, due
to the  relatively  limited  extent to which  the  Company  is using  derivative
instruments and the simple nature of the instruments  used,  management does not
expect the impact of adoption to be significant.

Accounting for  Mortgage-Backed  Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise

         In  October  1998,  the FASB  issued  SFAS  No.  134-  "Accounting  for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise." This Statement amends SFAS No.
65 to require that after the  securitization of mortgage loans held for sale, an
entity   engaged  in  mortgage   banking   activities   classify  the  resulting
mortgage-backed  securities or other retained  interest based on its ability and
intent to sell or hold those investments. This Statement conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage  banking  enterprise  with the  subsequent  accounting for securities
retained  after the  securitization  of other types of assets by a  non-mortgage
banking  enterprise.  This  Statement is effective for the first fiscal  quarter
beginning  after  December 15,  1998.  In  connection  with the adoption of this
Statement  on  January 1, 1999 the  Company  reclassified  approximately  $427.4
million of mortgage-backed securities from trading to available for sale.


NOTE 2  -         EARNINGS PER SHARE

         Basic  earnings  per common  share for the three months ended March 31,
1999 and 1998 are  computed  by  dividing  net  income  for such  periods by the
weighted  average  number  of shares of common  stock  outstanding  during  such
periods,  which was 28,600,647 and 28,289,504,  respectively.  Outstanding stock
options  granted in connection with the Company's Stock Option Plan are included
in the weighted  average  number of shares for purposes of the diluted  earnings
per  share  computation.   The  Company's  weighted  average  number  of  shares
outstanding  for  purposes  of diluted  earnings  per share was  29,342,647  and
29,045,504  for  the  three  month  periods  ended  March  31,  1999  and  1998,
respectively.


                                      -8-
<PAGE>
         On June 25,  1998 the  Company  effected  a 2 for 1 stock  split on the
Company's  common stock, in the form of a stock dividend of one additional share
of common  stock for each  share of common  stock  held in record as of June 12,
1998.  Following   distribution  of  the  additional  shares,  the  Company  had
28,289,504  common shares  outstanding.  Per share  information  for all periods
presented  take into  consideration  the stock split paid by the Company in June
1998.

NOTE 3  -         INVESTMENT AND MORTGAGE-BACKED SECURITIES

         The  carrying   value  and  estimated  fair  value  of  investment  and
mortgage-backed  securities  by  category  are shown  below.  The fair  value of
investment securities is based on quoted market prices and dealer quotes, except
for the investment in Federal Home Loan Bank (FHLB) stock which is valued at its
redemption value.
<TABLE>
<CAPTION>


                                                   March 31,        December 31,
                                                    1999                1998
                                                 ------------       ------------
                                                           (Unaudited)
<S>                                              <C>                <C>         
Mortgage-backed securities held for trading:

CMO Residuals (all interest only)                $  8,261,442       $  7,146,762
GNMA Certificates                                  16,954,747        443,399,272
                                                 ------------       ------------
                                                 $ 25,216,189       $450,546,034
                                                 ============       ============

</TABLE>
                                       -9-
<PAGE>
<TABLE>
<CAPTION>
                                                               March 31, 1999                     December 31, 1998
                                                       -----------------------------     -----------------------------  
                                                         Amortized          Fair            Amortized          Fair
                                                           cost            value              cost             value
                                                       ------------     ------------     ------------     ------------  
                                                                (Unaudited)
<S>                                                    <C>              <C>              <C>              <C>            
Mortgage-backed securities available for sale:

CMO residuals and other mortgage-backed securities     $  8,338,991     $ 10,154,780     $  7,845,382     $  9,661,171  
                                                       ------------     ------------     ------------     ------------  
FNMA certificates:
     Due over ten years                                   7,699,654        7,704,471        8,091,335        8,161,704  
                                                       ------------     ------------     ------------     ------------  
FHLMC certificates:
     Due from one to five years                              83,754           85,363           89,209           90,765 
     Due from five to ten years                           1,003,828        1,015,858          240,394          244,140  
     Due over ten years                                  18,990,388       19,185,453       21,368,689       21,723,711  
                                                       ------------     ------------     ------------     ------------  
                                                         20,077,970       20,286,674       21,698,292       22,058,616  
                                                       ------------     ------------     ------------     ------------  
GNMA certificates:
      Due over ten years                                491,138,214      490,611,142       55,158,840       55,158,840
                                                       ------------     ------------     ------------     ------------  

