Business & Finance
Business and Finance
Business and Finance
Thu, January 29, 2009 Rainier Pacific Financial Group: Rainier Pacific Financial Group, Inc. Reports Fourth Quarter and Annual Results
TACOMA, WA--(Marketwire - January 29, 2009) - Rainier Pacific Financial Group, Inc. (the "Company") (
The net loss of ($2.0) million for the fourth quarter of 2008 was primarily attributable to a pre-tax other-than-temporary impairment ("OTTI") charge of $2.8 million relating to one of the Company's 15 investment securities holdings in pooled trust preferred securities. The net loss of ($2.5) million for the year was primarily attributable to the combination of the aforementioned $2.8 million OTTI charge on investment securities, and the significantly higher level of provision for loan losses of $7.0 million during the year ended December 31, 2008 as a result of weakness in the local housing market that led to a deterioration in the underlying collateral values associated with the Company's portfolio of single-family land development and residential construction loans.
"The local residential housing market slowdown created additional stress for our local builders, which reduced the credit quality of our residential construction and land loan portfolio principally during the second and third quarters of 2008. At the same time, the ongoing turmoil and continued deterioration in the financial services industry severely reduced the investment quality and fair value of our $108.0 million pooled trust preferred securities. These investment securities are collateralized debt obligations of 515 FDIC-insured financial institutions and 37 insurance companies that have been pooled into 15 separate issues, all of which are mezzanine tranches. The troubles currently being experienced throughout the banking industry and an inactive market for trust preferred securities have severely reduced the quality and the value of these investment securities," said John A. Hall, President and CEO.
The Company's revenue (i.e., net interest income before provision for loan losses plus non-interest income, exclusive of any impairment charges on investment securities) for the quarter and year ended December 31, 2008 was $8.9 million and $35.9 million, respectively, compared to $9.4 million and $35.9 million for the respective periods ended December 31, 2007. Net interest income before the provision for loan losses for the quarter and year ended December 31, 2008 was $6.2 million and $25.3 million, respectively, compared to $6.8 million and $26.3 million for the same periods a year ago. The declines for both the quarter and the year were primarily attributable to the increased level of non-performing assets in 2008. The Company's non-performing loans reduced interest income by $382,000 and $1.1 million, respectively, for the quarter and year ended December 31, 2008 when compared to the same periods in 2007.
The Company's net interest margin was 3.14% for the quarter ended December 31, 2008, compared to 3.06% and 3.23% for the quarters ended September 30, 2008 and December 31, 2007, respectively. The yield on the Company's interest-earning assets was 6.32% for the quarter ended December 31, 2008, compared to 6.15% and 6.88% for the quarters ended September 30, 2008 and December 31, 2007. For the quarter ended December 31, 2008, the Company's cost of interest-bearing liabilities was 3.34%, compared to 3.34% and 4.04% for the quarters ended September 30, 2008 and December 31, 2007, respectively.
Non-interest income for the quarter ended December 31, 2008 was $2.7 million, excluding the effect of the $2.8 million impairment charge, essentially unchanged from the $2.6 million during the same period in 2007. For the year ended December 31, 2008, non-interest income was $10.6 million, excluding the effect of the $2.8 million impairment charge, reflecting a 10.4% increase from the $9.6 million earned during the same period in 2007. This increase was primarily attributable to an $800,000 increase in gains generated on the sale of single-family mortgage loans.
Non-interest expenses were $7.9 million for the quarter ended December 31, 2008, or $484,000 more than the $7.5 million incurred during the same period in 2007. For the year ended December 31, 2008, non-interest expenses were $28.8 million, or $196,000 less than the $29.0 million incurred during the same period in 2007. In December 2008, the Company took certain steps relative to its compensation and benefits programs for its executive officers that included eliminating all performance awards under its senior management annual incentive compensation plans for 2008, accepting the voluntary forfeiture by the executive officers and board members of all unvested restricted stock and stock option awards previously granted to the executive officers and board members, and suspending all performance awards under the senior management annual incentive compensation plans for 2009. The combination of these actions is expected to reduce the Company's 2009 compensation and benefits costs by approximately $750,000.
