UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q

(Mark One)

|[ X ]   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------- | ----------------------------------------------------------------------------------------
|        |                                                                                         
|        | For the quarterly period ended  March 31, 2007                                          
|        |                                                                                         
|[     ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|        |                                                                                         
|        | For the transition period from ________________ to _________________                    

Commission File Number 000-50362



RAINIER PACIFIC FINANCIAL GROUP, INC.



|Washington                      | 87-0700148         
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S.  Employer  
|incorporation or organization)  | Identification No.)

1498 Pacific Avenue, Tacoma, WA 98402



(253) 926-4000

|______________________________________                                            
|----------------------------------------------------------------------------------
|(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
       
Yes X       No_____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
____                                                               Accelerated filer X                                                      Non-accelerated filer
____

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

|Title of class:            | As of March 31, 2007
|-------------------------- | --------------------
|                           |                     
|Common stock, no par value | 6,569,670 *         



|* | Includes 441,185 shares held by the Rainier Pacific 401(k) Employee Stock Ownership Plan that have not been released, committed to be released, or allocated to participant accounts; and 140,592 restricted shares granted under the Rainier Pacific Financial Group, Inc. 2004 Management Recognition Plan that have not yet vested.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY



Table of Contents





|PART I  -     | FINANCIAL INFORMATION                                                                | Page                                                                       
|------------- | ------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------
|              |                                                                                      |                                                                            
|ITEM 1 -      | Financial Statements.                                                                |                                                                            
|              |                                                                                      |                                                                            
|              | Consolidated Statements of Financial Condition at                                    |                                                                            
|              |                                                                                      | March 31, 2007 and December 31, 2006                                       
|              | Consolidated Statements of Income for the                                            |                                                                            
|              |                                                                                      | Three Months Ended March 31, 2007 and 2006                                 
|              | Consolidated Statements of Shareholders Equity for the                               |                                                                            
|              |                                                                                      | Three Months Ended March 31, 2007 and
Twelve Months Ended December 31, 2006
|              | Consolidated Statements of Cash Flows for the                                        |                                                                            
|              |                                                                                      | Three Months Ended March 31, 2007 and 2006                                 
|              | Selected Notes to Unaudited Interim Consolidated Financial Statements                | 7                                                                          
|              |                                                                                      |                                                                            
|ITEM 2 -      | Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                            
|              |                                                                                      |                                                                            
|              | Forward-Looking Statements                                                           | 10                                                                         
|              | Comparison of Financial Condition at 
        
March 31, 2007 and December 31, 2006  | 10                                                                         
|              | Comparison of Operating Results for the                                              |                                                                            
|              | Three Months Ended March 31, 2007 and 2006                                           | 13                                                                         
|              | Liquidity and Capital Resources                                                      | 16                                                                         
|              |                                                                                      |                                                                            
|ITEM 3 -      | Quantitative and Qualitative Disclosures about Market Risk                           | 17                                                                         
|              |                                                                                      |                                                                            
|ITEM 4 -      | Controls and Procedures                                                              | 17                                                                         
|              |                                                                                      |                                                                            
|PART II -     | OTHER INFORMATION                                                                    |                                                                            
|              |                                                                                      |                                                                            
|ITEM 1 -      | Legal Proceedings                                                                    | 18                                                                         
|ITEM 1A -     | Risk Factors                                                                         | 18                                                                         
|ITEM 2 -      | Unregistered Sales of Equity Securities and Use of Proceeds                          | 18                                                                         
|ITEM 3 -      | Defaults Upon Senior Securities                                                      | 19                                                                         
|ITEM 4 -      | Submission of Matters to a Vote of Security Holders                                  | 19                                                                         
|ITEM 5 -      | Other Information                                                                    | 19                                                                         
|ITEM 6 -      | Exhibits                                                                             | 19                                                                         
|              |                                                                                      |                                                                            
|SIGNATURES    | 20                                                                                  
|              |                                                                                     
|EXHIBIT INDEX |                                                                                     
|Exhibit 31.1  | 22                                                                                  
|Exhibit 31.2  | 23                                                                                  
|Exhibit 32    | 24                                                                                  



1

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition(Dollars in Thousands)



ASSETSAt March 31,

At December 31,2007

2006ASSETS:Cash and cash equivalents

$                       12,452

$                         11,847Interest-bearing deposits with banks

8,206

57Securities available-for-sale

143,541

145,110Securities held-to-maturity (fair value at March 31, 2007: $50,108; at 
                 
December 31, 2006: $51,589)

50,950

52,652Federal Home Loan Bank of Seattle ("FHLB") stock, at cost

13,712

13,712Loans

638,500

639,378Less allowance for loan losses

(8,276)

(8,283)Loans, net

630,224

631,095Premises and equipment, net

33,913

34,383Accrued interest receivable

4,154

4,177Other assets

9,408

9,664TOTAL ASSETS

$                    906,560

$                      902,697LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:DepositsNon-interest bearing