                                                       $527,254,829     $528,757,067     $ 92,793,849     $ 95,040,331  
                                                       ============     ============     ============     ============  
Investment securities available for sale:

U.S.  Treasury securities:
     Due from one to five years                        $  4,995,772     $  4,963,280     $  4,995,028     $  4,990,625
                                                       ------------     ------------     ------------     ------------

U.S. Government and agencies securities:              
      Due from one to five years                         55,500,000       55,204,050       38,100,000       38,106,648
      Due from five to ten years                                                            5,010,140        5,000,000      
                                                       ------------     ------------     ------------     ------------   
                                                         55,500,000       55,204,050       43,110,140       43,106,648  
                                                       ------------     ------------     ------------     ------------   

 FHLB stock                                              11,404,867       11,404,867       11,404,867       11,404,867
                                                       ------------     ------------     ------------     ------------
                                                       $ 71,900,639     $ 71,572,197     $ 59,510,035     $ 59,502,140
                                                       ============     ============     ============     ============
</TABLE>

         Mortgage  backed  securities  available for sale include  interest only
securities with an amortized cost of $3,771,323 as of March 31, 1999,  which are
primarily  associated  with  the sale in prior  years of  collaterized  mortgage
obligations. These sales were not made in connection with the Company's mortgage
banking activities.


                                      -10-
<PAGE>
<TABLE>
<CAPTION>
                                                           March 31, 1999                December 31, 1998
                                                     ---------------------------    -----------------------------  
                                                     Amortized          Fair          Amortized         Fair
                                                        cost            value            cost            value
                                                     -----------     -----------     -----------     -----------
                                                             (Unaudited)
<S>                                                 <C>             <C>             <C>             <C>            
Mortgage-backed securities held to maturity:

GNMA certificates:
         Due from one to five years                  $    24,404     $    26,173     $    27,227     $    29,201
          Due from five to ten years                  12,406,776      12,146,591      13,024,960      12,751,640
          Due over ten years                           2,338,609       2,285,900       2,359,713       2,306,529
                                                     -----------     -----------     -----------     -----------
                                                      14,769,789      14,458,664      15,411,900      15,087,370
                                                     -----------     -----------     -----------     -----------
  FNMA certificates:
     Due over ten years                               11,842,243      12,155,027      12,607,700      12,944,020
                                                     -----------     -----------     -----------     -----------

FHLMC certificates:

     Due over ten years                                  222,167         216,155         235,918         229,535
                                                     -----------     -----------     -----------     -----------

                                                     $26,834,199     $26,829,846     $28,255,518     $28,260,925
                                                     ===========     ===========     ===========     ===========

Investment securities held to maturity:

U.S.  Treasury securities:
     Due within one year                             $   197,446     $   197,000     $   194,892     $   196,000
                                                     -----------     -----------     -----------     -----------

U.S. Government and agencies securities:
      Due within one year                                207,066         206,910         204,167         204,167
                                                     -----------     -----------     -----------     -----------


Puerto Rico Government and Agencies obligations:
       Due from five to ten years                      5,943,660       5,963,667       5,944,870       5,978,467
                                                     -----------     -----------     -----------     -----------   
                                                     $ 6,348,172     $ 6,367,577     $ 6,343,929     $ 6,378,634
                                                     ===========     ===========     ===========     ===========