Total deposits were $519.2 million at December 31, 2008, compared to $464.1 million at September 30, 2008 and $461.5 million at December 31, 2007. This reflects an increase at December 31, 2008 of 11.9% and 12.5% from September 30, 2008 and December 31, 2007, respectively. Core deposits (comprised of checking, savings, money market, and individual retirement accounts) were $256.7 million, or 49.4% of total deposits at December 31, 2008, compared to $226.7 million, or 49.1% of total deposits at December 31, 2007. Brokered deposit balances were $87.4 million at December 31, 2008, compared to $64.7 million at September 30, 2008 and $60.9 million at December 31, 2007. For the quarter ended December 31, 2008, the average cost of interest-bearing deposits increased to 2.61%, compared to 2.56% for the quarter ended September 30, 2008, primarily as a result of a $6.5 million increase in the average balances of higher priced certificates of deposit; however, the average cost was 111 basis points less than the 3.72% for the quarter ended December 31, 2007. For the year ended December 31, 2008, the average cost of interest-bearing deposits decreased 96 basis points to 2.86% from 3.82% in 2007.
In November 2008, the Company took steps to enhance the insurance protection of its customers' deposits through its voluntary participation in the Federal Deposit Insurance Corporation's (the "FDIC") Transaction Account Guarantee Program, which provides, without charge to the Company's deposit customers, a full FDIC guarantee on all non-interest bearing transaction accounts and certain other low-interest bearing deposit accounts regardless of the dollar amount in the account. This guarantee is in addition to the $250,000 per depositor limit on federal deposit insurance coverage through December 31, 2009, which was adopted by the FDIC under the Emergency Economic Stabilization Act of 2008. The Company has not, however, received any funds from, nor anticipates participating in, the U.S. Treasury's Capital Purchase Program.
Total loans increased to $672.3 million at December 31, 2008, compared to $664.2 million at September 30, 2008 and $637.0 million at December 31, 2007. This reflects an increase at December 31, 2008 of 1.2% and 5.5% from September 30, 2008 and December 31, 2007, respectively. For the quarter ended December 31, 2008, the yield on loans was 6.40%, compared to 6.39% and 7.36% for the quarters ended September 30, 2008 and December 31, 2007, respectively. Total loan originations were $57.5 million during the quarter ended December 31, 2008, compared to $36.4 million and $67.2 million for the quarters ended September 31, 2008 and December 31, 2007, respectively. For the year ended December 31, 2008, total loan originations were $240.4 million, compared to $214.7 million for the same period in 2007. At December 31, 2008, the loan portfolio consisted of 37.7% commercial real estate loans, 22.2% multi-family real estate loans, 12.2% land development and real estate construction loans, 8.4% one- to four-family real estate loans, 6.8% commercial business loans, 6.4% consumer loans (excluding home equity loans), and 6.3% home equity loans.
The Company sold $19.9 million of fixed-rate one- to four-family residential loans during the quarter ended December 31, 2008, which generated $303,000 in net gains, compared to $6.2 million in loan sales and $117,000 in net gains during the same period in 2007. For the year, the Company sold $68.1 million of single-family loans, which generated $1.2 million in net gains, compared to $23.7 million and $379,000 in net gains during the same period in 2007. The portfolio of loans serviced for others increased to $148.5 million at December 31, 2008, compared to $135.5 million and $114.6 million at September 30, 2008 and December 31, 2007, respectively.
Non-performing loans, along with real estate owned and other repossessed assets, were $31.4 million, or 3.60% of total assets, at December 31, 2008; compared to $31.9 million, or 3.79% of total assets, at September 30, 2008; and $546,000, or 0.06% of total assets, at December 31, 2007. The ratio of loans more than 30 days delinquent as a percentage of total loans increased to 4.00% at December 31, 2008, compared to 3.92% and 0.33% at September 30, 2008 and December 31, 2007, respectively. As of December 31, 2008, 98.0% of the Company's delinquent loans were concentrated in three single-family residential builder relationships totaling $24.0 million in loans. Net charge-offs were $914,000 for the quarter ended December 31, 2008, compared to $328,000 for the quarter ended September 30, 2008 and $214,000 for the quarter ended December 31, 2007. Net charge-offs for the year ended December 31, 2008 were $1.8 million, compared to $804,000 for the year ended December 31, 2007. The Company's provision for loan losses was $300,000 for the quarter ended December 31, 2008, compared to $6.0 million for the quarter ended September 30, 2008 and $150,000 for the quarter ended December 31, 2007. For the year ended December 31, 2008, the Company's provision for loan losses was $7.0 million compared to $600,000 for the year ended December 31, 2007. At December 31, 2008, the allowance for loan losses was at $13.3 million or 1.98% of total loans, compared to $13.9 million or 2.10% as of September 30, 2008 and $8.1 million or 1.27% at year-end 2007.
