Rainier Pacific Financial Group, Inc. Reports Third Quarter Results

TACOMA, WA, Nov 09 (MARKET WIRE) --
Rainier Pacific Financial Group, Inc. (the "Company") (NASDAQ: RPFG), the
holding company for Rainier Pacific Bank (the "Bank"), announced today
its third quarter results for the period ended September 30, 2009. The
Company recognized a net loss of $35.0 million, or $5.82 per basic and
diluted share, for the quarter ended September 30, 2009, compared to a
net loss of $3.0 million, or $0.49 per basic and diluted share, for the
same period in 2008. The loss for the third quarter of 2009 was primarily
attributable to non-cash pre-tax other-than-temporary impairment ("OTTI")
charges of $22.1 million relating to the Company's investment in pooled
trust preferred collateralized debt obligation ("trust preferred CDO")
securities, a $5.7 million provision for loan losses, and a $16.7 million
charge against earnings to establish a valuation allowance for deferred
tax assets.

For the nine months ended September 30, 2009, the Company recognized a net
loss of $43.3 million, or $7.23 per basic and diluted share, compared to a
net loss of $489,000, or $0.08 per diluted share, for the same nine month
period in 2008. The loss for the nine month period of 2009 was primarily
attributable to non-cash pre-tax OTTI charges of $32.3 million relating to
the Company's trust preferred CDO securities and provisions for loan
losses of $12.0 million.

"Despite the further deterioration in the credit quality and valuation of
the trust preferred CDO securities, Rainier Pacific Bank's core business
operations remained relatively stable during the quarter. We are extremely
disappointed with the continued increases in the level of banks and
insurance companies that are deferring their payments on their trust
preferred securities, and the need to replenish the Bank's allowance for
loan losses in light of the continued weakness in the local real estate
market," said John A. Hall, President and CEO. "While this operating
environment remains challenging, we remain committed to working diligently
to re-capitalize the Bank while continuing to meet the needs of our
customers."

As a result of the third quarter loss, at September 30, 2009, the
Company's capital levels have been materially reduced and have resulted
in both the Company and Bank to be considered "significantly
undercapitalized" by regulatory definition. The Bank's regulatory capital
ratios are as follows as of September 30, 2009: a Tier I leverage ratio
of 3.04% (compared to an "adequately capitalized" threshold of 4.00%); a
Tier I risk-based capital ratio of 2.71% (compared to an "adequately
capitalized" threshold of 4.00%); and a total risk-based capital ratio of
3.79% (compared to an "adequately capitalized" threshold of 8.00%).

The trust preferred CDO securities held by the Company have experienced
considerable stress due to the effects of the continued financial and
economic crisis, resulting in a number of the bank and insurance company
issuers of the underlying collateral opting to defer their quarterly
payments. Furthermore, the trust preferred CDO securities continue to be
substantially illiquid, and their evaluation for impairment and the
determination of fair value remains highly complex. As of September 30,
2009, 14 of the 15 trust preferred CDO securities held by the Company,
with an aggregate par value of $99.2 million, were determined to involve
OTTI, compared to seven of the securities with an aggregate par value of
$34.1 million that were determined to involve OTTI as of June 30, 2009.
Of the 14 trust preferred CDO securities that involved OTTI at September
30, 2009, 11 incurred credit loss impairment charges during the third
quarter. As part of the evaluation, the Company completes an analysis of
projected cash flows for each trust preferred CDO security, which
incorporates both known and projected defaults and payment deferrals on
the underlying debt obligations of the trust preferred CDO securities to
determine each security's net present value. The net present values were
calculated in a manner consistent with the methodology used in the June
30, 2009 evaluation; although, the cash flow projections supporting the
net present value calculations for the current period were negatively
impacted by further increases in the cumulative level of actual and
projected payment deferrals by the bank and insurance company issuers of
the underlying debt obligations. Accordingly, the lower net present
values, when compared to the securities' amortized costs, resulted in
additional impairment charges. The 11 securities determined to have
incurred a credit loss during the quarter resulted in total non-cash
pre-tax impairment charges of $22.1 million for the quarter ended
September 30, 2009, compared to three securities that incurred $1.8
million in impairment charges for the quarter ended June 30, 2009. To
determine the fair value of the trust preferred CDO securities, the
Company considered indications of value using both a "market approach"
and "present value techniques" available under generally accepted
accounting principles. Based upon management's quarterly evaluation,
management determined that the 15 trust preferred CDO securities held by
the Company had an aggregate fair value of $23.4 million, compared to an
aggregate fair value of $36.3 million at June 30, 2009.