$                     36,418

$                        33,722Interest-bearing

430,317

423,703Total deposits

466,735

457,425Borrowed funds

339,285

345,395Corporate drafts payable

6,053

3,537Accrued compensation and benefits

826

2,111Other liabilities

4,868

6,399TOTAL LIABILITIES

817,767

814,867SHAREHOLDERS EQUITY:Common stock, no par value: 49,000,000 shares authorized; 
        
6,569,670 shares issued and 5,987,892 shares outstanding at 
        
March 31, 2007; and 6,587,670  shares issued and 5,971,913 shares                   outstanding at December 31, 2006

50,164

50,038Unearned Employee Stock Ownership Plan ("ESOP") shares

(4,412)

(4,582)Accumulated other comprehensive loss, net of tax

(601)

(806)Retained earnings

43,642

43,180TOTAL SHAREHOLDERS EQUITY

88,793

87,830TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$                  906,560

$                        902,697




2

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Income





|                                                    |  | Three Months Ended March 31,      
|--------------------------------------------------- |  | ----------------------------------
|                                                    |  | 2007                              
|INTEREST INCOME                                     |  |                                   
|Loans                                               |  | $                        11,599   
|Securities available-for-sale                       |  | 2,052                             
|Securities held-to-maturity                         |  | 565                               
|Interest-bearing deposits                           |  | 10                                
|FHLB dividends                                      |  | 14                                
|Total interest income                               |  | 14,240                            
|                                                    |  |                                   
|INTEREST EXPENSE                                    |  |                                   
|Deposits                                            |  | 4,111                             
|Borrowed funds                                      |  | 3,743                             
|Total interest expense                              |  | 7,854                             
|Net interest income                                 |  | 6,386                             
|                                                    |  |                                   
|PROVISION FOR LOAN LOSSES                           |  | 150                               
|Net interest income after provision for loan losses |  | 6,236                             
|                                                    |  |                                   
|NON-INTEREST INCOME                                 |  |                                   
|Deposit service fees                                |  | 826                               
|Loan service fees                                   |  | 292                               
|Insurance service fees                              |  | 543                               
|Investment service fees                             |  | 113                               
|Real estate lease income                            |  | 294                               
|Gain on sale of loans, net                          |  | 136                               
|Gain on sale of premises and equipment, net         |  | 10                                
|Other operating income                              |  | 28                                
|Total non-interest income                           |  | 2,242                             
|                                                    |  |                                   
|NON-INTEREST EXPENSE                                |  |                                   
|Compensation and benefits                           |  | 3,993                             
|Office operations                                   |  | 986                               
|Occupancy                                           |  | 635                               
|Loan servicing                                      |  | 110                               
|Outside and professional services                   |  | 432                               
|Marketing                                           |  | 243                               
|Other operating expenses                            |  | 710                               
|Total non-interest expense                          |  | 7,109                             
|                                                    |  |                                   
|INCOME BEFORE PROVISION FOR FEDERAL INCOME TAX      |  | 1,369                             
|                                                    |  |                                   
|PROVISION FOR FEDERAL INCOME TAX                    |  | 479                               
|                                                    |  |                                   
|NET INCOME                                          |  | $                              890
|                                                    |  |                                   
|EARNINGS PER COMMON SHARE:                          |  |                                   
|Basic                                               |  | $                             0.15
|Diluted                                             |  | $                             0.15
|Weighted average shares outstanding-Basic           |  | 5,976,430(1)                      
|Weighted average shares outstanding-Diluted         |  | 6,094,528                         
|                                                    |  |                                   
|Dividends declared per share                        |  | $                           0.065 

|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Weighted average shares outstanding - Basic includes 180,708 vested and ratably earned shares of the 312,300 restricted shares granted and issued under the 2004 Management Recognition Plan ("MRP"), net of forfeited shares.
|    |                                                                                                                                                                                                                               
|(2) | Weighted average shares outstanding - Basic includes 117,648 vested and ratably earned shares of the 325,500 restricted shares granted and issued under the MRP, net of forfeited shares.                                     







3

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders Equity(Dollars in Thousands)





Common Stock

Unearned
ESOP

Retained
Accumulated
Other
ComprehensiveShares

Amount

Shares

Earnings

Income/(Loss)

TotalBalance, December 31, 2005

6,690,847

$     49,598

$     (5,261)

$     41,814

$    (1,441)

$    84,710Common stock repurchased

(100,477)

(1,700)







(1,700)MRP forfeitures

(2,700)Earned ESOP shares released





679





679ESOP activity - Change in value of shares            committed to be released



631







631Dividends paid







(1,594)



(1,594)Amortization of compensation related to MRP



1,032







1,032Amortization of compensation related to the            Stock Option Plan ("SOP")



477







477Comprehensive income:Net income







2,960



2,960Unrealized gain on securities, net of                  tax of $342









635

635Total comprehensive income











3,595Balance, December 31, 2006

6,587,670

$     50,038

$     (4,582)

