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Despite the net loss for the second quarter, the Company's total shareholders' equity increased by $2.7 million during the period to $41.9 million at June 30, 2009, compared to $39.2 million at March 31, 2009 and $75.5 million at June 30, 2008. The increase in shareholders' equity was primarily attributable to positive fair value adjustments recorded in the Company's portfolio of trust preferred CDO securities during the quarter ended June 30, 2009. The weighted average fair value of the 15 trust preferred CDO securities was approximately $0.33 per $1.00 of par value (representing an aggregate fair value of $36.3 million) at June 30, 2009, compared to $0.26 per $1.00 of par value (representing an aggregate fair value of $28.2 million) at March 31, 2009 and $0.75 per $1.00 of par value (representing an aggregate fair value of $81.6 million) at June 30, 2008. Accordingly, the Company's capital ratio (i.e., shareholders' equity divided by total assets) increased during the quarter to 5.11% at June 30, 2009, compared to 4.56% and 8.68% at March 31, 2009 and June 30, 2008, respectively. The tangible common equity-to-assets ratio increased to 4.75% at June 30, 2009, compared to 4.21% at March 31, 2009 and 8.30% at June 30, 2008. The Company's book value and tangible book value per share as of June 30, 2009 also increased to $6.98 and $6.49 per share, respectively.
The Company's trust preferred CDO securities are substantially illiquid, and their evaluation of impairment and the determination of fair value are highly complex and involve a comprehensive process including quantitative modeling and significant judgment. As of June 30, 2009, seven of the 15 trust preferred CDO securities with a par value of $34.1 million, held by the Company, were determined to involve OTTI, compared to six of the securities with a par value of $29.1 million that were determined to involve OTTI as of March 31, 2009. As part of the evaluation, management completed an analysis of projected cash flows for each trust preferred CDO security, which incorporates both known and projected defaults by the bank and insurance company issuers of the underlying debt obligations of the trust preferred securities that collateralize 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 March 31, 2009 evaluation. The net present value of each security was compared to the security's amortized cost in connection with determining if the security involved OTTI. Based on the Company's evaluation, two of the six trust preferred CDO securities previously determined to involve OTTI incurred $1.6 million in additional credit losses for the quarter ended June 30, 2009, with the four others experiencing no further credit loss. One additional trust preferred CDO security was determined to involve OTTI as of June 30, 2009 and resulted in the recognition of $218,000 in credit losses for the quarter ended June 30, 2009. The three securities determined to have incurred a credit loss during the quarter resulted in total non-cash pre-tax impairment charges of $1.8 million for the quarter ended June 30, 2009, compared to five securities that incurred $8.5 million in impairment charges for the quarter ended March 31, 2009. In addition to the credit losses recognized, the Company recorded the temporary change in the non-credit related factors of fair value for these three securities as an unrealized loss of $57.4 million (pre-tax), and a component of shareholders' equity (i.e., accumulated other comprehensive loss). To determine the fair value of the trust preferred CDO securities, the Company engaged an independent financial consulting firm to assist the Company's management in its quarterly evaluation of the fair value of these securities. Based upon management's quarterly evaluation, management determined the Company's trust preferred CDO securities had an aggregate fair value of $36.3 million, including the seven trust preferred CDO securities involving OTTI that had an aggregate fair value of $8.8 million at June 30, 2009.
The effects of the trust preferred CDO securities on the Company's earnings and capital position will 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 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 that additional holdings of its trust preferred CDO securities portfolio involve OTTI, and such a determination would correspondingly have a further material adverse affect on the Company's earnings, shareholders' equity, and regulatory capital.
The Company's net interest margin was 2.73% for the quarter ended June 30, 2009, compared to 2.85% and 3.13% for the quarters ended March 31, 2009 and June 30, 2008, respectively. The yield on the Company's interest-earning assets decreased to 5.54% for the quarter ended June 30, 2009, compared to 5.90% and 6.32% for the quarters ended March 31, 2009 and June 30, 2008, respectively. The Company's cost of interest-bearing liabilities also decreased to 2.86% for the quarter ended June 30, 2009, compared to 3.09% and 3.51% for the quarters ended March 31, 2009 and June 30, 2008, respectively. The decline in asset yields for the second 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, 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.