</TABLE>


                                      -11-
<PAGE>
 NOTE 4  -         LOANS AND ALLOWANCE FOR LOAN LOSSES

   Loans consist of the following:
<TABLE>
<CAPTION>

                                                March 31,           December 31,
                                                  1999                 1998
                                            ----------------     --------------- 
                                               (Unaudited)
<S>                                         <C>                  <C>            
Real estate loans:
     Residential - first mortgage           $   814,544,472      $   735,457,756
     Residential - second mortgage               18,368,941           18,633,916
     Land                                           388,750              337,250
     Construction                                36,024,315           34,391,170
     Commercial                                 139,092,081          121,393,030
                                            ---------------      ---------------
                                              1,008,418,559          910,213,122
Undisbursed portion of loans in process         (19,489,007)         (18,170,178)
Net deferred loan costs (fees)                      249,207             (166,056)
                                            ---------------      ---------------
                                                989,178,759          891,876,888
                                            ---------------      ---------------
Other loans:
     Commercial                                  44,921,382           46,532,311  
     Consumer:                               
        Secured by deposits                      16,998,053           17,225,437 
        Secured by real estate                   85,837,802           85,054,815   
        Other                                    39,150,532           41,381,304   
Unamortized discount                               (187,188)            (163,499)  
Unearned interest                                  (165,693)            (183,546)
                                            ---------------      ---------------
                                                186,554,888          189,846,822
                                            ---------------      ---------------
    
           Total loans                        1,175,733,647        1,081,723,710
     Allowance for loan losses                   (8,493,117)          (8,055,432)
                                            ---------------      ---------------
                                            $ 1,167,240,530      $ 1,073,668,278
                                            ===============      ===============
</TABLE>
<PAGE>

The changes in the allowance for loan losses follow:
<TABLE>
<CAPTION>
                                                     Three months ended
                                                          March 31,
                                               --------------------------------- 
                                                  1999                  1998
                                               -----------          -----------
                                                        (Unaudited)
<S>                                            <C>                  <C>        
Balance, beginning of period                   $ 8,055,432          $ 6,771,698
Provision for loan losses                        1,300,000            1,500,000
Loans charged-off                               (1,039,726)          (1,980,602)
Recoveries                                         177,411               44,920
                                               -----------          -----------
Balance, end of period                         $ 8,493,117          $ 6,408,016
                                               ===========          ===========

</TABLE>
                                      -12-
<PAGE>
NOTE 5  -         COMMITMENTS AND CONTINGENCIES

Commitments to developers providing end loans

         The Company has  outstanding  commitments  for various  projects in the
process of  completion.  Total  commitments  amounted  to  approximately  $478.0
million at March 31, 1999.  All  commitments  are subject to  prevailing  market
prices at time of closing  with no market risk  exposure  against the Company or
with firm back-to-back commitments extended in favor of the mortgagee.

Loans in process

         Loans in process  pending final  approval  and/or  closing  amounted to
approximately $153.7 million at March 31, 1999.


Commitments to buy and sell GNMA certificates

         As of March 31, 1999,  the Company had open  commitments  to issue GNMA
certificates of approximately $118.8 million.


Commitments to sell mortgage loans

         As of March 31, 1999 the Company had commitments to sell mortgage loans
to third party investors amounting to approximately $76.9 million.


Lease commitments

         The Company is obligated under several noncancellable leases for office
space and equipment rentals, all of which are accounted for as operating leases.
The leases expire at various dates with options for renewals.


Other

         At March 31,  1999,  the  Company  is  liable  under  limited  recourse
provisions  resulting from the sale of loans to several  investors,  principally
FHLMC. The principal balance of these loans,  which are serviced by the Company,
amounts to approximately  $567.8 million at March 31, 1999.  Liability,  if any,
under the recourse provisions at March 31, 1999 is estimated by management to be
significant.


                                      -13-
<PAGE>
Item 2:  Management's Discussion and Analysis
-------  ------------------------------------

Financial Condition

         At March 31, 1999, the Company's total assets amounted to $2.1 billion,
as compared to $2.0  billion at December  31,  1998.  The $57.8  million or 2.8%
increase in total assets  during the three month period ended March 31, 1999 was
attributable  to a $93.6  million or 8.7%  increase in loans  receivable,  which
reflects net  originations  following  repayments and sales, and a $19.0 million
increase in the Company's investments  portfolio.  Such increases were partially
offset by a $55.4 million or 53.4% decrease in cash and cash  equivalents due to
the  use of  excess  liquid  assets  to fund  increased  loan  originations  and
investments during the period.