The investment securities portfolio (excluding $13.7 million in Federal Home Loan Bank of Seattle stock holdings) at December 31, 2008 totaled $87.1 million, compared to $102.5 million at September 30, 2008 and $177.0 million at December 31, 2007. The investment securities portfolio contains $53.1 million of pooled trust preferred securities (representing $108.0 million in par value less $52.1 million in unrealized valuation losses and $2.8 million in OTTI losses) issued by FDIC-insured financial institutions and insurance companies, $22.9 million of mortgage backed securities, and $11.1 million of municipal bonds.
The Company's investment in the trust preferred securities represents an investment in debt obligations issued by the underlying FDIC-insured financial institutions and insurance companies. At the end of each calendar quarter, the Company's management evaluates all of its trust preferred securities for impairment and to determine their fair value. In the current market environment, these securities have become substantially illiquid, and the valuation of such securities is highly complex and involves a comprehensive process including the use of quantitative modeling and significant management judgment.
As of September 30, 2008, all of the trust preferred securities were investment grade, were paying as-agreed with no shortfall in principal or interest payments, were determined not to involve OTTI, and were determined to have a weighted average fair value of $0.54 for every $1.00 of par value. During the fourth quarter, Moody's Investors Service downgraded 180 tranches of 44 trust preferred securities nationwide, including 10 of the Company's 15 issues to "speculative grade." All of the Company's 15 separate trust preferred securities remain rated "investment grade" by Fitch Ratings (with a "rating watch negative" for possible downgrade).
Based upon management's evaluation as of December 31, 2008 of the underlying issuers and the cash flows of the underlying debt obligations, one of the 15 issues held by the Company was determined to involve OTTI. Under generally accepted accounting principles, when a security is deemed to involve OTTI, it must be written down to its fair value as a charge against the Company's net income; therefore, the one issue determined to represent OTTI resulted in a non-cash impairment charge of $2.8 million recognized during the quarter ended December 31, 2008. This $2.8 million charge reduced the carrying amount of the $6.5 million (par value) security on the Company's balance sheet to a fair value of $3.7 million. The remaining 14 trust preferred securities held by the Company were determined to not involve OTTI, and their weighted average fair value was estimated by management to be $49.4 million, or $0.49 for every $1.00 of par value, as of December 31, 2008. The Company has reflected the temporary change in the value of these 14 issues as an unrealized loss of $52.1 million (pre-tax), or $33.9 million net of income tax benefit, as a component of shareholders' equity (i.e., accumulated other comprehensive loss).
Management closely monitors its trust preferred securities for changes in credit risk, and the Company expects to hold these securities until the market value recovers or they mature. The effects of these securities on the Company's earnings and capital position will also continue to be influenced by external market conditions and other factors outside of the Company's control, including but not limited to; the implementation of Securities and Exchange Commission (the "SEC") and Financial Accounting Standards Board ("FASB") guidance on fair value accounting, specific issuer credit deterioration, deferral and default rates of specific issuer financial institutions, failure or government seizure of the underlying financial institution or insurance company issuers, rating agency actions, regulatory actions, and the prices at which observable market transactions in these types of securities occur. The current market environment significantly limits the Company's ability to mitigate its exposure to future OTTI conditions and valuation changes in these securities. Accordingly, if the previously described market conditions deteriorate further or other detrimental factors occur, it is likely that the Company would then determine additional holdings of its trust preferred pooled securities portfolio involve OTTI, and such a determination would correspondingly have a material adverse affect on the Company's earnings, shareholders' equity, and regulatory capital.