Upon completing its quarterly evaluation of the allowance for loan losses, including consideration given to the increased level of classified loans that are predominately single-family land development and construction loans, the Company increased its provisions for loan losses to $4.0 million for the quarter ended June 30, 2009, compared to provisions for loan losses of $2.3 million and $550,000 for the quarters ended March 31, 2009 and June 30, 2008, respectively. This increased provision resulted in an allowance for loan losses of $11.7 million, or 1.90% of total loans, at June 30, 2009; compared to $8.5 million, or 1.32% of total loans, at March 31, 2009; and $8.3 million, or 1.25% of total loans, at June 30, 2008.
Non-interest income for the quarter ended June 30, 2009 was $2.8 million, or $240,000 more than the $2.6 million for the same period in 2008. This increase was primarily attributable to a $424,000 increase in gains generated on the sale of $29.5 million in single-family mortgage loans during the quarter ended June 30, 2009, compared to the sale of $22.9 million during the same period in 2008.
Non-interest expenses were $7.8 million for the quarter ended June 30, 2009, compared to $6.9 million incurred during the same period in 2008. The increase was primarily attributable to $1.3 million of Federal Deposit Insurance Corporation ("FDIC") deposit insurance premiums and regulatory assessments, compared to $65,000 for the same quarter a year ago. This increase was partially offset by a $401,000 decrease in compensation and benefits costs that is primarily a result of a reduction of 10 full-time equivalent employees, the elimination of equity-based compensation for executive officers and board members, and lower employee incentive and retirement compensation.
Total loans were $615.8 million at June 30, 2009, compared to $640.3 million at March 31, 2009 and $672.3 million at December 31, 2008. The decrease in the loan portfolio resulted primarily from the Company's focus on lowering its asset base by reducing new loan originations for its portfolio, the shrinkage of the land development and construction loan portfolio, and the amortization of the consumer loan portfolio, as well as the sale of single-family mortgage loans and certain multi-family loans sold at par value during the quarter ended June 30, 2009. For the quarter ended June 30, 2009, the yield on loans was 6.07%, compared to 6.26% and 6.80% for the quarters ended March 31, 2009 and June 30, 2008, respectively. Total loan originations were $36.4 million during the quarter ended June 30, 2009, compared to $53.3 million and $66.3 million for the quarters ended March 31, 2009 and June 30, 2008, respectively. At June 30, 2009, the loan portfolio consisted of 41.3% commercial real estate loans, 23.0% multi-family real estate loans, 10.9% land development and real estate construction loans, 8.5% one- to four-family real estate loans, 7.5% commercial business loans, 6.2% home equity loans, and 2.6% consumer loans (excluding home equity loans).
During the three months ended June 30, 2009, the Company sold $29.5 million of fixed-rate single-family residential loans and $4.1 million of multi-family residential loans, compared to $22.9 million in single-family loan sales during the same period in 2008. At June 30, 2009, the portfolio of loans serviced for others increased to $179.9 million, compared to $163.7 million and $127.8 million at March 31, 2009 and June 30, 2008, respectively.
Net loan charge-offs were $737,000 for the quarter ended June 30, 2009, compared to $7.2 million for the quarter ended March 31, 2009 and $258,000 for the quarter ended June 30, 2008, and are primarily related to real estate construction loans. During the quarter, non-performing assets (inclusive of loans, other real estate owned, and other repossessed assets) increased to $39.9 million, or 4.85% of total assets, at June 30, 2009; compared to $25.4 million, or 2.96% of total assets, at March 31, 2009; and $14.3 million, or 1.65% of total assets, at June 30, 2008. The ratio of loans more than 30 days delinquent as a percentage of total loans also increased to 5.49% at June 30, 2009, compared to 3.13% and 1.07% at March 31, 2009 and June 30, 2008, respectively. As of June 30, 2009, non-performing assets totaled $39.9 million, of which $37.3 million, or 93.5%, were concentrated in five residential builder relationships. The $37.3 million in non-performing assets to these builders was comprised of $27.0 million in real estate construction loans (of which $26.2 million are land development loans on properties located in the Pierce and South King Counties), $2.3 million in commercial business loans, and $8.0 million in real estate owned (located in Pierce and North Thurston Counties).