$     43,180

$     (806)

$    87,830Common stock repurchased

(16,700)

(343)







(343)MRP forfeitures

(1,500)Earned ESOP shares released





170





170ESOP activity - Change in value of shares            committed to be released



121







121Dividends paid







(428)



(428)Amortization of compensation related to MRP



251







251Amortization of compensation related to SOP



94







94Exercise of stock options

200

3







3Comprehensive income:Net income







890



890Unrealized gain on securities, net of                  tax of $110









205

205Total comprehensive income











1,095Balance, March 31, 2007

6,569,670

$     50,164

$     (4,412)

$     43,642

$     (601)

$    88,793








4

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows(Dollars in Thousands)



|                                                                           |  | Three Months Ended March 31,
|-------------------------------------------------------------------------- |  | ----------------------------
|                                                                           |  | 2007                        
|CASH FLOWS FROM OPERATING ACTIVITIES                                       |  |                             
|Net income                                                                 |  | $              890          
|Adjustments to reconcile net income to net cash from operating activities: |  |                             
|Depreciation                                                               |  | 573                         
|Provision for loan losses                                                  |  | 150                         
|Deferred income tax (benefit)                                              |  | (337)                       
|Gain on sale of premises and equipment, net                                |  | (10)                        
|Gain on sale of loans, net                                                 |  | (136)                       
|Amortization of premiums and discounts on securities                       |  | 166                         
|Amortization of intangible assets                                          |  | 65                          
|Accrued compensation for restricted stock awards                           |  | 251                         
|Accrued compensation for stock options                                     |  | 94                          
|Change in operating assets and liabilities, net:                           |  |                             
|Accrued interest receivable                                                |  | 23                          
|Other assets                                                               |  | 311                         
|Corporate drafts payable                                                   |  | 2,516                       
|Other liabilities                                                          |  | (1,666)                     
|                                                                           |  |                             
|Net cash provided from operating activities                                |  | 2,890                       
|                                                                           |  |                             
|CASH FLOWS FROM INVESTING ACTIVITIES                                       |  |                             
|Decrease/(increase) in interest-bearing deposits with banks                |  | (8,149)                     
|Activity in securities available-for-sale:                                 |  |                             
|Maturities, prepayments, and calls                                         |  | 1,861                       
|Purchases                                                                  |  | -                           
|Activity in securities held-to-maturity:                                   |  |                             
|Maturities, prepayments, and calls                                         |  | 1,666                       
|Purchase of insurance agency                                               |  | (1,150)                     
|Increase in loans, net                                                     |  | (5,962)                     
|Proceeds from sales of loans                                               |  | 6,819                       
|Purchases of premises and equipment                                        |  | (103)                       
|Proceeds from sales of premises and equipment                              |  | 10                          
|                                                                           |  |                             
|Net cash used in investing activities                                      |  | (5,008)                     
|                                                                           |  |                             
|CASH FLOWS FROM FINANCING ACTIVITIES                                       |  |                             
|Net increase in deposits                                                   |  | 9,310                       
|Advances on borrowed funds                                                 |  | 77,253                      
|Repayments of borrowed funds                                               |  | (83,363)                    
|Repayment of ESOP debt                                                     |  | 170                         
|Change in value of ESOP shares committed to be released                    |  | 121                         
|Proceeds from exercise of stock options                                    |  | 3                           
|Dividends paid                                                             |  | (428)                       
|Common stock repurchased                                                   |  | (343)                       
|                                                                           |  |                             
|Net cash provided from financing activities                                |  | 2,723                       
|                                                                           |  |                             
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       |  | 605                         
|                                                                           |  |                             
|CASH AND CASH EQUIVALENTS, at beginning of period                          |  | 11,847                      
|                                                                           |  |                             
|CASH AND CASH EQUIVALENTS, at end of period                                |  | $              12,452       



5

<PAGE>

RAINIER PACIFIC FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)(Dollars in Thousands)



|                                                           |  | Three  Months Ended March 31,
|---------------------------------------------------------- |  | -----------------------------
|                                                           |  | 2007                         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          |  |                              
|Cash payments for:                                         |  |                              
|Interest                                                   |  | $                     7,850  
|                                                           |  |                              
|Income taxes                                               |  | $                        150 
|                                                           |  |                              
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES  |  |                              
|Unrealized gains/(losses) on available-for-sale securities |  | $                        315 
|                                                           |  |                              



6

<PAGE>





Note 1 - Organization and Basis of Presentation



Organization.  On October 20, 2003, Rainier Pacific Savings Bank (the "Bank") converted from a Washington State chartered mutual savings bank to a Washington State chartered stock savings bank.  In connection with the Banks conversion, Rainier Pacific Financial Group, Inc. (the "Company") was formed to be the bank holding company for the Bank.  The Company purchased 100% of the Banks common stock simultaneously with the Banks conversion to stock form and the Companys offering and sale of its common stock to the public.