The effects of the trust preferred CDO securities on the Company's
earnings and capital position continue to be influenced by external market
conditions and other factors outside of the Company's control, including
but not limited to: 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. While management closely monitors the performance of the trust
preferred CDO securities and does not intend to sell these securities
prior to their recovery in value, the current market environment
significantly limits the Company's ability to mitigate its exposure to
future impairment 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 that additional impairment charges on its holdings
of trust preferred CDO securities portfolio would be recognized, and such
charges would correspondingly have a further material adverse affect on
the Company's earnings, shareholders' equity, and regulatory capital.

At September 30, 2009, the Company had $37.8 million in income tax assets,
which are comprised of tax affected cumulative temporary differences
(inclusive of both current and deferred portions) related to unrealized
valuation losses on the trust preferred CDO securities ($16.5 million),
OTTI credit losses recognized ($12.5 million), provisions for loan losses
($3.3 million), and other miscellaneous items ($5.5 million). The Company
considered all of the available positive and negative evidence in its
quarterly evaluation of the net deferred tax assets, including the tax
carry-back and carry-forward benefits. Based upon its analysis, the
Company concluded that it is more likely than not that a significant
portion of the net deferred tax assets may not be available as a benefit
in future periods; and therefore, recognized a $16.7 million valuation
allowance against the net deferred tax assets. Accordingly, the only
remaining income tax assets as of September 30, 2009 are the $16.5 million
for unrealized valuation losses on the trust preferred CDO securities and
$4.6 million in tax carry-back benefits.

The Company's net interest income for the quarter ended September 30, 2009
was $5.0 million, compared to $6.2 million for the same period in 2008.
The decrease in net interest income was due to a $69.3 million reduction
in average interest-bearing assets, and a reduction in net interest
margin. The Company's net interest margin was 2.75% for the quarter ended
September 30, 2009, compared to 2.73% and 3.06% for the quarters ended
June 30, 2009 and September 30, 2008, respectively. The yield on the
Company's interest-earning assets decreased to 5.34% for the quarter
ended September 30, 2009, compared to 5.54% and 6.15% for the quarters
ended June 30, 2009 and September 30, 2008, respectively. The Company's
cost of interest-bearing liabilities also decreased to 2.65% for the
quarter ended September 30, 2009, compared to 2.86% and 3.34% for the
quarters ended June 30, 2009 and September 30, 2008, respectively. The
decline in asset yields for the third quarter of 2009 related primarily
to the loss of relatively higher loan yields that were being earned on
the VISA credit card portfolio that was sold in February 2009, the
increased level of non-performing assets, lower yields on trust preferred
CDO securities, the higher level of low-rate interest-bearing deposits
currently being maintained by the Company to provide a sufficient level
of liquidity, and the general decline in market interest rates. The
decline in the cost of interest-bearing liabilities relates primarily to
reductions in the rates of interest paid on retail customer deposits
during the quarter, and the removal of relatively higher cost brokered
deposits during the nine months ended September 30, 2009.

Non-interest income for the quarter ended September 30, 2009 was $2.5
million, essentially unchanged compared to the same period in 2008. Gains
on the sale of loans were $431,000 in the current quarter, compared to
$190,000 for the quarter ended September 30, 2008, which more than offset
lower loan service fees of $169,000 for the quarter ended September 30,
2009, compared to $310,000 for the same period in 2008.

Non-interest expenses were $7.5 million for the quarter ended September
30, 2009, compared to $7.0 million incurred during the same quarter in
2008. The increase was primarily attributable to $796,000 in Federal
Deposit Insurance Corporation ("FDIC") deposit insurance premiums and
assessments, compared to $81,000 for the same quarter a year ago, and
higher legal and professional expenses related primarily to third-party
consultant costs required to evaluate the Company's trust preferred CDO
securities. These increased expenses were partially offset by a $325,000
decrease in compensation and benefits costs that is primarily a result of
a reduction of 26 full-time equivalent employees since the beginning of
2009, the elimination of equity-based compensation for executive officers
and board members, and lower employee incentive and retirement
compensation.

Total loans were $584.1 million at September 30, 2009, compared to $615.8
million at June 30, 2009 and $672.3 million at December 31, 2008. The
decrease in the loan portfolio resulted primarily from the Company's
continued focus on lowering its asset base by restricting new loan
originations for its portfolio. During the quarter ended September 30,
2009, the most significant contributing factors to the decreased size of
the loan portfolio were the reduction of $13.1 million in the land
development and construction loan portfolio, the sale of $19.1 million in
single-family mortgage loans, and the prepayment of $8.2 million in
multi-family and commercial real estate loans. For the quarter ended
September 30, 2009, the yield on loans was 6.11%, compared to 6.07% and
6.39% for the quarters ended June 30, 2009 and September 30, 2008,
respectively. Total loan originations were $21.8 million during the
quarter ended September 30, 2009, compared to $36.4 million for both
quarters ended June 30, 2009 and September 30, 2008. At September 30,
2009, the loan portfolio consisted of 43.0% commercial real estate loans,
23.1% multi-family real estate loans, 9.2% land development and real
estate construction loans, 8.2% one- to four-family real estate loans,
7.8% commercial business loans, 6.2% home equity loans, and 2.5% consumer
loans (excluding home equity loans).

