TACOMA, Wash., Oct. 20, 2004 (PRIMEZONE) -- Rainier Pacific Financial Group, Inc., (the "Company") (Nasdaq:RPFG) today announced net income of $604,000, or $0.08 per share, for the quarter ended September 30, 2004, compared to net income of $415,000 for the same period a year ago. For the first nine months of the fiscal year ending December 31, 2004, the Company's net income was $2.3 million, or $0.31 per share, compared to $1.6 million for the same nine-month period in 2003. Per share data for the three and nine month periods ended September 30, 2003 is not meaningful as the Company did not complete its stock offering in connection with the conversion of Rainier Pacific Savings Bank (the "Bank") from a mutual-to-stock savings bank until October 20, 2003.
The Company's revenue (i.e., net interest income before provision for loan losses plus non-interest income) for the quarter ended September 30, 2004 was $8.9 million, relatively unchanged compared to the same period a year ago. Net interest income before the provision for loan losses for the quarter ended September 30, 2004 was $7.1 million, and was virtually the same as that generated for the quarter ended September 30, 2003. Non-interest income also remained the same at $1.8 million in the third quarter of 2004 as compared to the third quarter of 2003.
The Company's provision for loan losses was $600,000 for the quarter ended September 30, 2004, representing a decrease from the $1.2 million provision for the same period a year ago and was unchanged compared to the quarter ended June 30, 2004. The lower provision, compared to the same period a year ago, was a result of lower charge-offs, the continued growth in the allowance for loan losses and the improving quality of the loan portfolio.
Non-interest expense increased $266,000, or 3.8%, to $7.3 million for the quarter ended September 30, 2004, compared to the same period ended September 30, 2003. Non-interest expenses were higher during the quarter, primarily as a result of three distinct non-recurring events amounting to $570,000 in operating expenses during the quarter. Based upon management's review of these events, no additional expenses are expected to occur from these events in future periods.
The Bank incurred $269,000 in expenses related to processing errors resulting from the Bank's recently implemented technology upgrades. The Bank has now implemented additional safeguards for its data processing systems and all transactional processing is adequately controlled. The second non-recurring event was related to the result of a comprehensive tax audit by the Washington State Department of Revenue. The audit focused on state business and occupation (B&O) and use tax, and resulted in an aggregate assessment of $157,000, representing taxes and penalties for the four year period ended December 31, 2003. The underpayment of taxes assessed was primarily related to the treatment of inter-company transactions that result in taxable income, the application of use tax on certain goods and services, the reduction of sales tax credit on certain charged-off loans, and the recognition of taxable income from netting gains and losses on the sale of loans and investments whose interest income is generally exempt from B&O taxation. The third non-recurring event was associated with the misappropriation of funds by a Bank employee that was detected in August 2004 and resulted in a loss of $144,000. No officers, or other employees, of the Company were involved with this incident, and additional controls have been implemented to help prevent this from occurring in the future.
During the quarter ended September 30, 2004, compensation and benefits expense increased $139,000, or 4.0%, compared to the same period a year ago, as a result of additional staffing associated with the Company's growth strategy and expenses related to the Company's equity-based Management Recognition Plan implemented in June 2004, which were partially offset by reductions in accrued expenses for performance awards. The Company also incurred increased costs compared to the same period last year related to its branch network expansion, as well as depreciation and software maintenance associated with the Bank's recent technology systems implementation, offset by a decrease in outside professional services related to the Bank's technology initiative.