The Bank provides a full range of banking services to consumers and small to medium-sized businesses and professionals through 14 banking offices located in the Tacoma-Pierce County market and the City of Federal Way.  The Bank also provides insurance and investment services through operating units of the Bank doing business as Rainier Pacific Insurance Services and Rainier Pacific Financial Services.



Basis of Presentation.

Reclassifications.  Certain amounts in the prior periods have been reclassified to conform to the March 31, 2007 presentation.  These reclassifications have no effect on net income, equity, or earnings per share.

Note 2 - Summary of Significant Accounting Policies

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements.  Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein.

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses, the valuation of the deferred tax asset and liability accounts, and the valuation of real estate or other collateral acquired in connection with foreclosures or in satisfaction of loans.  In connection with the determination of the allowance for loan losses and the valuation of foreclosed or repossessed assets held-for-sale, management obtains independent appraisals for significant properties. There were no material changes in the Companys significant accounting policies or critical accounting estimates from those disclosed in the Companys 2006 Form 10-K.

Note 3 - Income Taxes

In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes("FIN 48").FIN 48 requires recognition and measurement of uncertain tax positions using a "more-likely-than-not" approach.  FIN 48 is effective for fiscal years beginning after December 31, 2006.  Our approach to adopting FIN 48 on January 1, 2007 consisted of an examination of our financial statements, our income tax provision, and our federal income tax returns.  We analyzed our tax positions including the permanent and temporary differences as well as the major components of income and expense.

Our permanent differences consist primarily of ESOP, MRP, and SOP adjustments, tax exempt investment income, meals and entertainment, and non-deductible dues.  These items are common within the banking industry and have not been subject to controversy.  We have supporting documentation for these differences and appropriately add back an allocable interest expense under Internal Revenue Code Sections 265 and 291 related to our tax exempt income.

7

<PAGE>

Our temporary differences consist primarily of loan loss adjustments, stock dividends from the FHLB of Seattle, differences in depreciation, certain adjustments for the ESOP, MRP and SOP, and other timing differences that are common in the banking industry.  We have utilized cost segregation for a small percentage of our fixed assets, and this cost segregation study was performed by a third-party.

As disclosed in the Companys 2006 Form 10-K, we recorded a $300,000 valuation allowance in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes, in December 2006.  Management believes it is more likely than not that the Company will be unable to realize the full deduction for the charitable contributions made in 2003 and 2004 because of potentially insufficient future taxable income.  Management does not believe this is an issue regarding the deductibility of the charitable contribution (in accordance with FIN 48), but rather whether the entire deduction will be recognized.

We do not believe that we have any uncertain tax positions as of March 31, 2007 that would rise to the level of having a material impact on our financial statements.  We have concluded, as of March 31, 2007, that no additional adjustments or valuation allowances are necessary, and there will be no material impact to the financial statements as a result of FIN 48.

Note 4 - Stock-Based Compensation

Accounting for Stock-Based Compensation.  On January 1, 2006 (the effective date), the Company adopted the fair value recognition provisions of SFAS 123(R), using the "modified prospective" method in which compensation cost is recognized for all share-based payments granted prior to the effective date of SFAS 123(R) that remained unvested on the effective date and for all awards granted to employees after the effective date.  See the Companys 2006 Form 10-K for additional information regarding stock-based compensation.

On June 7, 2004, the Company granted 351,750 non-qualified stock options and 328,250 incentive stock options to certain directors and employees.  The fair market value of the Companys common stock on the date of grant was $16.26 per share.  On August 17, 2005, the Company granted an additional 40,000 incentive stock options to certain employees.  The fair market value of the Companys common stock on the August 17, 2005 grant date was $16.72 per share.  There were no grants in 2006 or during the first three months of 2007.

The following represents the stock option activity and option exercise price information for the three months ended March 31, 2007:



|                             | Number of
 Options |  | Weighted-
Average Price
Exercise Price |  | Aggregate 
Intrinsic Value
|---------------------------- | ------------------ |  | -------------------------------------- |  | --------------------------
|Balance at December 31, 2006 | 657,400            |  | $                               16.27  |  |                           
|                             |                    |  |                                        |  |                           
|Granted                      | -                  |  | -                                      |  |                           
|Exercised                    | (200)              |  | 16.72                                  |  |                           
|Cancelled                    | (1,000)            |  | 16.44                                  |  |                           
|                             |                    |  |                                        |  |                           
|Balance at March 31, 2007    | 656,200            |  | $                    16.27             |  | $               2,355,758 

Financial data pertaining to the stock options at March 31, 2007 is as follows:



|Year of Grant |  | Number of
 Outstanding
 Options |  | Weighted-
Average
Remaining
Contractual Life
in Years |  | Weighted-Average
Exercise Price of Outstanding Options |  | Number
Exercisable |  | Weighted-
Average
Exercise Price
of Exercisable
Options
|------------- |  | ------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------------------------ |  | ------------------ |  | -------------------------------------------------------
|2004          |  | 637,400                         |  | 7.25                                                  |  | $      16.26                                           |  | 254,960            |  | $      16.26                                           
|2005          |  | 18,800                          |  | 8.50                                                  |  | 16.72                                                  |  | 3,760              |  | 16.72                                                  
|              |  | 656,200                         |  | 7.29                                                  |  | $     16.27                                            |  | 258,720            |  | $      16.27                                           