Total deposits were $489.0 million at June 30, 2009, compared to $508.6 million at March 31, 2009 and $463.7 million at June 30, 2008, as the Bank continued to reduce its portfolio of brokered deposits to $31.0 million, or 6.3% of total deposits at June 30, 2009 from $70.8 million, or 13.9% of total deposits at March 31, 2009. Total retail deposits increased by $20.2 million to $458.0 million at June 30, 2009 from $437.8 million at March 31, 2009. Core deposits (comprised of checking, savings, money market, and individual retirement accounts) also increased to $272.1 million, or 55.6% of total deposits at June 30, 2009, compared to $268.7 million, or 52.8% of total deposits at March 31, 2009. For the quarter ended June 30, 2009, the average cost of interest-bearing deposits decreased to 1.84%, compared to 2.24% for the quarter ended March 31, 2009 and 2.84% for the quarter ended June 30, 2008. The decline in the cost of interest-bearing deposits related primarily to lower market interest rates and the increase in core deposits, which are usually less costly than certificates of deposit.
The investment securities portfolio at June 30, 2009 (excluding $13.7 million in Federal Home Loan Bank of Seattle stock holdings recorded at cost) totaled $65.4 million, compared to $60.8 million at March 31, 2009 and $132.0 million at June 30, 2008. The investment securities portfolio contains $36.3 million of trust preferred CDO securities recorded at their fair value (representing $108.4 million in par value, less $14.7 million in accumulated pre-tax OTTI credit losses charged against earnings and $57.4 million in pre-tax non-credit related losses recognized in the accumulated other comprehensive loss component of shareholders' equity), $19.8 million of mortgage-backed securities, and $9.4 million of municipal bonds recorded at amortized cost.
Given that the investment ratings of all of the trust preferred CDO securities declined over the past eight months to highly speculative, the Company's subsidiary, Rainier Pacific Bank (the "Bank") is required to maintain higher levels of regulatory risk-based capital for the portfolio of trust preferred CDO securities because of the greater perceived risk of default by the underlying bank and insurance company issuers. Therefore, the Bank is required to apply a higher "risk weighting formula" to these securities in calculating its regulatory capital ratios. That formula calls for increasing the Bank's risk-weighted assets for these securities to $418.2 million, well above the $108.4 million in par value held by the Company, in calculating the Bank's regulatory capital ratios, thereby diluting such ratios. Upon applying the higher level of risk-weighted assets to the Bank's regulatory capital ratios, the calculated ratios are as follows at June 30, 2009: a Tier I leverage ratio of 7.94% (compared to a "well capitalized" threshold of 5.00%); a Tier I risk-based capital ratio of 6.30% (compared to a "well capitalized" threshold of 6.00%); and a total risk-based capital ratio of 7.43% (compared to a "well capitalized" threshold of 10.00% and an "adequately capitalized" threshold of 8.00%). Accordingly, with a total risk-based capital ratio of 7.43%, the Bank is categorized as "under capitalized" as calculated under the regulatory capital standards, and both the Bank and the Company are subject to a higher level of regulatory oversight and supervision. Undercapitalized banks may not accept, renew, or rollover brokered deposits or solicit deposits yielding more than 75 basis points over prevailing rates in either the Bank's market area or the area where deposits are solicited. In addition, as a result of being undercapitalized, the Bank is subject to certain regulatory restrictions. These restrictions include, among others, that the Bank generally may not make any capital distributions; must submit an acceptable capital restoration plan to the FDIC; may not increase its average total assets during a calendar quarter in excess of its average total assets during the preceding calendar quarter unless any increase in total assets is consistent with the capital restoration plan approved by the FDIC and the Bank's ratio of tangible equity to total assets increases during the calendar quarter at a rate sufficient to enable the Bank to become adequately capitalized within a reasonable time; and may not acquire a business, establish or acquire a branch office, or engage in a new line of business without regulatory approval. In light of the current challenging operating environment, the Company and Bank continue to work closely with its federal and state banking regulators to improve asset quality and capital adequacy, while maintaining sufficient liquidity.