Total shareholders' equity at December 31, 2008 was $54.2 million, compared to $57.5 million at September 30, 2008 and $86.8 million at December 31, 2007. The decline in shareholders' equity was primarily attributable to the net losses incurred during the quarter and year ended December 31, 2008, and the fair value adjustments recorded in the Company's portfolio of investment securities. The Company's book value and tangible book value per share as of December 31, 2008 were $9.07 and $8.54 per share, respectively, based upon 5,972,931 outstanding shares of common stock. The number of outstanding shares includes 4,538 restricted shares granted to participants under the Company's 2004 Management Recognition Plan that have not yet vested or were not ratably earned, and excludes 322,367 unallocated shares held by the Rainier Pacific 401(k) Employee Stock Ownership Plan. During the quarter ended December 31, 2008, the Company purchased and retired 47,732 shares of its outstanding shares of common stock at an average price of $3.85 per share early in the fourth quarter. At December 31, 2008, the Company had the authority to purchase an additional 308 shares of common stock under its currently approved stock repurchase program that will automatically expire on February 21, 2009 unless extended. In light of current conditions, the Company is also taking steps to preserve capital and improve earnings. Accordingly, on January 28, 2009, the Company's Board of Directors decided to suspend its quarterly cash dividends on its common stock until economic conditions improve.
The Company's capital ratio (i.e., shareholders' equity divided by total assets) was 6.21% at December 31, 2008, compared to 6.84% and 9.88% at September 30, 2008 and December 31, 2007, respectively. Tangible equity to assets was 5.85% at December 31, 2008, compared to 6.46% and 9.48% at September 30, 2008 and December 31, 2007, respectively. As of September 30, 2008, the Company's sole operating subsidiary, Rainier Pacific Bank, was categorized as "well capitalized" under regulatory standards with a total risk-based capital ratio of 12.11%. As a result of the recent investment rating downgrades associated with 10 of the 15 trust preferred securities, the Bank is required to maintain higher levels of capital for these assets. Accordingly, the Bank's total risk-based capital ratio as of December 31, 2008, calculated under the regulatory standards, was determined to be 10.63% and remained categorized as "well capitalized."
"The local housing market slowdown during 2008 reduced the credit quality of our land development and residential construction loan portfolio, while at the same time the influence of market conditions across the banking industry nationwide have put downward pressure on the value of our trust preferred securities," said John A. Hall, President and CEO. "While these two broader market factors are expected to continue to challenge the Company's construction loan and trust preferred securities portfolios in 2009, we will remain focused on improving the earnings of our core banking, insurance, and financial planning operations and the Company's capital position during this difficult operating environment."
Rainier Pacific Financial Group, Inc. is the bank holding company for Rainier Pacific Bank, a Tacoma, Washington-based state-chartered savings bank operating 14 full-service locations in the Tacoma-Pierce County and City of Federal Way market areas.
For additional information, visit Rainier Pacific's website at [ www.rainierpac.com ].
Forward-looking statements:
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. The Company's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to, the credit risk of lending activities, including changes in the level and trend of loan delinquencies and write-offs; results of examinations by our banking regulators; interest rate fluctuations; economic conditions in the Company's primary market area; ability of the issuers of trust preferred securities to repay the obligations, demand for residential, commercial real estate, consumer, and other types of loans; success of new products; competitive conditions between banks and non-bank financial service providers; regulatory and accounting changes; technological factors affecting operations; pricing of products and services; and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Accordingly, these factors should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no responsibility to update or revise any forward-looking statement.