Stock-based compensation expense for the SOP recognized by the Company in the Consolidated Statements of Income was $94,000 for the three months ended March 31, 2007 compared to $157,000 for the three months ended March 31, 2006.  On an after-tax basis, stock-based compensation expense was $61,000 for the three months ended March 31, 2007 compared to $102,000 for the same period in 2006.  The remaining unrecognized compensation expense for the fair value of outstanding stock options was approximately $414,000 and $518,000 at March 31, 2007 and December 31, 2006, respectively.

8

<PAGE>

On June 24, 2004, the Company granted restricted stock awards of 336,800 shares of its common stock to its directors and certain employees under the MRP.  The fair market value of the restricted stock awards was $16.20 per share on June 24, 2004, and totaled $5.5 million.  These restricted stock awards vest over a five-year period, and therefore, the cost of such is accrued ratably over a five-year period as compensation expense.  Compensation expense related to the MRP awards was $251,000 and $266,000 for the three months ended March 31, 2007 and 2006.  The remaining unrecognized compensation expense for MRP restricted stock was approximately $2.3 million and $2.6 million at March 31, 2007 and December 31, 2006, respectively.

Note 5 - Earnings Per Share

Earnings per share ("EPS") is computed using the basic and diluted weighted average number of common shares outstanding during the periods presented.  Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period.  Unallocated shares related to the ESOP are deducted in the calculation of weighted average shares outstanding.  Diluted EPS is computed by dividing net income by diluted weighted average shares outstanding, which includes common stock equivalent shares outstanding using the treasury stock method, unless such shares are not dilutive.  Common stock equivalents include the stock options and restricted stock awards under the SOP and the MRP approved by the Companys shareholders in April 2004.





|                                                                                                                    |  | Three Months Ended 
March 31,
|------------------------------------------------------------------------------------------------------------------- |  | -----------------------------
|                                                                                                                    |  | 2007                         
|Numerator:                                                                                                          |  |                              
|Net income ("Earnings")                                                                                             |  | $                890         
|                                                                                                                    |  |                              
|Denominator:                                                                                                        |  |                              
|Denominator for basic earnings per share:                                                                           |  |                              
|Weighted average shares                                                                                             |  | 5,976,430                    
|Effect of dilutive common stock equivalents:                                                                        |  |                              
|Stock options                                                                                                       |  | 98,592                       
|MRP restricted stock                                                                                                |  | 19,560                       
|Denominator for diluted earnings per share:                                                                         |  |                              
|Weighted average shares and assumed conversion                       of dilutive stock options and restricted stock |  | 6,094,582                    
|                                                                                                                    |  |                              
|Basic earnings per share                                                                                            |  | $               0.15         
|                                                                                                                    |  |                              
|Diluted earnings per share                                                                                          |  | $               0.15         

Note 6 - Cash Dividends

On February 22, 2007, the Company announced a quarterly cash dividend of $0.065 per share payable on March 19, 2007 to shareholders of record on March 5, 2007.

Note 7 - Recently Issued Accounting Standards

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments ("SFAS 155") - an amendment to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140").  SFAS 155 provides the framework for fair value remeasurement of any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation as well as establishes a requirement to evaluate interests in securitized financial assets to identify interests. SFAS 155 further amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The SFAS 155 guidance also clarifies which interest-only strips and principal-only strips are not subject to the requirement of SFAS 133 and which concentrations of credit risk in the form of subordination are not embedded derivatives. This statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company adopted SFAS 155 on January 1, 2007, which did not have a material impact on our consolidated financial statements.

9

<PAGE>

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets ("SFAS 156") - an amendment of SFAS 140.  SFAS 156 requires the recognition of a servicing asset or servicing liability under certain circumstances when an obligation to service a financial asset is created by entering into a servicing contract.  SFAS 156 also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value utilizing the amortization method or fair market value method.  SFAS 156 is effective for an entitys first fiscal year that begins after September 15, 2006.  The Company adopted SFAS 156 on January 1, 2007, which did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157").  This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability.  Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is not expected to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities- including an amendment of FASB Statement 115("SFAS 159").  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  Most of the provisions of this statement apply only to entities that elect the fair value option.  However, the amendment to FASB Statement No. 115,Accounting for Certain Investments in Debt and Equity Securities,applies to all entities with available-for-sale and trading securities.  SFAS 159 is effective for fiscal years beginning after November 15, 2007, and is not expected to have a material impact on our consolidated financial statements.



