Rainier Pacific Financial Group, Inc. (the ?Company?) (NASDAQ GM:RPFG) announced today its first quarter results for the period ending March 31, 2007. Net income for the quarter ended March 31, 2007, was up 38.6% to $890,000, or $0.15 per diluted share, compared to net income of $642,000, or $0.11 per diluted share, for the same period in 2006.

The Company's revenue (i.e., net interest income before provisions for loan losses plus non-interest income) for the quarter ended March 31, 2007, was $8.6 million, compared to $8.4 million for the same period a year ago. Net interest income before the provision for loan losses for the quarter was relatively unchanged at $6.4 million, compared to the same period a year ago, as increases in earning assets essentially offset a lower net interest margin. For the quarter ended March 31, 2007, the Company's net interest margin was 2.96%, compared to 2.92% for the quarter ended December 31, 2006, and 3.03% for the quarter ended March 31, 2006. The yield on the Company's interest-earning assets was 6.69% for the quarter ended March 31, 2007, compared to 6.63% and 6.07% for the quarters ended December 31, 2006, and March 31, 2006, respectively. For the quarter ended March 31, 2007, the Company's cost of interest-bearing liabilities was 4.13%, compared to 4.10% and 3.36% for the quarters ended December 31, 2006, and March 31, 2006, respectively.

Non-interest income was up 10.0% to $2.2 million for the quarter ended March 31, 2007, compared to $2.0 million for the same quarter in 2006. A net gain of $136,000 on the sale of loans during the first quarter of 2007, compared to $6,000 for the same period in 2006, accounted for most of the increase in non-interest income.

Non-interest expense was $7.1 million for the quarter ended March 31, 2007, or 2.7% lower than the $7.3 million for the same quarter in 2006. This decrease was primarily the result of reduced depreciation costs related to technology assets becoming fully depreciated at year-end 2006, and contributed to office operations expense decreasing by $312,000 in the first quarter of 2007, compared to the same period in 2006.

At March 31, 2007, the Company's total assets were $906.6 million, reflecting an increase of $3.9 million from $902.7 million at December 31, 2006. Total shareholders' equity at March 31, 2007, was $88.8 million, compared to $87.8 million at December 31, 2006.

In the first quarter ended March 31, 2007, the Company purchased and retired 16,700 shares of its outstanding shares of common stock at an average price of $20.52 per share. At March 31, 2007, the Company had the authority to purchase an additional 223,920 shares of common stock under its currently approved stock repurchase program.

The Company's book value and tangible book value per share as of March 31, 2007, were $14.49 and $13.96 per share, respectively, based upon 6,128,485 outstanding shares of common stock. The number of outstanding shares includes 140,592 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 441,185 of unallocated shares held by the Rainier Pacific 401(k) Employee Stock Ownership Plan.

Total loans were $638.5 million at March 31, 2007, compared to $639.4 million at December 31, 2006, and $595.7 million at March 31, 2006, respectively. For the quarter ended March 31, 2007, the yield on loans was 7.24%, compared to 7.19% and 6.79% for the quarters ended December 31, 2006, and March 31, 2006, respectively. At March 31, 2007, the loan portfolio consisted of 31.9% commercial real estate loans, 25.3% multi-family real estate loans, 12.6% single-family real estate loans, 12.3% real estate construction loans, 9.2% consumer loans, 6.7% home equity loans, and 2.0% commercial business loans.

The Company sold $6.8 million of single-family fixed-rate real estate loans during the quarter, compared to $4.4 million during the same period in 2006. The portfolio of loans serviced for others increased to $112.7 million at March 31, 2007, compared to $107.0 million at March 31, 2006.

Total loan originations during the quarter ended March 31, 2007, were $40.4 million, compared to $46.0 million for the same period in 2006 and $52.4 million for the quarter ended December 31, 2006.

The loan portfolio credit quality remained good during the first quarter. Net charge-offs were $157,000 for the quarter ended March 31, 2007, compared to $282,000 for the quarter ended December 31, 2006, and $260,000 for the quarter ended March 31, 2006. Loans more than 30 days delinquent as a percentage of total loans were 0.26% at March 31, 2007, compared to 0.28% at December 31, 2006, and 0.21% at March 31, 2006. Non-performing loans (i.e., loans 90 days or more past due or non-accrual loans) were $224,000, or 0.04% of total loans, at March 31, 2007, compared to $241,000, or 0.04% of total loans, at December 31, 2006, and $121,000, or 0.02% of total loans, at March 31, 2006. Non-performing assets were $245,000, or 0.03% of total assets, at March 31, 2007, compared to $274,000, or 0.03% of total assets, at December 31, 2006, and $150,000, or 0.02% of total assets, at March 31, 2006. The Company's provision for loan losses was $150,000 for the quarter ended March 31, 2007, unchanged from the provision made for the quarters ended December 31, 2006, and March 31, 2006. The allowance for loan losses totaled $8.3 million at March 31, 2007, representing an allowance to total loans ratio of 1.30%, unchanged from the $8.3 million at December 31, 2006, and $200,000 less than the $8.5 million, or 1.42% of total loans, at March 31, 2006.

The investment securities portfolio at March 31, 2007, of $194.5 million (excluding $13.7 million in Federal Home Loan Bank of Seattle stock holdings), was less than the $197.8 million at December 31, 2006, and the $230.3 million at March 31, 2006. These declines reflect the Company's continued focus on growing its core business with less emphasis on the investment portfolio to generate increased earning assets.