Rainier Pacific Financial Group, Inc. & Subsidiary Consolidated Statements of Condition (Dollars in Thousands) ASSETS At At At December 31, September 30, December 31, 2008 2008 2007 ------------- ------------- ------------- Cash and cash equivalents $ 8,811 $ 8,070 $ 8,724 Interest-bearing deposits with banks 29,425 15 90 Securities available-for-sale 53,142 65,993 131,287 Securities held-to-maturity (fair value at December 31, 2008: $34,162; at September 30, 2008: $35,650; and at December 31, 2007: $45,541) 33,984 36,516 45,756 Federal Home Loan Bank of Seattle ("FHLB") stock, at cost 13,712 13,712 13,712 Loans 670,776 664,247 637,000 Loans held-for-sale 1,505 - - Less: allowance for loan losses (13,329) (13,943) (8,079) ------------- ------------- ------------- Loans, net 658,952 650,304 628,921 Premises and equipment, net 33,770 33,826 33,813 Accrued interest receivable 3,535 3,378 3,980 Other assets 36,767 28,835 12,581 ------------- ------------- ------------- TOTAL ASSETS $ 872,098 $ 840,649 $ 878,864 ============= ============= ============= LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits Non-interest bearing $ 40,331 $ 40,526 $ 33,924 Interest-bearing 478,908 423,530 427,563 ------------- ------------- ------------- Total deposits 519,239 464,056 461,487 Borrowed funds 291,217 308,500 320,454 Corporate drafts payable 1,554 4,492 2,510 Accrued compensation and benefits 1,745 1,269 1,758 Other liabilities 4,184 4,824 5,835 ------------- ------------- ------------- TOTAL LIABILITIES 817,939 783,141 792,044 ------------- ------------- ------------- SHAREHOLDERS’ EQUITY: Preferred stock, no par value: 1,000,000 shares authorized; none issued or outstanding - - - Common stock, no par value: 49,000,000 shares authorized; 6,295,298 shares issued and 5,968,393 shares outstanding at December 31, 2008; 6,399,390 shares issued and 6,011,462 shares outstanding at September 30, 2008; and 6,466,633 shares issued and 5,977,645 shares outstanding at December 31, 2007. 51,303 50,689 50,458 Unearned Employee Stock Ownership Plan ("ESOP") shares (3,224) (3,393) (3,903) Accumulated other comprehensive loss, net of tax (34,446) (32,783) (4,575) Retained earnings 40,526 42,995 44,840 ------------- ------------- ------------- TOTAL SHAREHOLDERS’ EQUITY 54,159 57,508 86,820 ------------- ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 872,098 $ 840,649 $ 878,864 ============= ============= ============= Rainier Pacific Financial Group, Inc. & Subsidiary Consolidated Statements of Operations (Dollars in Thousands, except per share data) Three Months Ended Year Ended December 31, December 31, -------------------------- -------------------------- 2008 2007 2008 2007 ------------ ------------ ------------ ------------ INTEREST INCOME Loans $ 10,794 $ 11,808 $ 43,928 $ 47,179 Securities available- for-sale 1,325 2,102 5,762 8,201 Securities held-to- maturity 381 512 1,650 2,150 Interest-bearing deposits 3 23 36 131 FHLB dividends - 27 130 82 ------------ ------------ ------------ ------------ Total interest income 12,503 14,472 51,506 57,743 ------------ ------------ ------------ ------------ INTEREST EXPENSE Deposits 2,934 3,960 12,235 16,228 Borrowed funds 3,377 3,751 13,944 15,216 ------------ ------------ ------------ ------------ Total interest expense 6,311 7,711 26,179 31,444 ------------ ------------ ------------ ------------ Net interest income 6,192 6,761 25,327 26,299 PROVISION FOR LOAN LOSSES 300 150 7,000 600 ------------ ------------ ------------ ------------ Net interest income after provision for loan losses 5,892 6,611 18,327 25,699 ------------ ------------ ------------ ------------ NON-INTEREST INCOME Deposit service fees 873 885 3,578 3,496 Loan service fees 289 295 1,201 1,314 Insurance service fees 537 595 2,214 2,312 Investment service fees 238 134 670 580 Real estate lease income 406 249 1,184 1,112 Gain on sale of securities, net 28 - 40 - Gain on sale of loans, net 303 117 1,178 379 Gain (loss) on sale of other real estate owned 4 - (21) - Gain (loss) on sale