ITEM 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains 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 Companys strategies. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. The Companys 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 Companys primary market area; deposit flows; demand for residential, commercial real estate, consumer, and other types of loans; levels of non-performing assets and other loans of concern; real estate values; 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; time to lease excess space in Company-owned buildings; and other risks detailed from time to time in our filings with the Securities Exchange Commission. 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 statements.  These risks could cause our actual results for 2007 and beyond to differ materially from those expressed in any financial statements made by or on behalf of the Company.

Comparison of Financial Condition at March 31, 2007 and December 31, 2006

The following table sets forth certain information concerning the Companys consolidated financial condition at the dates indicated (dollars in thousands):



|                                        | At March 31, |  | At December 31, |  | $ Increase (Decrease) |  | % Increase (Decrease)
|--------------------------------------- | ------------ |  | --------------- |  | --------------------- |  | ---------------------
|                                        | 2007         |  | 2006           
|                                        |              |  |                 |  |                       |  |                      
|Total assets                            | $    906,560 |  | $    902,697    |  | $           3,863     |  | 0.4%                 
|Investment securities (1)               | 194,491      |  | 197,762         |  | (3,271)               |  | (1.7)                
|Interest-bearing deposits with banks    | 8,206        |  | 57              |  | 8,149                 |  | 14,296.5             
|Loans, net                              | 630,224      |  | 631,095         |  | (871)                 |  | (0.1)                
|Deposits                                | 466,735      |  | 457,425         |  | 9,310                 |  | 2.0                  
|Borrowed funds                          | 339,285      |  | 345,395         |  | (6,110)               |  | (1.8)                
|Total shareholders equity               | 88,793       |  | 87,830          |  | 963                   |  | 1.1                  
|                                        |              |  |                 |  |                       |  |                      
|(1) Includes mortgage-backed securities |              |  |                 |  |                       |  |                      

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Total assets increased by $3.9 million, or 0.4%, to $906.6 million at March 31, 2007 from $902.7 million at December 31, 2006.  This increase reflects an $8.1 million increase in interest-bearing deposits, partially offset by a $3.3 million decrease in investments and an $871,000 decrease in net loans.  Interest-bearing deposits were higher as a result of cash being set aside at quarter-end to retire a brokered certificate of deposit on April 1, 2007.  The decrease in investments is primarily the result of principal repayments on mortgage-backed securities.  Mortgage-backed securities decreased $2.8 million, or 4.5%, to $60.2 at March 31, 2007 from $63.0 million at December 31, 2006.  Deposits increased $9.3 million to $466.7 million from $457.4 million, resulting primarily from increases in interest-bearing customer deposits.  Shareholders equity increased $963,000 to $88.8 million at March 31, 2007 from $87.8 million at December 31, 2006, primarily as a result of the net income earned during the three months ended March 31, 2007.

Loans.The following table sets forth the composition of the Companys loan portfolio by type of loan at the dates indicated (dollars in thousands):



|                                | At March 31, 2007 |  | At December 31, 2006 |  | $ Increase 
(Decrease) |  | % Increase (Decrease)
|------------------------------- | ----------------- |  | -------------------- |  | ---------------------- |  | ---------------------
|                                | Amount            |  | Percent              |  | Amount                 |  | Percent              
|Real estate:                    |                   |  |                      |  |                        |  |                      
|One-to four-family residential  | $80,324           |  | 12.6%                |  | $    81,542            |  | 12.8%                
|Five or more family residential | 161,273           |  | 25.3                 |  | 163,060                |  | 25.5                 
|Commercial                      | 203,732           |  | 31.9                 |  | 195,854                |  | 30.6                 
|Total real estate               | 445,329           |  | 69.8                 |  | 440,456                |  | 68.9                 
|                                |                   |  |                      |  |                        |  |                      
|Real estate construction:       |                   |  |                      |  |                        |  |                      
|One-to four-family residential  | 75,060            |  | 11.8                 |  | 75,508                 |  | 11.8                 
|Five or more family residential | 3,640             |  | 0.5                  |  | 4,180                  |  | 0.7                  
|Commercial                      | -                 |  | -                    |  | -                      |  | -                    
|Total real estate construction  | 78,700            |  | 12.33                |  | 79,688                 |  | 12.5                 
|                                |                   |  |                      |  |                        |  |                      
|Consumer:                       |                   |  |                      |  |                        |  |                      
|Automobile                      | 29,298            |  | 4.6                  |  | 31,888                 |  | 5.0                  
|Home equity                     | 42,738            |  | 6.7                  |  | 42,718                 |  | 6.7                  
|Credit cards                    | 21,936            |  | 3.4                  |  | 23,327                 |  | 3.6                  
|Other                           | 7,494             |  | 1.2                  |  | 8,179                  |  | 1.3                  
|Total consumer                  | 101,466           |  | 15.9                 |  | 106,112                |  | 16.6                 
|                                |                   |  |                      |  |                        |  |                      
|Commercial/business             | 13,005            |  | 2.0                  |  | 13,122                 |  | 2.0                  
|                                |                   |  |                      |  |                        |  |                      
|Total loans                     | 638,500           |  | 100.0%               |  | 639,378                |  | 100.0%               
|                                |                   |  |                      |  |                        |  |                      
|Less allowance for loan losses  | (8,276)           |  |                      |  | (8,283)                |  |                      
|                                |                   |  |                      |  |                        |  |                      
|Loans, net                      | $   630,224       |  |                      |  | $  631,095             |  |                      