During the three months ended September 30, 2009, the Company sold $17.7
million of fixed-rate single-family residential loans, compared to $11.8
million of fixed-rate single-family residential loans during the same
period in 2008. At September 30, 2009, the portfolio of loans serviced for
others increased to $188.0 million, compared to $179.9 million and $135.5
million at June 30, 2009 and September 30, 2008, respectively.

Net loan charge-offs were $7.7 million for the quarter ended September 30,
2009, compared to $737,000 for the quarter ended June 30, 2009 and
$328,000 for the quarter ended September 30, 2008. Of the $7.7 million in
charge-offs, $7.1 million was concentrated in two residential builder
relationships and was deemed necessary due to updated appraisal
information indicating lower values for these collateral-dependent loan
relationships. The ratio of loans more than 30 days delinquent as a
percentage of total loans decreased to 3.75% at September 30, 2009,
compared to 5.49% at June 30, 2009, and 3.92% at September 30, 2008.
During the quarter, non-performing assets (inclusive of loans, other real
estate owned, and other repossessed assets) decreased to $33.8 million,
or 4.42% of total assets at September 30, 2009; compared to $39.9
million, or 4.85% of total assets at June 30, 2009; and $31.9 million, or
3.79% of total assets at September 30, 2008. As of September 30, 2009,
$31.2 million, or 92.3%, of the $33.8 million in non-performing assets
were concentrated in six residential builder relationships. The $31.2
million in non-performing assets to these builders was comprised of $17.7
million in real estate construction loans (of which $15.4 million are
land development loans on properties located in the Pierce and South King
Counties), $701,000 in commercial business loans, and $12.8 million in
real estate owned (located in Pierce and North Thurston Counties).

Upon completing its quarterly evaluation of the allowance for loan losses,
the Company increased its provisions for loan losses to $5.7 million for
the quarter ended September 30, 2009, compared to provisions for loan
losses of $4.0 million and $6.0 million for the quarters ended June 30,
2009 and September 30, 2008, respectively. The allowance for loan losses
was $9.7 million, or 1.66% of total loans at September 30, 2009; compared
to $11.7 million, or 1.90% of total loans at June 30, 2009; and $13.9
million, or 2.10% of total loans at September 30, 2008.

Total deposits were $466.3 million at September 30, 2009, compared to
$489.0 million at June 30, 2009 and $464.1 million at September 30, 2008,
as the Bank continued to reduce its portfolio of brokered deposits. At
September 30, 2009, brokered deposits were $19.0 million, or 4.1% of total
deposits, compared to $31.0 million, or 6.3% of total deposits at June 30,
2009, and $64.7 million, or 13.9% of total deposits at September 30, 2008.
Total retail deposits (which excludes all brokered deposits) decreased by
$10.7 million during the quarter to $447.3 million at September 30, 2009,
compared to $458.0 million at June 30, 2009. For the quarter ended
September 30, 2009, the average cost of interest-bearing deposits
decreased to 1.49%, compared to 1.84% for the quarter ended June 30, 2009
and 2.56% for the quarter ended September 30, 2008. The decline in the
cost of interest-bearing deposits related primarily to lower market
interest rates.

The investment securities portfolio at September 30, 2009 (excluding $13.7
million in Federal Home Loan Bank of Seattle stock holdings recorded at
cost) totaled $51.0 million, compared to $65.4 million at June 30, 2009
and $102.5 million at September 30, 2008. The investment securities
portfolio contains $23.4 million of trust preferred CDO securities
recorded at their fair value (representing $108.8 million in par value
and $71.9 million in amortized cost), $18.2 million of mortgage-backed
securities, and $9.4 million of municipal bonds recorded at amortized
cost.

The Company's total shareholders' equity declined to $12.8 million at
September 30, 2009, compared to $41.9 million at June 30, 2009 and $57.5
million at September 30, 2008. The decline in shareholders' equity during
the third quarter was a result of the $35.0 million net loss for the
quarter, partially offset by a lower tax affected unrealized valuation
loss on the trust preferred CDO securities held by the Company in the
amount of $5.9 million. Accordingly, the Company's capital ratio (i.e.,
shareholders' equity divided by total assets) decreased to 1.68% at
September 30, 2009, compared to 5.11% and 6.84% at June 30, 2009 and
September 30, 2008, respectively. The tangible common equity-to-assets
ratio decreased to 1.31% at September 30, 2009, compared to 4.75% at June
30, 2009 and 6.46% at September 30, 2008. The Company's book value and
tangible book value per share as of September 30, 2009 also decreased to
$2.13 and $1.66 per share, respectively.