At September 30, 2004, the Company's total assets were $747.9 million, compared to $685.3 million at December 31, 2003. Total shareholders' equity at September 30, 2004 was $105.0 million, compared to $114.6 million at December 31, 2003. On July 20, 2004, the Company's Board of Directors approved the purchase of up to five percent of Company's outstanding common stock including shares issued under the Management Recognition Plan or 390,701 shares. During the quarter ended September 30, 2004, the Company repurchased 337,600 shares at an average price per share of $16.93. The Company's book value as of September 30, 2004 was $14.02 per share based upon 7,491,400 outstanding shares. The number of outstanding shares excludes 610,926 of unallocated shares issued by the Company that are held by the Rainier Pacific 401(k) Employee Stock Ownership Plan and includes shares issued under the Management Recognition Plan
The Company's net interest margin was 3.99% for the quarter ended September 30, 2004, compared to 4.11% for the same period a year ago, and 4.23% for the quarter ended June 30, 2004. The lower net interest margin during the quarter ended September 30, 2004, compared to the same quarter in 2003 and the quarter ended June 30, 2004, was primarily the result of higher short-term funding costs, and the refinancing and pre-payment of higher commercial real estate multi-family loans by borrowers. The investment securities portfolio, excluding Federal Home Loan Bank stock, was $200.6 million at September 30, 2004, compared to $193.9 million at December 31, 2003. The yield on investment securities was 3.78%, 3.72%, and 3.82% for the quarters ended September 30, 2004, September 30, 2003, and June 30, 2004, respectively. Total loans increased $42.0 million, or 9.4%, to $489.6 million at September 30, 2004, compared to $447.6 million at December 31, 2003. For the quarter ended September 30, 2004, the yield on loans was 6.63% compared to 7.22% for the quarter ended September 30, 2003, and 6.83% for the quarter ended June 30, 2004.
The Company's portfolio of commercial real estate and multi-family loans continues to increase as a percentage of its total loan portfolio. The loan portfolio at September 30, 2004 consisted of 25.4% commercial real estate loans, 23.9% single-family real estate loans, 23.3% multi-family real estate loans, 18.5% consumer loans, 6.0% home equity loans, 2.5% residential construction and land development loans, and 0.4% commercial business loans.
Decreases in single-family real estate originations and slowing consumer loan originations were partially offset by continued strength in commercial real estate and multi-family loan originations. Loan originations during the quarter ended September 30, 2004 totaled $56.7 million, compared to $76.3 million for the same period a year ago. In the third quarter, commercial real estate and multi-family loan originations totaled $35.8 million, compared to $26.2 million during the same period a year ago. Single-family loan originations were $6.9 million, compared to $32.9 million, and construction loan originations totaled $4.7 million compared to $4.8 million for the same quarter one year ago. During the quarter ended September 30, 2004, home equity and consumer loan originations were $2.3 million and $7.0 million, respectively, as compared to $3.8 million and $8.6 million, respectively, for the same period a year ago.
The Company sold $10.7 million of single-family real estate loans during the quarter ended September 30, 2004, compared to $6.7 million during the same period a year ago. These sales generated net gains of $74,000 and $173,000, during the quarters ended September 30, 2004 and 2003, respectively. The Company's portfolio of loans serviced for others increased to $80.8 million at September 30, 2004, compared to $76.9 million at December 31, 2003, and $75.9 million at September 30, 2003.
The credit quality of the loan portfolio remains very good. Net charge offs, delinquencies and loans and non-performing loans and assets all improved during the quarter ended September 30, 2004, compared to prior periods. Net loan charge-offs decreased to $344,000 for the quarter ended September 30, 2004, or 0.28% of average loans, compared to $519,000, or 0.49% of average loans, for the same period a year ago, and $512,000 or 0.44% of average loans for the quarter ended June 30, 2004. Loans more than 30 days delinquent as a percentage of total loans also decreased to 0.43% at September 30, 2004, compared to 0.51% as of June 30, 2004 and 0.74% as of December 31, 2003. Non-performing loans (i.e., non-accrual loans and loans 90 days or more past due) decreased to $317,000, or 0.06% of total loans at September 30, 2004, compared to $494,000, or 0.10% at June 30, 2004, and $475,000, or 0.11% of total loans at December 31, 2003. Non-performing assets were $375,000, or 0.05% of total assets at September 30, 2004, compared to $562,000, or 0.07% of total assets at June 30, 2004, and $905,000, or 0.13% of total assets at December 31, 2003.