Our net loan portfolio decreased $871,000, or 0.1%, to $630.2 million at March 31, 2007 from $631.1 million at December 31, 2006. This decrease was primarily attributable to declines in our consumer loans, which decreased $4.6 million or 4.4%; five or more residential ("multi-family") real estate loans, which decreased $1.8 million, or 1.1%, as a result of $1.9 million in prepayments; real estate construction loans, which decreased $988,000, or 1.2%, because of regular repayments; and commercial/business loans, which decreased $117,000, or 0.9%.  Additionally, one- to four-family residential loans decreased $1.2 million, or 1.5% as a result of $6.8 million in sales of single family mortgage loans.  These decreases were nearly offset by an increase in non-residential commercial real estate loans, which increased $7.9 million, or 4.0%.  Total loans secured by real estate increased $3.9 million, or 0.7%, to $566.8 million at March 31, 2007 from $562.9 million at December 31, 2006.  Subject to market conditions, we will continue to focus on growing our real estate secured loans, primarily multi-family and commercial real estate.

Investments. The following table sets forth the composition of the Companys investment securities at the dates indicated.  The available-for-sale investments are presented at net book value after a mark-to-market fair value adjustment, while the held-to-maturity

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securities are presented at amortized cost.  The Companys investment in the FHLB of Seattles common stock is presented at cost and for reference purposes only (dollars in thousands):



|                                        | At March 31,        |  | At December 31,    |  | $ Increase (Decrease) |  | % Increase (Decrease)
|--------------------------------------- | ------------------- |  | ------------------ |  | --------------------- |  | ---------------------
|                                        | 2007                |  | 2006               |  |                      
|Available-for-sale:                     |                     |  |                    |  |                       |  |                      
|U. S. Government Agency obligations     | $             5,601 |  | $            5,565 |  | $               36    |  | 0.6%                 
|Corporate obligations                   | 5,065               |  | 5,077              |  | (12)                  |  | (0.2)                
|Trust preferred securities              | 110,853             |  | 111,312            |  | (459)                 |  | (0.4)                
|Mortgage-backed securities              | 22,022              |  | 23,156             |  | (1,134)               |  | (4.9)                
|Total available-for-sale portfolio      | 143,541             |  | 145,110            |  | (1,569)               |  | (1.1)                
|                                        |                     |  |                    |  |                       |  |                      
|Held-to-maturity:                       |                     |  |                    |  |                       |  |                      
|Municipal obligations                   | 12,780              |  | 12,780             |  | -                     |  | -                    
|Mortgage-backed securities              | 38,170              |  | 39,872             |  | (1,702)               |  | (4.3)                
|Total held-to-maturity portfolio        | 50,950              |  | 52,652             |  | (1,702)               |  | (3.2)                
|                                        |                     |  |                    |  |                       |  |                      
|Total investment securities             | 194,491             |  | 197,762            |  | (3,271)               |  | (1.7)                
|                                        |                     |  |                    |  |                       |  |                      
|Federal Home Loan Bank of Seattle stock | 13,712              |  | 13,712             |  | -                     |  | -                    
|                                        |                     |  |                    |  |                       |  |                      
|Total                                   | $        208,203    |  | $     211,474      |  | $        (3,271)      |  | (1.5)%               

Our investment securities portfolio decreased by $3.3 million, or 1.7%, to $194.5 million at March 31, 2007 from $197.8 million at December 31, 2006.  The decrease in investments is primarily the result of $2.8 million of principal repayments on mortgage backed securities, a $459,000 partial call of a trust preferred security, and amortization of purchase premiums.  These decreases were partially offset by a $315,000 gain in the market value of available for sale securities.

Deposits.  The following table sets forth the composition of the Companys deposits at the dates indicated (dollars in thousands):



|                              | At March 31, 2007 |  | At December 31, 2006 |  | $ Increase (Decrease) |  | % Increase (Decrease)
|----------------------------- | ----------------- |  | -------------------- |  | --------------------- |  | ---------------------
|                              | Amount            |  | Percent              |  | Amount                |  | Percent              
|                              |                   |  |                      |  |                       |  |                      
|Non-interest-bearing checking | $     36,418      |  | 7.8%                 |  | $          33,722     |  | 7.4%                 
|Interest-bearing checking     | 43,776            |  | 9.4                  |  | 41,548                |  | 9.1                  
|Savings accounts              | 31,426            |  | 6.7                  |  | 30,487                |  | 6.7                  
|Money market accounts         | 124,988           |  | 26.8                 |  | 108,990               |  | 23.8                 
|IRA accounts                  | 5,834             |  | 1.2                  |  | 5,605                 |  | 1.2                  
|Certificates of deposit       | 224,293           |  | 48.1                 |  | 237,073               |  | 51.8                 
|Total deposits                | $   466,735       |  | 100.0%               |  | $       457,425       |  | 100.0%               
|                              |                   |  |                      |  |                       |  |                      
|Core deposits                 | $   242,442       |  | 51.9%                |  | $       220,352       |  | 48.2%                
|Non-core deposits             | 224,293           |  | 48.1                 |  | 237,073               |  | 51.8                 
|Total deposits                | $   466,735       |  | 100.0%               |  | $       457,425       |  | 100.0%               