of premises and equipment, net (1) (1) (2) 10 Impairment on securities (2,792) - (2,792) - Other operating income 32 354 568 423 ------------ ------------ ------------ ------------ Total non-interest income (loss) (83) 2,628 7,818 9,626 ------------ ------------ ------------ ------------ NON-INTEREST EXPENSE Compensation and benefits 4,722 4,043 16,868 16,341 Office operations 924 1,014 3,806 3,962 Occupancy 658 672 2,460 2,580 Loan servicing 140 129 499 498 Outside and professional services 414 426 1,393 1,366 Marketing 543 226 1,305 1,036 Other operating expenses 536 943 2,486 3,230 ------------ ------------ ------------ ------------ Total non- interest expense 7,937 7,453 28,817 29,013 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR FEDERAL INCOME TAX (2,128) 1,786 (2,672) 6,312 PROVISION (BENEFIT) FOR FEDERAL INCOME TAX (107) 876 (162) 2,458 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (2,021) $ 910 $ (2,510) $ 3,854 ============ ============ ============ ============ EARNINGS (LOSS) PER COMMON SHARE Basic $ (0.34) $ 0.15 $ (0.42) $ 0.64 Diluted $ (0.34) $ 0.15 $ (0.42) $ 0.64 Weighted average shares outstanding - Basic 5,991,574(1) 5,979,580(2) 5,990,260(1) 5,983,677(2) Weighted average shares outstanding - Diluted 5,991,574 5,979,580 5,990,260 6,010,971 (1) Weighted average shares outstanding - Basic includes 265,202 vested and ratably earned shares of the 269,740 restricted shares granted and issued under the 2004 Management Recognition Plan ("MRP"), net of forfeited shares. (2) Weighted average shares outstanding - Basic includes 228,175 vested and ratably earned shares of the 326,900 restricted shares granted and issued under the MRP, net of forfeited shares. Rainier Pacific Financial Group, Inc. & Subsidiary Selected Information and Ratios (Dollars in Thousands) Three Months Ended ------------------------------------------------------ December September June March 31, 2008 30, 2008 30, 2008 31, 2008 ------------ ------------ ------------ ------------ INTEREST INCOME Loans $ 10,794 $ 10,666 $ 11,191 $ 11,277 Securities available-for- sale 1,325 1,304 1,276 1,857 Securities held-to-maturity 381 398 420 451 Interest-bearing deposits 3 - 6 27 FHLB dividends - 48 48 34 ------------ ------------ ------------ ------------ Total interest income 12,503 12,416 12,941 13,646 ------------ ------------ ------------ ------------ INTEREST EXPENSE Deposits 2,934 2,735 2,979 3,587 Borrowed funds 3,377 3,527 3,524 3,516 ------------ ------------ ------------ ------------ Total interest expense 6,311 6,262 6,503 7,103 ------------ ------------ ------------ ------------ Net interest income 6,192 6,154 6,438 6,543 PROVISION FOR LOAN LOSSES 300 6,000 550 150 ------------ ------------ ------------ ------------ Net interest income after provision for loan loss 5,892 154 5,888 6,393 ------------ ------------ ------------ ------------ NON-INTEREST INCOME Deposit service fees 873 958 908 839 Loan service fees 289 310 287 315 Insurance service fees 537 598 529 550 Investment service fees 238 147 121 164 Real estate lease income 406 270 262 246 Gain on sale of securities, net 28 1 - 11 Gain on sale of loans, net 303 190 450 235 Gain (loss) on sale of other real estate owned 4 (32) 7 - Gain (loss) on sale of premises and equipment, net (1) - (1) - Impairment on securities (2,792) - - - Other operating income 32 37 38 461 ------------ ------------ ------------ ------------ Total non-interest income (loss) (83) 2,479 2,601 2,821 ------------ ------------ ------------ ------------ NON-INTEREST EXPENSE Compensation and benefits 4,722 4,044 4,042 4,060 Office operations 924 990 937 955 Occupancy 658 572 616 614 Loan servicing 140 127 123 109 Outside and professional services 414 283 248 448 Marketing 543 260 218 284 Other operating expenses 536 746 716 488 ------------ ------------ ------------ ------------ Total non-interest expens 7,937 7,022 6,900 6,958 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR FEDERAL INCOME TAX (2,128) (4,389) 1,589 2,256 PROVISION (BENEFIT) FOR FEDERAL