"The operating environment remains very challenging, with continued weakness in the local residential construction market placing continued pressure on the Bank's land development and construction loan portfolio, while the broader economic recession continues to take a toll on the financial services industry nationwide. As a result, we experienced deterioration in the Bank's residential construction and land development loan portfolio and recorded further credit losses on the trust preferred CDO securities holdings during the second quarter. We are hopeful that the operating environment will gradually improve; however, we anticipate the improvement to be slow during the next few quarters. We are pleased with the stability of the Bank's core business operations during these difficult times and will continue to focus on improving Rainier Pacific's profitability and capital ratios during the balance of the year," 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 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 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 strategies. 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 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; 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. 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
At June 30, At March 31, December 31,
2009 2009 2008
------------ ------------ ------------
Cash and cash equivalents $ 8,758 $ 6,184 $ 8,811
Interest-bearing deposits with
banks 47,666 64,051 29,425
Securities available-for-sale 36,280 28,233 14,895
Securities held-to-maturity
(fair value at June 30, 2009:
$29,774; at March 31, 2009:
$33,243; at December 31, 2008:
$34,162) 29,167 32,598 33,984
Federal Home Loan Bank of
Seattle ("FHLB") stock,
at cost 13,712 13,712 13,712
Loans held-for-sale - 9,573 1,505
Loans 615,833 630,695 670,776
Less: allowance for loan losses (11,719) (8,456) (13,329)
------------ ------------ ------------
Loans, net 604,114 631,812 658,952
Premises and equipment, net 33,298 33,458 33,770
Accrued interest receivable 3,071 3,322 3,535
Real estate owned 8,077 6,087 6,796
Deferred tax asset, net 31,330 32,786 37,551
Other assets 5,918 6,081 5,802
------------ ------------ ------------
TOTAL ASSETS $ 821,391 $ 858,324 $ 847,233
============ ============ ============
LIABILITIES AND SHAREHOLDERS'EQUITY
LIABILITIES:
Deposits
Non-interest bearing $ 43,447 $ 45,166 $ 40,331
Interest-bearing 445,512 463,443 478,908
------------ ------------ ------------
Total deposits 488,959 508,609 519,239
Borrowed funds 281,421 299,681 291,217
Corporate drafts payable 1,498 3,927 1,554
Accrued compensation and
benefits 1,163 1,013 1,745
Other liabilities 6,409 5,929 4,184
------------ ------------ ------------
TOTAL LIABILITIES 779,450 819,159 817,939
------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, no par value:
49,000,000 shares authorized;
6,294,898 shares issued and
6,005,312 shares outstanding
at June 30, 2009; 6,294,898
shares issued and 5,986,809
shares outstanding at March
31, 2009; and 6,295,298 shares
issued and 5,968,393 shares
outstanding at Dec. 31, 2008 51,163 51,284 51,303
Unearned Employee Stock
Ownership Plan ("ESOP") shares (2,884) (3,054) (3,224)
Accumulated other comprehensive
loss, net of tax (37,843) (44,270) (47,206)
Retained earnings 31,505 35,205 28,421
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 41,941 39,165 29,294
------------ ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 821,391 $ 858,324 $ 847,233
============ ============ ============
Rainier Pacific Financial Group, Inc. & Subsidiary
Consolidated Statements of Operations
(Dollars in Thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2009 2008 2009 2008
--------- --------- --------- ---------
INTEREST INCOME
Loans $ 9,534 $ 11,191 $ 19,776 $ 22,468
Securities
available-for-