         Effective  January 1, 1999, the Company  reclassified of $427.4 million
of mortgage  backed  securities from trading to available for sale in connection
with  the  adoption  of SFAS  134.  The  adoption  resulted  in an  increase  in
mortgage-backed  securities  available  for  sale  for the  same  amount,  and a
corresponding decrease in mortgage-backed securities held for trading.

         The increase in the Company's assets were primarily funded by increased
deposits of $87.0  million or 8.6% during the three month period ended March 31,
1999.

         At March 31,  1999,  the  Company's  stockholders'  equity  amounted to
$229.9  million,  which is an increase  of $8.8  million or 4.0% from the amount
reported at December 31, 1998.  The primary  reason for the increase was the net
income earned for the quarter, which was partially offset by a $650,000 decrease
in  unrealized  gains on  securities  available  for  sale,  net of  income  tax
benefits, and $1,868,000 in dividends paid during the period. At March 31, 1999,
the Bank's leverage and Tier 1 risk-based  capital  amounted to 7.42% and 12.57%
of adjusted total assets, respectively,  compared to a 4.0% minimum requirement,
and its total risk-based capital amounted to 13.58%, compared to an 8.0% minimum
requirement.

Results of Operations

         The  Company  reported  net  income of $11.1  million  during the three
months  ended  March 31,  1999,  as compared  to $7.5  million  during the prior
comparable period.

         Total revenues  amounted to $29.7 million during the three months ended
March 31, 1999 compared to $20.9 million for the prior  comparable  period.  The
41.9% increase was due to an increase in net interest  income of $3.2 million or
32.5%  during the three  months  ended March 31, 1999 over the prior  comparable
period,  primarily due to a $8.0 million or 42.7% increase in interest income on
loans, which was primarily associated with an increase in the average balance of
the outstanding loan portfolio.

         Contributing  to the 41.9%  increase in  revenues  during the March 31,
1999 quarter was a $3.1 million or 41.7% increase in net gain on origination and
sale of loans,  which  reflects a 45%  increase  in mortgage  loan  originations
during the 1999 period  associated  with an expansion of the Company's  existing
branch network during fiscal year 1998. Loan  administration  and servicing fees
also increased by $2.1 million or 56.2% due to an increase of the Company's loan
servicing  portfolio as a result of an increase in the number of loans serviced.
Service  charges,  fees and other also increased by $301,000 or 25.4% due mainly
to an increase in banking fees  associated  with an increased  number of deposit
accounts during the 1999 period.

                                      -14-
<PAGE>
         Total  expenses  increased  by $9.3  million or 28.3%  during the three
months  ended  March 31, 1999 over the prior  comparable  period.  The  increase
during the three month  period in 1999 was due  primarily  to a $1.2  million or
34.1% increase in employee compensation and benefits associated with an increase
in the number of employees to accommodate  increased loan production  during the
1999  period,  and a $565,000 or 30.9%  increase in  occupancy  expenses  mainly
related to the operation of five  additional  branches  completed  during fiscal
1998 and an  additional  branch  completed  in early 1999.  These  increases  in
expenses  were  accompanied  by a  $2.9  million  or  60.1%  increase  in  other
miscellaneous expenses, mainly as a result of a $481,000 increase in advertising
costs  and  other  expense  increases   associated  with  an  increase  in  loan
production,  and a  $1.0  million  increase  in  amortization  expenses  of  the
Company's servicing asset.

         Total  income tax expense  increased  by  $433,000 or 13.3%  during the
three  months  ended  March  31,  1999  over the prior  comparable  period,  due
primarily to a $4.1 million or 38.2%  increase in income before taxes during the
1999 period. The Company's effective tax rate amounted to 24.9% during the three
month  period  ended  March 31, 1999  compared  to 30.3% in the 1998  comparable
period.  The decrease in 1999 of the Company's  effective tax rate was primarily
attributable to an increase in the Company's exempt interest income.