INCOME TAX (107) (1,439) 572 812 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (2,021) $ (2,950) $ 1,017 $ 1,444 ============ ============ ============ ============ EARNINGS (LOSS) PER COMMON SHARE Basic $ (0.34) $ (0.49) $ 0.17 $ 0.24 Diluted $ (0.34) $ (0.49) $ 0.17 $ 0.24 Weighted average shares outstanding - Basic 5,991,574(1) 5,998,207(2) 5,987,866(3) 5,983,393(4) Weighted average shares outstanding - Diluted 5,979,580 5,998,207 5,987,866 5,983,393 (1) Weighted average shares outstanding - Basic includes 265,202 vested and ratably earned shares of the 269,740 restricted shares granted and issued under the MRP, net of forfeited shares. (2) Weighted average shares outstanding - Basic includes 277,513 vested and ratably earned shares of the 326,100 restricted shares granted and issued under the MRP, net of forfeited shares. (3) Weighted average shares outstanding - Basic includes 262,877 vested and ratably earned shares of the 326,300 restricted shares granted and issued under the MRP, net of forfeited shares. (4) Weighted average shares outstanding - Basic includes 245,972 vested and ratably earned shares of the 326,300 restricted shares granted and issued under the MRP, net of forfeited shares. Rainier Pacific Financial Group, Inc. & Subsidiary Selected Information and Ratios (Dollars in Thousands) As of ----------------------------------------------------- December September June 30, March 31, December 31, 2008 30, 2008 2008 2008 31, 2007 --------- --------- --------- --------- --------- Loan portfolio composition: Real estate: One- to four-family residential (1) $ 56,325 $ 65,997 $ 75,879 $ 84,211 $ 76,882 Five or more family residential 148,949 141,449 146,050 148,991 149,080 Commercial 253,801 248,243 245,522 223,076 212,901 --------- --------- --------- --------- --------- Total real estate 459,075 455,689 467,451 456,278 438,863 Real estate construction: One- to four-family residential 71,424 79,120 79,581 78,607 73,114 Five or more family residential 483 471 - - 1,839 Commercial 9,953 5,991 4,032 4,157 3,827 --------- --------- --------- --------- --------- Total real estate construction 81,860 85,582 83,613 82,764 78,780 Consumer: Automobile 11,818 13,409 15,621 18,027 20,798 Home equity 42,442 42,660 42,344 43,980 45,293 Credit cards 23,192 22,793 22,063 22,120 23,172 Other 8,132 8,123 7,962 7,812 7,411 --------- --------- --------- --------- --------- Total consumer 85,584 86,985 87,990 91,939 96,674 Commercial business 45,762 35,991 24,920 24,643 22,683 --------- --------- --------- --------- --------- Subtotal 672,281 664,247 663,974 655,624 637,000 Less: Allowance for loan losses (13,329) (13,943) (8,271) (7,979) (8,079) --------- --------- --------- --------- --------- Total loans, net $ 658,952 $ 650,304 $ 655,703 $ 647,645 $ 628,921 ========= ========= ========= ========= ========= Sold loans, serviced for others $ 148,493 $ 135,496 $ 127,824 $ 115,214 $ 114,629 ========= ========= ========= ========= ========= Non-performing assets: Loans 90 days or more past due or non-accrual loans (2): Real estate $ - $ - $ - $ - $ - Real estate construction 24,042 31,243 13,461 - - Consumer 488 242 415 426 497 Commercial business 14 288 - - - Repossessed assets 38 - - 6 49 Other real estate owned 6,796 103 446 1,222 - --------- --------- --------- --------- --------- Total non- performing assets $ 31,378 $ 31,876 $ 14,322 $ 1,654 $ 546 ========= ========= ========= ========= ========= Loans greater than 30 days delinquent (2) $ 26,863 $ 26,049 $ 7,091 $ 1,678 $ 2,125 Loans greater than 30 days delinquent as a percentage of loans 4.00% 3.92% 1.07% 0.26% 0.33% Non-performing loans as a percentage of loans 3.65% 4.78% 2.09% 0.06% 0.08% Non-performing assets as a percentage of assets 3.60% 3.79% 1.65% 0.19% 0.06% Allowance for loan loss as a percentage of non-performing loans 54.31% 43.88% 59.61% 1,873.00% 1,625.55% Allowance for loan loss as a percentage of non-performing assets 42.48% 43.74% 57.75% 482.41% 1,479.67% Allowance for loan loss as a percentage of total