sale 595 1,276 1,429 3,133
Securities
held-to-
maturity 330 420 683 871
Interest-bearing
deposits 32 6 51 33
FHLB dividends - 48 - 82
--------- --------- --------- ---------
Total interest
income 10,491 12,941 21,939 26,587
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 2,075 2,979 4,707 6,566
Borrowed funds 3,232 3,524 6,458 7,040
--------- --------- --------- ---------
Total
interest
expense 5,307 6,503 11,165 13,606
--------- --------- --------- ---------
Net interest
income 5,184 6,438 10,774 12,981
PROVISION FOR LOAN
LOSSES 4,000 550 6,300 700
--------- --------- --------- ---------
Net interest
income after
provision for
loan losses 1,184 5,888 4,474 12,281
--------- --------- --------- ---------
NON-INTEREST INCOME
Deposit service
fees 868 908 1,666 1,747
Loan service fees 214 287 445 602
Insurance service
fees 503 529 1,090 1,079
Investment service
fees 175 121 350 285
Real estate lease
income 177 262 434 508
Gain on sale of
securities, net - - - 11
Gain on sale of
loans, net 874 450 4,435 685
Gain (loss) on sale
of other real
estate owned (8) 7 (10) 7
Loss on sale of
premises and
equipment, net (2) (1) (3) (1)
Other operating
income 40 38 84 499
--------- --------- --------- ---------
Total non-
interest
income 2,841 2,601 8,491 5,422
--------- --------- --------- ---------
NON-INTEREST
EXPENSE
Compensation and
benefits 3,641 4,042 7,266 8,102
Office operations 927 937 1,883 1,892
Occupancy 630 616 1,268 1,230
Loan servicing 119 123 254 232
Outside and
professional
services 264 248 749 696
Marketing 274 218 531 502
Federal deposit
insurance
premiums
and assessments 1,261 65 1,755 130
Other operating
expenses 655 651 1,454 1,074
--------- --------- --------- ---------
Total non-
interest
expense 7,771 6,900 15,160 13,858
--------- --------- --------- ---------
IMPAIRMENT ON
SECURITIES
Total other-
than-temporary
impairment
losses (2,035) - (3,468) -
Portion of gains
(losses)
recognized in
other
comprehensive
loss 227 - (6,823) -
--------- --------- --------- ---------
Net impairment
losses (1,808) - (10,291) -
INCOME (LOSS)
BEFORE PROVISION
(BENEFIT) FOR
FEDERAL INCOME TAX (5,554) 1,589 (12,486) 3,845
PROVISION (BENEFIT)
FOR FEDERAL INCOME
TAX (1,854) 572 (4,173) 1,384
--------- --------- --------- ---------
NET INCOME (LOSS) $ (3,700) $ 1,017 $ (8,313) $ 2,461
========= ========= ========= =========
EARNINGS (LOSS) PER
COMMON SHARE
Basic $ (0.62) $ 0.17 $ (1.39) $ 0.41
Diluted $ (0.62) $ 0.17 $ (1.39) $ 0.41
Weighted average
shares
outstanding
- Basic 5,993,150 (1) 5,987,866 (2) 5,983,869 (1) 5,985,629 (2)
Weighted average
shares
outstanding
- Diluted 5,993,150 5,987,866 5,983,869 5,985,629
(1) Weighted average shares outstanding - Basic includes 268,173 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 262,877 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)
Three Months Ended
---------------------------------------------------
June March December September
30, 2009 31, 2009 31, 2008 30, 2008
--------- --------- --------- ---------
INTEREST INCOME
Loans $ 9,534 $ 10,242 $ 10,794 $ 10,666
Securities
available-for-
sale 595 834 1,325 1,304
Securities
held-to-maturity 330 353 381 398
Interest-bearing
deposits 32 19 3 -
FHLB dividends - - - 48
--------- --------- --------- ---------
Total interest
income 10,491 11,448 12,503 12,416
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 2,075 2,632 2,934 2,735
Borrowed funds 3,232 3,226 3,377 3,527
--------- --------- --------- ---------
Total interest
expense 5,307 5,858 6,311 6,262
--------- --------- --------- ---------
Net interest
income 5,184 5,590 6,192 6,154
PROVISION FOR LOAN
LOSSES 4,000 2,300 300 6,000
--------- --------- --------- ---------
Net interest
income after
provision for
loan loss 1,184 3,290 5,892 154
--------- --------- --------- ---------
NON-INTEREST INCOME
Deposit service
fees 868 798 873 958