The allowance for loan losses increased $256,000 during the quarter ended September 30, 2004, which was attributable to the Company's provision for loan losses continuing to exceed loan charge-offs. As a result, the allowance for loan losses increased to $8.9 million at September 30, 2004, resulting in a ratio of the allowance to total loans of 1.83%, compared to $8.2 million or 1.84% at December 31, 2003.
At September 30, 2004, total deposits were $342.9 million, representing an increase of 8.7%, or $27.5 million greater than total deposits of $315.4 million at December 31, 2003. Core deposits (comprised of checking, savings, money market, and individual retirement accounts) represented 56.0% of total deposits as of September 30, 2004.
"As expected, the change in market interest rates during the third quarter placed pressure on the Company's net interest margin. We anticipate the margin will continue to decrease through the balance of the year as short-term interest rates continue to rise and increase the Bank's funding costs. We will continue to focus on growing assets with higher rate loans in the upcoming quarters, which will help to reduce the effect of the narrowing net interest margin going into 2005," said John Hall, President/CEO.
Rainier Pacific Financial Group, Inc. is the bank holding company for Rainier Pacific Savings Bank, a Tacoma-based state chartered savings bank operating 12 branch offices in the Tacoma-Pierce County and Federal Way 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; success of new technology; technological factors affecting operations; costs of technology; pricing of products and services; costs of constructing new buildings; 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, 2003. 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 Statement of Condition
(Dollars in Thousands)
At September 30, At December 31,
--------- ---------
2004 2003
--------- ---------
ASSETS
ASSETS
Cash and cash equivalents $ 7,622 $ 9,922
Interest-bearing deposits
with banks 5,899 115
Securities available-for-sale 103,236 80,213
Securities held-to-maturity
(fair value of $96,783 at
September 30, 2004 and
$112,914 at December 31,
2003) 97,393 113,715
Federal Home Loan Bank
stock, at cost 13,239 11,443
Loans 489,589 447,557
Less: allowance for loan
losses (8,937) (8,237)
--------- ---------
Loans, net 480,652 439,320
Premises and equipment, net 30,043 21,236
Accrued interest receivable 3,303 3,559
Other assets 6,513 5,772
--------- ---------
TOTAL ASSETS $ 747,900 $ 685,295
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 29,199 $ 28,429
Interest-bearing 313,696 286,951
--------- ---------
Total Deposits 342,895 315,380
Borrowed funds 287,643 237,105
Corporate drafts payable 2,382 9,065
Deferred gain on sale and
leaseback transaction 909 1,019
Accrued compensation and
benefits 2,252 3,430
Other liabilities 6,785 4,739
--------- ---------
TOTAL LIABILITIES $ 642,866 $ 570,738
--------- ---------
SHAREHOLDERS' EQUITY
Common stock, no par value:
49,000,000 shares authorized;
8,102,326 shares issued and
7,174,642 shares outstanding
at September 30, 2004;
7,780,992 shares outstanding
at December 31, 2003 $ 71,927 $ 82,570
Employee Stock Ownership Plan
("ESOP") debt (6,109) (6,618)
Accumulated other
comprehensive income (loss),
net of tax (692) (232)
Retained Earnings 39,908 38,837
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 105,034 114,557
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 747,900 $ 685,295
========= =========
Rainier Pacific Financial Group, Inc. & Subsidiary
Consolidated Statement of Operations
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
INTEREST INCOME
Loans $ 8,030 $ 7,609 $ 23,893 $ 22,300
Securities available-
for-sale 1,078 926 3,027 2,514
Securities held-to-
maturity 901 1,199 2,888 2,427
Interest-bearing
deposits 3 66 5 77
Federal Home Loan
Bank stock dividends 116 134 354 379
----------- ----------- ----------- -----------
Total interest
income 10,128 9,934 30,167 27,697
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 1,029 991 2,824 3,225
Borrowed funds 2,040 1,804 5,614 5,186