As previously reported, Rainier Pacific Bank is currently operating under
a Supervisory Prompt Corrective Action Directive from the FDIC, and has
also consented to the issuance of an Order to Cease and Desist that became
effective September 30, 2009. Among other things, these regulatory
enforcement actions require the Bank to increase its Tier 1 capital ratio
to at least 10.0%, or to find a suitable buyer for the Bank, to implement
accurate and realistic modeling to determine the valuation of its trust
preferred CDO securities portfolio, to develop a plan to increase the
Bank's liquidity position, and other requirements. As a "significantly
undercapitalized" institution, the Bank is also subject to mandatory and
discretionary restrictions. In light of these current regulatory
enforcement actions, the Company and Bank continue to work closely with
its federal and state banking regulators to improve and capital adequacy
and asset quality, while maintaining sufficient liquidity. In addition,
the Company continues to work diligently to secure a capital infusion or
to find a suitable buyer for the Bank. However, there can be no assurances
that the Company will be successful in its efforts to recapitalize or sell
the Bank, and therefore its inability to do so would likely raise
substantial doubt about the Company's ability to continue as a going
concern.

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 certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may be
identified by the use of words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential." These forward-looking
statements are based on the Company's expectations and are subject to
risks and uncertainties that cannot be predicted or quantified and are
beyond the Company's control, including the potential that (1) the
Company may not be able to continue as a going concern, and (2) because
of our significantly undercapitalized status, our regulators may initiate
additional enforcement actions against us. 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
risks of lending activities, including changes in the level and trend of
loan delinquencies and write-offs that may be impacted by deterioration
in the housing and commercial real estate markets and may lead to
increased losses and non-performing assets in the Company's loan
portfolio, result in the Company's allowance for loan losses not being
adequate to cover actual losses, and require the Company to materially
increase its reserves; changes in general economic conditions, either
nationally or in the Company's market areas; changes in the levels of
general interest rates, and the relative differences between short and
long term interest rates, deposit interest rates, net interest margin,
and funding sources; deposit flows; fluctuations in the demand for loans,
the number of unsold homes and other properties, and fluctuations in real
estate values in the Company's market areas; adverse changes in the
securities markets, including changes in the ability of the issuers of
trust preferred CDO securities the Company owns to repay their
obligations; changes as a result of examinations of the Company by the
Federal Reserve Board and its bank subsidiary by the Federal Deposit
Insurance Corporation, the Washington State Department of Financial
Institutions, Division of Banks, or other regulatory authorities, or as a
result of agreements with these regulators, including the possibility that
any such regulatory authority may, among other things, require the Company
to increase its reserve for loan losses, write-down assets, change its
regulatory capital position, or affect its ability to borrow funds or
maintain or increase deposits, which could adversely affect the Company's
liquidity and earnings; the Company's ability to control operating costs
and expenses; the use of estimates in determining fair value of certain of
the Company's assets, which estimates may prove to be incorrect and result
in significant declines in valuation; difficulties in reducing risk
associated with the loans on the Company's balance sheet; staffing
fluctuations in response to product demand or the implementation of
corporate strategies that affect the Company's work force and potential
associated charges; computer systems on which the Company depends could
fail or experience a security breach, or the implementation of new
technologies may not be successful; the Company's ability to retain key
members of its senior management team; costs and effects of litigation,
including settlements and judgments; the Company's ability to manage loan
delinquency rates; increased competitive pressures among financial
services companies; changes in consumer spending, borrowing, and savings
habits; legislative or regulatory changes that adversely affect the
Company's business including changes in regulatory policies and
principles, including the interpretation of regulatory capital or other
rules; the availability of resources to address changes in laws, rules,
or regulations or to respond to regulatory actions; inability of key
third-party providers to perform their obligations to the Company;
changes in accounting policies and practices, as may be adopted by the
financial institution regulatory agencies or the Financial Accounting
Standards Board, including additional guidance and interpretation on
accounting issues and details of the implementation of new accounting
methods; economic impact of war or any terrorist activities; other
economic, competitive, governmental, regulatory, and technological
factors affecting the Company's operations; pricing, products, and
services; time to lease excess space in Company-owned buildings; future
actions of Nasdaq and the future listing of the Company's securities; 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, 2008 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 2009. Any of the forward-looking statements
that the Company makes in this press release and in the other public
statements may turn out to be wrong because of inaccurate assumptions the
Company might make, the factors illustrated above, or other factors that
the Company cannot foresee. Because of these and other uncertainties, the
Company's actual future results may be materially different from those
expressed in any forward-looking statements made by or on the Company's
behalf. Therefore, 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 September 30, At June 30, At December 31,
2009 2009 2008
------------- ------------ -------------