Loan service fees 214 231 289 310
Insurance service
fees 503 587 537 598
Investment service
fees 175 175 238 147
Real estate lease
income 177 257 406 270
Gain on sale of
securities, net - - 28 1
Gain on sale of
loans, net 874 3,561 303 190
Gain (loss) on
sale of other
real estate
owned (8) (2) 4 (32)
Gain (loss) on
sale of premises
and equipment,
net (2) (1) (1) -
Other operating
income 40 44 32 37
--------- --------- --------- ---------
Total non-
interest
income 2,841 5,650 2,709 2,479
--------- --------- --------- ---------
NON-INTEREST
EXPENSE
Compensation and
benefits 3,641 3,625 4,722 4,044
Office operations 927 956 924 990
Occupancy 630 638 658 572
Loan servicing 119 135 140 127
Outside and
professional
services 264 485 414 283
Marketing 274 257 543 260
Federal deposit
insurance
premiums
and assessments 1,261 494 89 81
Other operating
expenses 655 799 447 665
--------- --------- --------- ---------
Total non-
interest
expense 7,771 7,389 7,937 7,022
--------- --------- --------- ---------
IMPAIRMENT ON
SECURITIES
Total
other-than-
temporary
impairment
losses (2,035) (1,433) (21,706) -
Portion of gains
(losses)
recognized in
other
comprehensive
loss 227 (7,050) - -
--------- --------- --------- ---------
Net impairment
losses (1,808) (8,483) (21,706) -
INCOME (LOSS)
BEFORE PROVISION
(BENEFIT) FOR
FEDERAL INCOME TAX (5,554) (6,932) (21,042) (4,389)
PROVISION (BENEFIT)
FOR FEDERAL INCOME
TAX (1,854) (2,319) (6,916) (1,439)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (3,700) $ (4,613) $ (14,126) $ (2,950)
========= ========= ========= =========
EARNINGS (LOSS) PER
COMMON SHARE
Basic $ (0.62) $ (0.77) $ (2.36) $ (0.49)
Diluted $ (0.62) $ (0.77) $ (2.36) $ (0.49)
Weighted average
shares
outstanding
- Basic 5,993,150 (1) 5,974,588 (2) 5,991,574 (3) 5,998,207 (4)
Weighted average
shares
outstanding
- Diluted 5,993,150 5,974,588 5,991,574 5,998,207
(1) 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.
(2) 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.
(3) 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.
(4) 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.
Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)
As of
-----------------------------------------------------
June 30, March 31, December September June 30,
2009 2009 31, 2008 30, 2008 2008
--------- --------- --------- --------- ---------
Loan portfolio
composition:
Real estate:
One- to four-
family
residential (1) $ 52,463 $ 58,516 $ 56,325 $ 65,997 $ 75,879
Five or more
family
residential 141,794 149,562 148,949 141,449 146,050
Commercial 253,981 256,985 253,801 248,243 245,522
--------- --------- --------- --------- ---------
Total real
estate 448,238 465,063 459,075 455,689 467,451
Real estate
construction:
One- to four-
family
residential 55,529 59,263 71,424 79,120 79,581
Five or more
family
residential 495 491 483 471 -
Commercial 11,004 9,602 9,953 5,991 4,032
--------- --------- --------- --------- ---------
Total real
estate
construction 67,028 69,356 81,860 85,582 83,613
Consumer:
Automobile 8,645 10,127 11,818 13,409 15,621
Home equity 38,143 40,843 42,442 42,660 42,344
Credit cards - - 23,192 22,793 22,063
Other 7,384 7,547 8,132 8,123 7,962
--------- --------- --------- --------- ---------
Total consumer 54,172 58,517 85,584 86,985 87,990
Commercial business 46,395 47,333 45,762 35,991 24,920
--------- --------- --------- --------- ---------
Subtotal 615,833 640,269 672,281 664,247 663,974
Less: Allowance for
loan losses (11,719) (8,456) (13,329) (13,943) (8,271)
--------- --------- --------- --------- ---------
Total loans, net $ 604,114 $ 631,813 $ 658,952 $ 650,304 $ 655,703
========= ========= ========= ========= =========
Sold loans, serviced
for others $ 179,943 $ 163,657 $ 148,493 $ 135,496 $ 127,824
========= ========= ========= ========= =========
Non-performing
assets:
Loans 90 days or
more past due or