loans 1.98% 2.10% 1.25% 1.22% 1.27% Core deposits (all deposits, excluding CDs) $ 256,689 $ 247,990 $ 238,271 $ 229,401 $ 226,743 Non-core deposits (CDs) 262,550 216,066 225,454 241,971 234,744 --------- --------- --------- --------- --------- Total deposits $ 519,239 $ 464,056 $ 463,725 $ 471,372 $ 461,487 ========= ========= ========= ========= ========= Loans/Deposits 129.47% 143.14% 143.18% 139.09% 138.03% Equity/Assets 6.21% 6.84% 8.68% 9.56% 9.88% Tangible Equity/Assets 5.85% 6.46% 8.30% 9.18% 9.48% (1) Includes loans held-for-sale. (2) The Company may classify selected loans as non-accrual although the contractual payments on the loans are not past due, based upon other factors or characteristics known to the Company relating to the loan or the borrower. Therefore, the amount of loans reported as "90 days or more past due or non-accrual loans" may exceed the amount of loans reported as "greater than 30 days delinquent." Rainier Pacific Financial Group, Inc. & Subsidiary Selected Information and Ratios (Dollars in Thousands) Three Months Ended Year Ended December 31, December 31, ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Loan growth (decline) 1.21% 0.58% 5.54% (0.37%) Deposit growth 11.89% 0.12% 12.51% 0.89% Equity decline (5.82%) (3.14%) (37.62%) (1.15%) Asset growth (decline) 3.74% (0.39%) (0.77%) (2.64%) Loans originated $ 57,498 $ 67,223 $ 240,409 $ 214,713 Loans sold $ 19,900 $ 6,194 $ 68,121 $ 23,698 Loans charged-off, net $ 914 $ 214 $ 1,750 $ 804 Increase (decrease) in non-interest income (103.16%) 12.55% (18.78%) 8.40% Increase (decrease) in non-interest expense (6.49%) 6.24% (0.68%) 1.06% Net charge-offs to average loans 0.54% 0.13% 0.27% 0.13% Efficiency ratio 129.92% 79.38% 86.94% 80.76% Return on assets (0.94%) 0.41% (0.29%) 0.43% Return on equity (14.20%) 4.08% (3.41%) 4.32% Interest-earning assets: Yield on loans 6.40% 7.36% 6.67% 7.35% Yield on investments 6.83% 5.68% 5.46% 5.43% Yield on FHLB stock 0.00% 0.80% 0.95% 0.60% ---------- ---------- ---------- ---------- Yield on interest-earning assets 6.32% 6.88% 6.38% 6.80% ---------- ---------- ---------- ---------- Interest-bearing liabilities: Cost of deposits 2.61% 3.72% 2.86% 3.82% Cost of borrowed funds 4.43% 4.45% 4.39% 4.48% ---------- ---------- ---------- ---------- Cost of interest-bearing liabilities 3.34% 4.04% 3.51% 4.11% ---------- ---------- ---------- ---------- Net interest rate spread 2.98% 2.84% 2.87% 2.69% ========== ========== ========== ========== Net interest margin 3.14% 3.23% 3.14% 3.09% Net interest margin-quarter ended 09/30/2008 3.06% Net interest margin-quarter ended 06/30/2008 3.13% Net interest margin-quarter ended 03/31/2008 3.20% Net interest margin-quarter ended 12/31/2007 3.23% As of --------------------------------------------------------------- December 31, September 30, June 30, March 31, December 31, 2008 2008 2008 2008 2007 ----------- ----------- ----------- ----------- ----------- Shares outstanding at end of period 5,972,931(1) 6,054,391(2) 6,065,625(3) 6,078,444(4) 6,076,370(5) Book value per share $ 9.07 $ 9.50 $ 12.46 $ 13.83 $ 14.29 Tangible book value per share $ 8.54 $ 8.97 $ 11.91 $ 13.27 $ 13.77 (1) Shares outstanding represent 6,295,298 shares issued (including 4,538 unvested restricted shares granted under the MRP), less 322,367 unallocated shares under the ESOP. (2) Shares outstanding represent 6,399,390 shares issued (including 48,587 unvested restricted shares granted under the MRP), less 339,341 unallocated shares under the ESOP. (3) Shares outstanding represent 6,421,940 shares issued (including 63,423 unvested restricted shares granted under the MRP), less 356,315 unallocated shares under the ESOP. (4) Shares outstanding represent 6,451,733 shares issued (including 80,328 unvested restricted shares granted under the MRP), less 373,289 unallocated shares under the ESOP. (5) Shares outstanding represent 6,466,633 shares issued (including 98,725 unvested restricted shares granted under the MRP), less 390,263 unallocated shares under the ESOP. 