Cash and cash equivalents $ 8,156 $ 8,758 $ 8,811
Interest-bearing deposits
with banks 41,035 47,666 29,425
Securities available-for-sale 23,396 36,280 14,895
Securities held-to-maturity
(fair value at September 30,
2009: $28,744; at June 30,
2009: $29,774; at December
31, 2008: $34,162) 27,631 29,167 33,984
Federal Home Loan Bank of
Seattle ("FHLB") stock,
at cost 13,712 13,712 13,712

Loans held-for-sale 1,389 - 1,505
Loans 582,697 615,833 670,776
Less: allowance for loan
losses (9,684) (11,719) (13,329)
------------- ------------ -------------
Loans, net 574,402 604,114 658,952

Premises and equipment, net 32,621 33,298 33,770
Accrued interest receivable 2,857 3,071 3,535
Real estate owned 12,890 8,077 6,796
Income tax assets, net of
valuation allowance 21,071 31,330 37,551
Other assets 6,383 5,918 5,802
------------- ------------ -------------

TOTAL ASSETS $ 764,154 $ 821,391 $ 847,233
============= ============ =============

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Non-interest bearing $ 45,107 $ 43,447 $ 40,331
Interest-bearing 421,217 445,512 478,908
------------- ------------ -------------
Total deposits 466,324 488,959 519,239

Borrowed funds 279,337 281,421 291,217
Corporate drafts payable 97 1,498 1,554
Accrued compensation and
benefits 1,697 1,163 1,745
Other liabilities 3,852 6,409 4,184
------------- ------------ -------------

TOTAL LIABILITIES 751,307 779,450 817,939
------------- ------------ -------------

SHAREHOLDERS' EQUITY:
Common stock, no par value:
49,000,000 shares
authorized; 6,294,898 shares
issued and 6,022,386 shares
outstanding at Sept. 30,
2009; 6,294,898 shares
issued and 6,005,312 shares
outstanding at June 30,
2009; and 6,295,298 shares
issued and 5,968,393 shares
outstanding at Dec. 31, 2008 51,046 51,163 51,303
Unearned Employee Stock
Ownership Plan ("ESOP") shares (2,714) (2,884) (3,224)
Accumulated other
comprehensive income/(loss)
("OCI/(loss)"), net of tax (31,980) (37,843) (47,206)
Retained earnings
(accumulated deficit) (3,505) 31,505 28,421
------------- ------------ -------------

TOTAL SHAREHOLDERS'
EQUITY 12,847 41,941 29,294
------------- ------------ -------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 764,154 $ 821,391 $ 847,233
============= ============ =============

Rainier Pacific Financial Group, Inc. & Subsidiary
Consolidated Statements of Operations
(Dollars in Thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2009 2008 2009 2008
----------- ----------- ------------ -----------
INTEREST INCOME
Loans $ 9,291 $ 10,666 $ 29,067 $ 33,134
Securities
available-for-
sale 217 1,304 1,646 4,437
Securities
held-to-maturity 301 398 984 1,269
Interest-bearing
deposits 34 - 85 33
FHLB dividends - 48 - 130
----------- ----------- ------------ -----------
Total interest
income 9,843 12,416 31,782 39,003
----------- ----------- ------------ -----------
INTEREST EXPENSE
Deposits 1,656 2,735 6,363 9,301
Borrowed funds 3,156 3,527 9,614 10,567
----------- ----------- ------------ -----------
Total interest
expense 4,812 6,262 15,977 19,868
----------- ----------- ------------ -----------
Net interest
income 5,031 6,154 15,805 19,135
PROVISION FOR LOAN
LOSSES 5,700 6,000 12,000 6,700
----------- ----------- ------------ -----------
Net interest
income (loss)
after
provision for
loan losses (669) 154 3,805 12,435
----------- ----------- ------------ -----------