----------- ----------- ----------- -----------
Total interest
expense 3,069 2,795 8,438 8,411
----------- ----------- ----------- -----------
Net interest income 7,059 7,139 21,729 19,286
PROVISION FOR LOAN
LOSSES 600 1,200 2,100 3,300
----------- ----------- ----------- -----------
Net interest income
after provision for
loan loss 6,459 5,939 19,629 15,986
----------- ----------- ----------- -----------
NON-INTEREST INCOME
Deposit service fees 1,115 854 3,159 2,605
Loan service fees 242 270 598 759
Insurance service
fees 146 144 440 459
Investment service
fees 176 124 331 437
Gain on sale of
securities, net (1) 131 178 130
Gain on sale of
loans, net 74 173 356 1,055
Gain on sale of
premises and
equipment, net 36 50 118 142
Other operating
income 11 12 31 45
----------- ----------- ----------- -----------
Total non-interest
income 1,799 1,758 5,211 5,632
----------- ----------- ----------- -----------
NON-INTEREST EXPENSE
Compensation and
benefits 3,656 3,517 10,544 9,834
Office operations 1,215 851 3,713 2,460
Occupancy, net 347 326 1,048 890
Loan servicing 136 69 329 191
Outside and
professional
services 580 1,600 2,337 3,541
Marketing 273 258 996 844
Other operating
expenses 1,136 456 2,396 1,414
----------- ----------- ----------- -----------
Total non-interest
expense
7,343 7,077 21,363 19,174
----------- ----------- ----------- -----------
INCOME BEFORE
PROVISION FOR FEDERAL
INCOME TAX 915 620 3,477 2,444
PROVISION FOR FEDERAL
INCOME TAX 311 205 1,147 814
----------- ----------- ----------- -----------
NET INCOME $ 604 $ 415 $ 2,330 $ 1,630
=========== =========== =========== ===========
EARNINGS PER COMMON
SHARE
Basic $ 0.08 nm(2) $ 0.31 nm(2)
Diluted $ 0.08 nm(2) $ 0.31 nm(2)
Weighted average
shares outstanding
-- Basic 7,315,751 nm(2) 7,603,539 nm(2)
Weighted average
shares outstanding
-- Diluted 7,383,959 nm(2) 7,618,831 nm(2)
(1) Weighted average shares outstanding (both Basic and Diluted)
include 18,042 shares of the 334,800 restricted
shares granted and issued under the Management Recognition Plan.
(2) Shares outstanding and earnings per share information
is not meaningful. The Company did not complete its initial
public offering until October 20, 2003.
Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------- ----------- ----------- -----------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Loan growth 2.13% 8.19% 9.39% 21.05%
Deposit growth (0.59%) 30.73% 8.72% 122.83%
Equity growth (3.71%) (0.97%) (8.31%) 2.04%
Asset growth (1.67%) 21.55% 9.14% 73.61%
Net interest margin 3.99% 4.11% 4.19% 4.55%
Increase/decrease
in non-interest
income 2.33% (37.12%) (7.48%) (7.67%)
Increase/decrease
in non-interest
expense 3.76% 36.07% 11.42% 30.69%
Net charge-offs to
average loans 0.28% 0.49% 0.40% 0.62%
Efficiency ratio 82.90% 79.54% 79.30% 77.43%
Return on assets
(ROA) 0.32% 0.22% 0.43% 0.35%
Return on equity
(ROE) 2.25% 3.91% 2.78% 5.09%
Yield on loans 6.63% 7.22% 6.81% 7.48%
Yield on
investments 3.78% 3.72% 3.74% 4.31%
Yield on FHLB stock 3.50% 5.25% 3.79% 5.54%
Cost of deposits 1.31% 1.03% 1.22% 1.35%
Cost of borrowed
funds 2.83% 3.36% 2.77% 3.71%
Yield on interest-
earning assets 5.72% 5.88% 5.82% 6.46%
Cost of interest-
bearing
liabilities 2.04% 1.68% 1.95% 2.21%
----------- ----------- ----------- -----------
Net interest
spread 3.68% 4.20% 3.87% 4.25%
=========== =========== =========== ===========
Loans originated $ 56,698 $ 76,313 $ 181,119 $ 195,829
Loans sold $ 10,747 $ 6,696 $ 25,938 $ 31,458
Loans charged-off,
net $ 344 $ 519 $ 1,399 $ 1,847
Shares outstanding
at end of period 7,491,400 nm(2) 7,491,400 nm(2)
Book value per
share $ 14.02 nm(2) $ 14.02 nm(2)
Net Interest
margin-quarter
ended 09/30/2004 3.99%
Net interest
margin-quarter
ended 06/30/2004 4.23%
Net interest
margin-quarter
ended 03/31/2004 4.35%
Net interest
margin-quarter
ended 12/31/2003 4.21%
Net interest
margin-quarter
ended 09/30/2003 4.11%
(1) Shares outstanding at the end of the periods shown include
334,800 of restricted shares granted under the Management
Recognition Plan. As of September 30, 2004, none of these
shares have been vested.