Liquidity and Capital Resources

         Liquidity  -  Liquidity  refers to the  Company's  ability to  generate
sufficient  cash to meet the  funding  needs of  current  loan  demand,  savings
deposit withdrawals, principal and interest payments with respect to outstanding
borrowings and to pay operating expenses.  It is management's policy to maintain
greater  liquidity  than  required  in order to be in a  position  to fund  loan
purchases and originations,  to meet withdrawals from deposit accounts,  to make
principal and interest  payments with respect to  outstanding  borrowings and to
make  investments  that take  advantage of interest  rate  spreads.  The Company
monitors its liquidity in accordance with guidelines  established by the Company
and  applicable  regulatory  requirements.  The Company's  need for liquidity is
affected  by loan  demand,  net  changes  in deposit  levels  and the  scheduled
maturities of its borrowings.  The Company can minimize the cash required during
the times of heavy loan demand by modifying its credit  policies or reducing its
marketing  efforts.  Liquidity  demand caused by net  reductions in deposits are
usually  caused by factors  over which the  Company  has  limited  control.  The
Company derives its liquidity from both its assets and liabilities. Liquidity is
derived  from  assets  by  receipt  of  interest  and  principal   payments  and
prepayments,  by the  ability to sell assets at market  prices and by  utilizing
unpledged  assets as  collateral  for  borrowings.  Liquidity  is  derived  from
liabilities by  maintaining a variety of funding  sources,  including  deposits,
advances from the FHLB of New York and other short and long-term borrowings.

         The  Company's  liquidity  management  is  both a daily  and  long-term
function of funds management. Liquid assets are generally invested in short-term
investments  such as securities  purchased under  agreements to resell,  federal
funds sold and certificates of deposit in other financial  institutions.  If the
Company requires funds beyond its ability to generate them  internally,  various
forms of both short and long-term  borrowings  provide an  additional  source of
funds.  At March 31, 1999, the Company had $200.0 million in borrowing  capacity
under warehousing lines of credit, $335.7 million in borrowings capacity under a
line of credit with the FHLB of New York and $ 15 million  under  federal  funds
lines of credit.  The Company has generally not relied upon brokered deposits as
a source of liquidity,  and does not anticipate a change in this practice in the
foreseeable future.
 
         At March 31, 1999,  the Company had  outstanding  commitments to extend
credit  totaling $37.0

                                      -15-
<PAGE>
million.  Certificates  of deposit which are scheduled to mature within one year
totaled $956.2  million at March 31, 1999, and borrowings  that are scheduled to
mature  within  the  same  period  amounted  to  $584.3  million.   The  Company
anticipates  that it will have  sufficient  funds  available to meet its current
loan commitments.

         Capital Resources - The FDIC's capital regulations  establish a minimum
3.0  %  Tier  I  leverage   capital   requirement  for  the  most   highly-rated
state-chartered, non-member banks, with an additional cushion of at least 100 to
200  basis  points  for  all  other  state-chartered,  non-member  banks,  which
effectively will increase the minimum Tier 1 leverage ratio for such other banks
to 4.0% to 5.0% or more. Under the FDIC's  regulations,  the highest-rated banks
are  those  that  the  FDIC  determines  are not  anticipating  or  experiencing
significant  growth and have well diversified risk,  including no undue interest
rate risk exposure,  excellent asset quality, high liquidity, good earnings and,
in general,  which are  considered a strong banking  organization  and are rated
composite 1 under the Uniform Financial Institutions Rating System.  Leverage or
core  capital  is defined  as the sum of common  stockholders'equity  (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
and minority interests in consolidated subsidiaries, minus all intangible assets
other  than  certain  qualifying  supervisory  goodwill  and  certain  purchased
mortgage servicing rights.