NON-INTEREST INCOME
Deposit service
fees 948 958 2,614 2,705
Loan service fees 169 310 614 912
Insurance service
fees 566 598 1,656 1,677
Investment
service fees 120 147 470 432
Real estate lease
income 183 270 617 778
Gain on sale of
securities, net - 1 - 12
Gain on sale of
loans, net 431 190 4,866 875
Gain (loss) on
sale of other
real estate
owned 33 (32) 23 (25)
Loss on sale of
premises and
equipment, net - - (3) (1)
Other operating
income 46 37 130 536
----------- ----------- ------------ -----------
Total
non-interest
income 2,496 2,479 10,987 7,901
----------- ----------- ------------ -----------
NON-INTEREST
EXPENSE
Compensation and
benefits 3,719 4,044 10,985 12,146
Office operations 1,039 990 2,922 2,882
Occupancy 654 572 1,922 1,802
Loan servicing 57 127 311 359
Outside and
professional
services 442 283 1,191 979
Marketing 235 260 766 762
Federal deposit
insurance
premiums and
assessments 796 81 2,551 211
Other operating
expenses 604 665 2,058 1,739
----------- ----------- ------------ -----------
Total
non-interest
expense 7,546 7,022 22,706 20,880
----------- ----------- ------------ -----------
OTHER-THAN-TEMPORARY
IMPAIRMENT ON
SECURITIES
Total
other-than-
temporary
impairment
losses (53,835) - (57,303) -
Portion of losses
recognized in
OCI/(loss) 31,783 - 24,960 -
----------- ----------- ------------ -----------
Net impairment
losses (22,052) - (32,343) -

LOSS BEFORE
PROVISION
(BENEFIT) FOR
FEDERAL INCOME TAX (27,771) (4,389) (40,257) (544)

PROVISION (BENEFIT)
FOR FEDERAL INCOME
TAX 7,239 (1,439) 3,066 (55)
----------- ----------- ------------ -----------

NET LOSS $ (35,010) $ (2,950) $ (43,323) $ (489)
=========== =========== ============ ===========
EARNINGS (LOSS) PER
COMMON SHARE
Basic $ (5.82) $ (0.49) $ (7.23) $ (0.08)
Diluted $ (5.82) $ (0.49) $ (7.23) $ (0.08)
Weighted average
shares
outstanding -
Basic 6,011,065(1) 5,998,207(2) 5,992,934(1) 5,989,822(2)
Weighted average
shares
outstanding -
Diluted 6,011,065 5,998,207 5,992,934 5,989,822

(1) Weighted average shares outstanding - Basic includes 268,273 vested
and ratably earned shares of the 269,340 restricted shares granted and
issued under the 2004 Management Recognition Plan ("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 share.

Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)

Three Months Ended
---------------------------------------------------
September 30, June 30, March 31, December 31,
2009 2009 2009 2008
------------ ---------- ---------- ----------
INTEREST INCOME
Loans $ 9,291 $ 9,534 $ 10,242 $ 10,794
Securities
available-for-sale 217 595 834 1,325
Securities
held-to-maturity 301 330 353 381
Interest-bearing
deposits 34 32 19 3
------------ ---------- ---------- ----------
Total interest
income 9,843 10,491 11,448 12,503
------------ ---------- ---------- ----------
INTEREST EXPENSE
Deposits 1,656 2,075 2,632 2,934
Borrowed funds 3,156 3,232 3,226 3,377
------------ ---------- ---------- ----------
Total interest
expense 4,812 5,307 5,858 6,311
------------ ---------- ---------- ----------
Net interest
income 5,301 5,184 5,590 6,192
PROVISION FOR LOAN
LOSSES 5,700 4,000 2,300 300
------------ ---------- ---------- ----------
Net interest income
(loss) after
provision for loan
loss (669) 1,184 3,290 5,892
------------ ---------- ---------- ----------
NON-INTEREST INCOME
Deposit service fees 948 868 798 873
Loan service fees 169 214 231 289
Insurance service
fees 566 503 587 537
Investment service
fees 120 175 175 238
Real estate lease
income 183 177 257 406
Gain on sale of
securities, net - - - 28
Gain on sale of
loans, net 431 874 3,561 303
Gain (loss) on sale
of other real
estate owned 33 (8) (2) 4
Gain (loss) on sale
of premises and
equipment, net - (2) (1) (1)
Other operating
income 46 40 44 32
------------ ---------- ---------- ----------
Total non-interest
income 2,496 2,841 5,650 2,709
------------ ---------- ---------- ----------
NON-INTEREST EXPENSE
Compensation and
benefits 3,719 3,641 3,625 4,722
Office operations 1,039 927 956 924
Occupancy 654 630 638 658
Loan servicing 57 119 135 140
Outside and
professional
services 442 264 485 414
Marketing 235 274 257 543
Federal deposit
insurance premiums
and assessments 796 1,261 494 89
Other operating
expenses 604 655 799 447
------------ ---------- ---------- ----------
Total non-interest
expense 7,546 7,771 7,389 7,937
------------ ---------- ---------- ----------
OTHER-THAN-TEMPORARY
IMPAIRMENT ON
SECURITIES
Total
other-than-temporary
impairment losses (53,835) (2,035) (1,433) (21,706)
Portion of losses
(gains) recognized
in OCI/(loss) 31,783 227 (7,050) -
------------ ---------- ---------- ----------
Net impairment
losses (22,052) (1,808) (8,483) (21,706)
LOSS BEFORE PROVISION
(BENEFIT) FOR FEDERAL
INCOME TAX (27,771) (5,554) (6,932) (21,042)
PROVISION (BENEFIT)
FOR FEDERAL INCOME
TAX 7,239 (1,854) (2,319) (6,916)
------------ ---------- ---------- ----------
NET LOSS $ (35,010) $ (3,700) $ (4,613) $ (14,126)
============ ========== ========== ==========
EARNINGS (LOSS) PER
COMMON SHARE
Basic $ (5.82) $ (0.62) $ (0.77) $ (2.36)
Diluted $ (5.82) $ (0.62) $ (0.77) $ (2.36)
Weighted average
shares outstanding
- Basic 6,011,065(1) 5,993,150(2) 5,974,588(3) 5,991,574(4)
Weighted average
shares outstanding
- Diluted 6,011,065 5,993,150 5,974,588 5,991,574