(2) Shares outstanding and book value per share information is
not meaningful. The Company did not complete its initial
public offering until October 20, 2003.
Rainier Pacific Financial Group, Inc. & Subsidiary
Selected Information and Ratios
(Dollars in Thousands)
As of As of
September 30, December 31,
--------- --------- ---------
2004 2003 2003
--------- --------- ---------
Loans/Deposits 142.78% 68.77% 141.91%
Equity/Assets 14.04% 4.97% 16.72%
Non-performing assets:
Loans 90 days or more past due $ 317 $ 431 $ 475
Repossessed assets and other
real estate owned 58 495 430
--------- --------- ---------
Total non-performing assets $ 375 $ 926 $ 905
========= ========= =========
Loans greater than 30 days
delinquent $ 2,087 $ 2,188 $ 3,322
Loans greater than 30 days
delinquent as a percentage of
loans 0.43% 0.49% 0.74%
Non-performing loans as a
percentage of loans 0.06% 0.10% 0.11%
Non-performing assets as a
percentage of assets 0.05% 0.11% 0.13%
Allowance for loan loss as a
percentage of non-performing
loans 2,815.70% 1,751.29% 1,734.11%
Allowance for loan loss as a
percentage of non-performing
assets 2,384.07% 8,14.20% 909.98%
Allowance for loan loss as a
percentage of total loans 1.83% 1.70% 1.84%
Loan portfolio composition:
Real estate:
One-to-four family residential $ 117,117 $ 126,576 $ 126,183
Home equity 29,582 32,894 31,545
Five or more family
residential 114,162 89,754 87,068
Commercial 124,168 82,715 94,913
--------- --------- ---------
Total real estate 385,029 331,939 339,709
Real estate construction:
One-to-four family residential 12,092 8,425 8,364
Five or more family
residential -- -- --
Commercial -- -- --
--------- --------- ---------
Total real estate
construction 12,092 8,425 8,364
Consumer:
Automobile 56,124 61,389 59,779
Credit cards 21,651 23,169 22,834
Other 12,531 17,542 15,735
--------- --------- ---------
Total consumer 90,306 102,100 98,348
Commercial/Business 2,147 1,274 1,170
--------- --------- ---------
Subtotal 489,574 443,738 447,591
Less: Deferred loan (fees)/
costs, net 15 (190) (34)
Less: Allowance for loan losses (8,937) (7,538) (8,237)
--------- --------- ---------
Total loans $ 480,652 $ 436,010 $ 439,320
========= ========= =========
Sold loans, serviced for others $ 80,782 $ 75,873 $ 76,904
========= ========= =========
Core deposits (all deposits,
excluding CDs) $ 192,148 $ 488,680 $ 181,629
Non-core deposits (CDs) 150,747 156,337 133,751
--------- --------- ---------
Total deposits $ 342,895 $ 645,017 $ 315,380
========= ========= =========
The Rainier Pacific Financial Group logo can be found at http://www.primezone.com/newsroom/prs/?pkgid=1268