         The FDIC also requires that banks meet a risk-based  capital  standard.
The  risk-based  capital  standard for banks  requires the  maintenance of total
capital (which is defined as Tier I capital and supplementary  (Tier 2) capital)
to risk  weighted  assets  of 8%. In  determining  the  amount of  risk-weighted
assets,  all assets,  plus certain off-balance sheet assets, are multiplied by a
risk-weight of 0% to 100%,  based on the risks the FDIC believes are inherent in
the type of asset or item.  The  components of Tier 1 capital are  equivalent to
those discussed above under the 3% leverage capital standard.  The components of
supplementary   capital  include  certain  perpetual  preferred  stock,  certain
mandatory  convertible  securities,  certain  subordinated debt and intermediate
preferred stock and general allowances for loan and lease losses.  Allowance for
loan and lease  losses  includable  in  supplementary  capital  is  limited to a
maximum of 1.25% of risk-weighted assets. Overall, the amount of capital counted
toward  supplementary  capital cannot exceed 100% of core capital.  At March 31,
1999,  the Bank met  each of its  capital  requirements,  with  Tier 1  leverage
capital, Tier 1 risk-based capital and total risk-based capital ratios of 7.42%,
12.57% and 13.58%, respectively.

         In addition, the Federal Reserve Board has promulgated capital adequacy
guidelines for bank holding companies which are  substantially  similar to those
adopted by FDIC regarding state-chartered banks, as described above. The Company
is currently in compliance with such regulatory capital requirements.

Inflation and Changing Prices

         The  unaudited  consolidated  financial  statements  and  related  data
presented  herein  have been  prepared in  accordance  with  generally  accepted
accounting  principles,  which require the measurement of financial position and
operating  results  in terms of  historical  dollars  (except  with  respect  to
securities which are carried at market value),  without  considering  changes in
the relative  purchasing power of money over time due to inflation.  Unlike most
industrial  companies,  substantially  all of the assets and  liabilities of the
Company  are  monetary  in  nature.  As a  result,  interest  rates  have a more
significant  impact on the  Company's  performance  than the  effects of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or in the same magnitude as the prices of goods and services.


                                      -16-
<PAGE>
"SAFE HARBOR"  STATEMENT UNDER THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF
1995

         In addition to historical information,  forward-looking  statements are
contained  herein that are subject to risks and  uncertainties  that could cause
actual results to differ materially from those reflected in the  forward-looking
statements.  Factors  that  could  cause  future  results  to vary from  current
expectations, include, but are not limited to, the impact of economic conditions
(both  generally  and more  specifically  in the  markets  in which the  Company
operates),  the impact of government  legislation and regulation  (which changes
from time to time and over which the  Company has no  control),  and other risks
detailed in this Form 10-Q and in the Company's  other  Securities  and Exchange
Commission ("SEC") filings. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof.  Readers should carefully review the risk factors  described in
other documents the Company files from time to time with the SEC.


Item 3:  Quantitative and Qualitative Disclosures about Market Risk
-------  ----------------------------------------------------------

         Quantitative  and  qualitative   disclosures  about  market  risks  are
presented at  December  31, 1998 in Item 7A of the  Company's  Annual  Report on
Form  10-K.  Management  believes  there  have been no  material  changes in the
Company's market risk since December 31, 1998.


                           PART II - OTHER INFORMATION
                           ---------------------------


Item 1:  Legal Proceedings

                  The  Registrant  is  involved  in  routine  legal  proceedings
                  occurring in the  ordinary  course of business  which,  in the
                  aggregate,  are believed by management to be immaterial to the
                  financial   condition   and  results  of   operations  of  the
                  Registrant.

Item 2:  Changes in Securities

                  Not applicable

Item 3:  Defaults Upon Senior Securities

                  Not applicable

Item 4:  Submission of Matters to a Vote of Security Holders

                  Not applicable

Item 5:  Other Information

                  Not applicable


                                      -17-
<PAGE>

Item 6:  Exhibits and Reports on Form 8-K

                  a)       Exhibits

                           No.
                           ---
                           27     Financial Data Schedule                  E-1



                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                         R&G FINANCIAL CORPORATION



Date: May 14, 1999                       By: /S/ VICTOR J. GALAN
                                             -------------------
                                                  Victor J. Galan, Chairman
                                                  and Chief Executive Officer
                                                  (Principal Executive Officer)



                                         By: /S/ JOSEPH R. SANDOVAL
                                             ----------------------
                                                  Joseph R. Sandoval
                                                  Senior Vice President and
                                                  Chief Financial Officer
                                                  (Principal Financial and
                                                  Accounting Officer)


                                      -18-