(1) Weighted average shares outstanding - Basic includes 268,273 vested and
ratably earned shares of the 269,340 restricted shares granted and
issued under the MRP, net of forfeited shares.
(2) Weighted average shares outstanding - Basic includes 268,173 vested and
ratably earned shares of the 269,340 restricted shares granted and
issued under the MRP, net of forfeited shares.
(3) Weighted average shares outstanding - Basic includes 266,644 vested and
ratably earned shares of the 269,340 restricted shares granted and
issued under the MRP, net of forfeited shares.
(4) 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.

Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)

As of
-------------------------------------------------
September December September
30, June 30, March 31, 31, 30,
2009 2009 2009 2008 2008
-------- -------- -------- -------- ---------
Loan portfolio
composition:
Real estate:
One- to four-family
residential (1) $ 47,841 $ 52,463 $ 58,516 $ 56,325 $ 65,997
Five or more family
residential 135,023 141,794 149,562 148,949 141,449
Commercial 251,003 253,981 256,985 253,801 248,243
-------- -------- -------- -------- ---------
Total real estate 433,867 448,238 465,063 459,075 455,689
Real estate
construction:
One- to four-family
residential 41,956 55,529 59,263 71,424 79,120
Five or more family
residential 496 495 491 483 471
Commercial 11,484 11,004 9,602 9,953 5,991
-------- -------- -------- -------- ---------
Total real estate
construction 53,936 67,028 69,356 81,860 85,582
Consumer:
Automobile 7,491 8,645 10,127 11,818 13,409
Home equity 36,085 38,143 40,843 42,442 42,660
Credit cards - - - 23,192 22,793
Other 7,401 7,384 7,547 8,132 8,123
-------- -------- -------- -------- ---------
Total consumer 50,977 54,172 58,517 85,584 86,985
Commercial business 45,306 46,395 47,333 45,762 35,991
-------- -------- -------- -------- ---------
Subtotal 584,086 615,833 640,269 672,281 664,247
Less: Allowance for loan
losses (9,684) (11,719) (8,456) (13,329) (13,943)
-------- -------- -------- -------- ---------
Total loans, net $574,402 $604,114 $631,813 $658,952 $ 650,304
======== ======== ======== ======== =========
Sold loans, serviced for
others $187,977 $179,943 $163,657 $148,493 $ 135,496
======== ======== ======== ======== =========

Non-performing assets:
Loans 90 days or
more past due or
non-accrual loans (2):
Real estate $ 1,604 $ - $ - $ - $ -
Real estate
construction 18,155 29,265 17,490 24,042 31,243
Consumer 229 225 244 488 242
Commercial business 872 2,300 1,596 14 288
Repossessed assets 2 10 25 38 -
Other real estate
owned 12,890 8,077 6,087 6,796 103
-------- -------- -------- -------- ---------
Total non-performing
assets (3) $ 33,752 $ 39,877 $ 25,442 $ 31,378 $ 31,876
======== ======== ======== ======== =========