non-accrual loans
(2):
Real estate $ - $ - $ - $ - $ -
Real estate
construction 29,265 17,490 24,042 31,243 13,461
Consumer 225 244 488 242 415
Commercial
business 2,300 1,596 14 288 -
Repossessed assets 10 25 38 - -
Other real estate
owned 8,077 6,087 6,796 103 446
--------- --------- --------- --------- ---------
Total non-
performing
assets (3) $ 39,877 $ 25,442 $ 31,378 $ 31,876 $ 14,322
========= ========= ========= ========= =========
Loans greater than
30 days delinquent
(2) $ 33,780 $ 20,027 $ 26,863 $ 26,049 $ 7,091
Loans greater than
30 days delinquent
as a pct. of loans 5.49% 3.13% 4.00% 3.92% 1.07%
Non-performing loans
as a pct. of loans 5.16% 3.02% 3.65% 4.78% 2.09%
Non-performing
assets as a pct. of
assets 4.85% 2.96% 3.70% 3.79% 1.65%
Allowance for loan
loss as a pct. of
non-performing
loans 36.86% 43.75% 54.31% 43.88% 59.61%
Allowance for loan
loss as a pct. of
non-performing
assets 29.39% 33.24% 42.48% 43.74% 57.75%
Allowance for loan
loss as a pct. of
total loans 1.90% 1.32% 1.98% 2.10% 1.25%
Core deposits (all
deposits, excluding
CDs) $ 272,108 $ 268,663 $ 256,689 $ 247,990 $ 238,271
Retail CDs 185,869 169,146 175,108 151,355 164,220
Brokered CDs 30,982 70,800 87,442 64,711 61,234
========= ========= ========= ========= =========
Total deposits $ 488,959 $ 508,609 $ 519,239 $ 464,056 $ 463,725
========= ========= ========= ========= =========
Loans/Deposits 125.95% 125.89% 129.47% 143.14% 143.18%
Equity/Assets 5.11% 4.56% 3.46% 6.84% 8.68%
Tangible
Equity/Assets 4.75% 4.21% 3.09% 6.46% 8.30%
(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 one trust preferred CDO security in an amount of $2.9 million
(amortized cost) as of June 30, 2009 that is 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.
Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Loan growth (decline) (3.82%) 1.27% (8.40%) 4.23%
Deposit growth (decline) (3.86%) (1.62%) (5.83%) 0.48%
Equity growth (decline) 7.09% (10.11%) 43.17% (12.98%)
Asset growth (decline) (4.30%) (0.95%) (3.05%) (0.95%)
Loans originated $ 36,425 $ 66,267 $ 89,678 $ 146,521
Loans sold $ 33,635 $ 22,878 $ 89,194 $ 36,456
Loans charged-off, net $ 737 $ 258 $ 7,910 $ 508
Increase in non-interest income 9.23% 10.96% 56.60% 18.23%
Increase (decrease) in
non-interest expense 12.62% (2.84%) 9.40% (2.48%)
Net charge-offs to average
loans 0.47% 0.16% 2.45% 0.16%
Efficiency ratio 96.83% 76.34% 78.69% 75.30%
Return on assets (1.76%) 0.46% (1.97%) 0.56%
Return on equity (34.37%) 5.00% (44.64%) 5.87%
Interest-earning assets:
Yield on loans 6.07% 6.80% 6.17% 6.96%
Yield on investments 3.29% 4.63% 3.87% 5.19%
Yield on FHLB stock 0.00% 1.40% 0.00% 1.20%
--------- --------- --------- ---------
Yield on interest-earning
assets 5.54% 6.32% 5.73% 6.52%
--------- --------- --------- ---------
Interest-bearing liabilities:
Cost of deposits 1.84% 2.84% 2.05% 3.16%
Cost of borrowed funds 4.42% 4.38% 4.45% 4.39%
--------- --------- --------- ---------
Cost of interest-bearing
liabilities 2.86% 3.51% 2.98% 3.69%
--------- --------- --------- ---------
Net interest
rate spread 2.68% 2.81% 2.75% 2.83%
========= ========= ========= =========
Net interest margin 2.73% 3.13% 2.79% 3.17%
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%
Net interest margin-quarter
ended 06/30/2008 3.13%
As of
-------------------------------------------------------------
June 30, March 31, December September June 30,
2009 2009 31, 2008 30, 2008 2008
--------- --------- --------- --------- ---------
Shares
out-
standing
at end of
period 6,006,479(1) 5,989,505(2) 5,972,931(3) 6,054,391(4) 6,065,625(5)
Book value
per share $ 6.98 $ 6.54 $ 4.90 $ 9.50 $ 12.46
Tangible
book
value per
share $ 6.49 $ 6.03 $ 4.38 $ 8.97 $ 11.91
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
SOURCE: Rainier Pacific Financial Group
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