Total deposits were $466.7 million at March 31, 2007, compared to $457.4 million at December 31, 2006. Core deposits (comprised of checking, savings, money market, and individual retirement accounts) totaled $242.4 million, or 51.9% of total deposits, as of March 31, 2007, compared to $220.4 million at December 31, 2006. Brokered deposit balances were $49.9 million at March 31, 2007, compared to $50.9 million at December 31, 2006. For the quarter ended March 31, 2007, the average cost of deposits was 3.89%, compared to 3.80% for the quarter ended December 31, 2006, and 2.94% for the quarter ended March 31, 2006. The increased cost of deposits was the result of higher short-term interest rates and enhanced competition for deposits in our local market.

?We are pleased with our progress to improve earnings, the continued strong credit quality exhibited by our loan portfolio, and the growth of our core deposit base during the first quarter. Our focus during the balance of the year will be to continue to improve our operating efficiency and profitability, while growing new customer relationships,? said John A. Hall, President and CEO.

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, interest rate fluctuations; economic conditions in the Company's primary market area; 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, 2006. 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)

 

At
March
31, 2007

At
December
31, 2006

 

 

ASSETS
Cash and cash equivalents $ 12,452  $ 11,847 
Interest-bearing deposits with banks 8,206  57 
Securities available-for-sale 143,541  145,110 
Securities held-to-maturity (fair value of $50,108 at March 31, 2007; and $51,589 at December 31, 2006) 50,950  52,652 
Federal Home Loan Bank (?FHLB?) stock, at cost   13,712    13,712 
 
Loans 638,500  639,378 
Less: allowance for loan losses   (8,276)   (8,283)
Loans, net 630,224  631,095 
 
Premises and equipment, net 33,913  34,383 
Accrued interest receivable 4,154  4,177 
Other assets   9,408    9,664 
 
TOTAL ASSETS $ 906,560  $ 902,697 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Non-interest bearing $ 36,418  $ 33,722 
Interest-bearing   430,317    423,703 
Total deposits 466,735  457,425 
 
Borrowed funds 339,285  345,395 
Corporate drafts payable 6,053  3,537 
Accrued compensation and benefits 826  2,397 
Other liabilities   4,868    6,113 
 
TOTAL LIABILITIES   817,767    814,867 
 
SHAREHOLDERS' EQUITY:
Common stock, no par value: 49,000,000 shares authorized; 6,569,670 shares issued and 5,987,892 shares outstanding at March 31, 2007; and 6,587,670 shares issued and 5,971,913 shares outstanding at December 31, 2006 50,164  50,038 
Unearned Employee Stock Ownership Plan (?ESOP?) shares (4,412) (4,582)
Accumulated other comprehensive loss, net of tax (601) (806)
Retained earnings   43,642    43,180 
 
TOTAL SHAREHOLDERS' EQUITY   88,793    87,830 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 906,560  $ 902,697 

Rainier Pacific Financial Group, Inc. & Subsidiary

Consolidated Statements of Income

(Dollars in Thousands, except per share data)

 
Three Months Ended
March 31,
2007  2006 
INTEREST INCOME
Loans $ 11,599  $ 9,993 
Securities available-for-sale 2,052  1,925 
Securities held-to-maturity 565  742 
Interest-bearing deposits 10  64 
FHLB dividends   14    - 
Total interest income   14,240    12,724 
INTEREST EXPENSE
Deposits 4,111  2,999 
Borrowed funds   3,743    3,325 
Total interest expense   7,854    6,324 
Net interest income 6,386  6,400 
PROVISION FOR LOAN LOSSES   150    150 
Net interest income after provision for loan loss   6,236    6,250 
NON-INTEREST INCOME
Deposit service fees 826  804 
Loan service fees 292  260 
Insurance service fees 543  516 
Investment service fees 113  121 
Real estate lease income 294  283 
Gain on sale of securities, net -  - 
Gain on sale of loans, net 136  6 
Gain on sale of premises and equipment, net 10  - 
Other operating income   28    30 
Total non-interest income   2,242    2,020 
NON-INTEREST EXPENSE
Compensation and benefits 3,993  4,030 
Office operations 986  1,298 
Occupancy 635  640 
Loan servicing 110  117 
Outside and professional services 432  419 
Marketing 243  229 
Other operating expenses   710    548 
Total non-interest expense   7,109    7,281 
 
INCOME BEFORE PROVISION FOR FEDERAL INCOME TAX 1,369  989 
 
PROVISION FOR FEDERAL INCOME TAX   479    347 
 
NET INCOME $ 890  $ 642 
 
EARNINGS PER COMMON SHARE
Basic $ 0.15  $ 0.11 
Diluted $ 0.15  $ 0.11 
Weighted average shares outstanding ? Basic 5,976,430(1) 5,931,068(2)
Weighted average shares outstanding ? Diluted 6,094,582  5,931,068 
 
(1) Weighted average shares outstanding - Basic includes 180,708 vested and ratably earned shares of the 321,300 restricted shares granted and issued under the 2004 Management Recognition Plan ("MRP"), net of forfeited shares.
 
(2) Weighted average shares outstanding - Basic includes 117,648 vested and ratably earned shares of the 325,500 restricted shares granted and issued under the MRP, net of forfeited shares.
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Rainier Pacific Financial Group, Inc. & Subsidiary

Consolidated Statements of Income

(Dollars in Thousands, except per share data)

 
Three Months Ended
March 31,

2007

December 31,

2006

September 30, 2006

June 30,

2006

INTEREST INCOME
Loans $ 11,599  $

11,427 

$ 11,206  $ 10,414 
Securities available-for-sale 2,052  2,095  2,187  2,005 
Securities held-to-maturity 565  581