Rainier Pacific Financial gets stricter regulatory oversight

Federal regulators have placed Rainier Pacific Financial Group under stricter supervision, as a deteriorating investment portfolio weakened the Tacoma-based bank's capital position.

The company, parent of Rainier Pacific Bank, disclosed the regulatory move Wednesday as it reported a loss of $4.6 million, or 77 cents per share, for the first quarter.

Much of Rainier Pacific's trouble stems from its $108.2 million investment in complex pooled securities backed by more than 500 banks and insurance companies across the country.

As the nation's financial crisis has deepened, those securities have lost much of their value and cannot readily be sold off. Last month, Rainier Pacific said, Moody's downgraded all the securities to a "highly speculative" rating, and the bank's own analysis — using the generous accounting rules approved earlier this month — indicated that their fair value was just $28.2 million.

That actually was an improvement over the last time the securities were valued. But the Moody's downgrade, indicating a greater risk that some of the pooled securities will default, means Rainier Pacific is now considered "undercapitalized" under one key regulatory ratio.

The Federal Deposit Insurance Corp. has ordered Rainier Pacific to give it advance notice of any significant boardroom or executive-suite changes; to get approval before making certain kinds of severance payments or other forms of compensation; and to not renew existing brokered deposits without FDIC approval. In addition, the FDIC has capped the interest rates Rainier Pacific can offer on deposits.

Several other local banks are operating under varying levels of increased regulatory oversight, including Frontier Bank of Everett, Horizon Bank of Bellingham and Westsound Bank of Bremerton.

Two local banks reported somewhat better first-quarter earnings news Wednesday:

• Columbia Banking System of Tacoma eked out a $419,000 profit, or 2 cents per common share, after paying $1.1 million in preferred-stock dividends to the U.S. government as part of the bank's participation in the Troubled Asset Relief Program.

• First Financial Northwest of Renton earned $1.2 million, or 6 cents per share, down from $4.5 million, or 21 cents per share, in the first quarter of 2008. Nonperforming assets, however, rose to 6.36 percent of total assets, from 4.71 percent in the previous quarter and 2.06 percent in the equivalent quarter last year.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com