Loans greater than 30
days delinquent (2) $ 21,931 $ 33,780 $ 20,027 $ 26,863 $ 26,049
Loans greater than 30
days delinquent as a
pct. of loans 3.75% 5.49% 3.13% 4.00% 3.92%
Non-performing loans as
a pct. of loans 3.57% 5.16% 3.02% 3.65% 4.78%
Non-performing assets as
a pct. of assets (3) 4.42% 4.85% 2.96% 3.70% 3.79%
Allowance for loan loss
as a pct. of
non-performing loans 46.42% 36.86% 43.75% 54.31% 43.88%
Allowance for loan loss
as a pct. of total
loans 1.66% 1.90% 1.32% 1.98% 2.10%
Core deposits (all
deposits, excluding
CDs) $256,827 $272,108 $268,663 $256,689 $ 247,990
Retail CDs 190,499 185,869 169,146 175,108 151,355
Brokered CDs 18,998 30,982 70,800 87,442 64,711
======== ======== ======== ======== =========
Total deposits $466,324 $488,959 $508,609 $519,239 $ 464,056
======== ======== ======== ======== =========

Loans/Deposits 125.25% 125.95% 125.89% 129.47% 143.14%
Equity/Assets 1.68% 5.11% 4.56% 3.46% 6.84%
Tangible Equity/Assets 1.31% 4.75% 4.21% 3.09% 6.46%

(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."
(3) Excludes seven trust preferred CDO securities in an amount of $14.4
million (at fair value) as of September 30, 2009, and one such security
in an amount of $846,000 (at fair value) as of June 30, 2009 that are
being treated by the Company as "non-accrual." Due to the rights
granted to the issuers of the debt collateralizing the security, that
allow the issuers to contractually defer interest payments for up to 20
consecutive quarters, the security is not deemed to be "non-performing"
under its original terms. However, if these securities were deemed
"non-performing assets," the non-performing assets as a percentage of
assets reported for September 30, 2009 and June 30, 2009 would be 6.29%
and 4.96%, respectively.

Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------

Loan growth (decline) (5.16%) 0.04% (13.12%) 4.28%
Deposit growth (decline) (4.63%) 0.07% (10.19%) 0.56%
Equity growth (decline) (69.37%) (23.88%) (56.14%) (33.76%)
Asset growth (decline) (6.97%) (3.44%) (9.81%) (4.35%)

Loans originated $ 21,797 $ 36,390 $ 111,475 $ 182,911
Loans sold $ 17,697 $ 11,765 $ 106,891 $ 48,221
Loans charged-off, net $ 7,735 $ 328 $ 15,645 $ 836

Increase in non-interest income 0.69% 2.78% 39.06% 12.90%
Increase (decrease) in
non-interest expense 7.46% (4.45%) 8.75% (3.15%)
Net charge-offs to average
loans 5.10% 0.20% 3.31% 0.17%
Efficiency ratio 100.25% 81.34% 84.75% 77.23%
Return on assets (17.33%) (1.37%) (6.95%) (0.08%)
Return on equity (396.12%) (17.05%) (160.36%) (0.83%)

Interest-earning assets:
Yield on loans 6.11% 6.39% 6.15% 6.77%
Yield on investments 3.14% 5.41% 5.35% 5.25%
Yield on FHLB stock - 1.40% - 1.27%
--------- --------- --------- ---------
Yield on interest-earning
assets 5.34% 6.15% 5.60% 6.40%
--------- --------- --------- ---------

Interest-bearing liabilities:
Cost of deposits 1.49% 2.56% 1.86% 2.95%
Cost of borrowed funds 4.46% 4.37% 4.45% 4.38%
--------- --------- --------- ---------
Cost of interest-bearing
liabilities 2.65% 3.34% 2.87% 3.57%
--------- --------- --------- ---------
Net interest rate
spread 2.69% 2.81% 2.73% 2.83%
========= ========= ========= =========

Net interest margin 2.75% 3.06% 2.78% 3.14%

Net interest margin-quarter
ended 06/30/09 2.73%
Net interest margin-quarter
ended 03/31/09 2.85%
Net interest margin-quarter
ended 12/31/2008 3.14%
Net interest margin-quarter
ended 09/30/2008 3.06%

As of
------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
----------- ----------- ----------- ---------- ------------
Shares
outst-
anding
at end
of
period 6,023,453(1) 6,006,479(2) 5,989,505(3) 5,972,931(4) 6,054,391(5)
Book
value
per
share $ 2.13 $ 6.98 $ 6.54 $ 4.90 $ 9.50
Tangible
book
value
per
share $ 1.66 $ 6.49 $ 6.03 $ 4.38 $ 8.97

(1) Shares outstanding represent 6,294,898 shares issued (including 1,067
unvested restricted shares granted under the MRP), less 271,445
unallocated shares under the ESOP.
(2) Shares outstanding represent 6,294,898 shares issued (including 1,167
unvested restricted shares granted under the MRP), less 288,419
unallocated shares under the ESOP.
(3) Shares outstanding represent 6,294,898 shares issued (including 2,696
unvested restricted shares granted under the MRP), less 305,393
unallocated shares under the ESOP.
(4) 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.
(5) 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.

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