Our deposits increased $9.3 million, or 2.0%, to $466.7 million at March 31, 2007 from $457.4 million at December 31, 2006. Interest-bearing deposits increased by $6.6 million, or 1.6% and non-interest bearing deposits were up $2.7 million.  Our deposit mix at the end of the first quarter included 51.9% of relatively low-cost checking, savings, money market, and individual retirement accounts.  Certificates of deposit at March 31, 2007 included $50.0 million of brokered certificates of deposit, a decline of $937,000 from the $50.9 million of brokered certificates of deposit at December 31, 2006.

Borrowings.  Borrowed funds decreased $6.1 million, or 1.8%, to $339.3 million at March 31, 2007 from $345.4 million at December 31, 2006. We used the borrowed funds as part of our capital and interest rate risk management strategies for both short- and long-term funding of loans and investment securities.  We utilize borrowings from the FHLB of Seattle to fund attractive loan and investment opportunities and to enhance earnings in connection with leveraging the Companys capital to increase our net interest income.

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Capital.  Total shareholders equity increased $963,000, or 1.1%, to $88.8 million at March 31, 2007 from $87.8 million at December 31, 2006.  The increase in equity from December 31, 2006 to March 31, 2007 was the result of three items totaling $1.7 million, as follows: $890,000 in net income, $639,000 in equity adjustments related to stock compensation and benefits, and $205,000 in unrealized gains on securities.  This $1.7 million increase in equity was partially offset by $428,000 of cash dividends paid to shareholders and $343,000 of common stock repurchases.  As a result of these factors, and the $3.9 million increase in assets, our capital-to-assets ratio under accounting principles generally accepted in the United States increased slightly to 9.79% at March 31, 2007 compared to 9.73% at December 31, 2006.

Comparison of Operating Results for the Three Months Ended March 31, 2007 and 2006

The following table sets forth certain information concerning the Companys results of operations for the periods indicated (dollars in thousands):



|                          | Three Months Ended March 31, |  | $ Increase (Decrease) |  | % Increase (Decrease)
|------------------------- | ---------------------------- |  | --------------------- |  | ---------------------
|                          | 2007                         |  | 2006                  |  |                      
|                          |                              |  |                       |  |                      
|Net interest income       | $       6,386                |  | $      6,400          |  | $     (14)           
|Non-interest income       | 2,242                        |  | 2,020                 |  | 222                  
|Total revenue             | 8,628                        |  | 8,420                 |  | 208                  
|Provision for loan losses | 150                          |  | 150                   |  | -                    
|Non-interest expense      | 7,109                        |  | 7,281                 |  | (172)                
|Net income                | 890                          |  | 642                   |  | 248                  

Net Interest Income.  The following table sets forth detailed information concerning our net interest income for the periods indicated (dollars in thousands):



|                                       | Three Months Ended March 31, |  | $ Increase (Decrease) |  | % Increase (Decrease)
|-------------------------------------- | ---------------------------- |  | --------------------- |  | ---------------------
|                                       | 2007                         |  | 2006                  |  |                      
|Interest income:                       |                              |  |                       |  |                      
|Loans                                  | $         11,599             |  | $          9,993      |  | $        1,606       
|Securities available-for-sale          | 2,052                        |  | 1,925                 |  | 127                  
|Securities held-to-maturity            | 565                          |  | 742                   |  | (177)                
|Interest-bearing deposits              | 10                           |  | 64                    |  | (54)                 
|Federal Home Loan Bank stock dividends | 14                           |  | -                     |  | 14                   
|Total interest income                  | 14,240                       |  | 12,724                |  | 1,516                
|                                       |                              |  |                       |  |                      
|Interest expense:                      |                              |  |                       |  |                      
|Deposits                               | 4,111                        |  | 2,999                 |  | 1,112                
|Borrowed funds                         | 3,743                        |  | 3,325                 |  | 418                  
|Total interest expense                 | 7,854                        |  | 6,324                 |  | 1,530                
|Net interest income                    | $          6,386             |  | $          6,400      |  | $          (14)      

Our net interest income was essentially unchanged at $6.4 million for the three months ended March 31, 2007 and March 31, 2006.  Our net interest margin decreased to 2.96%, or 7 basis points, for the three months ended March 31, 2007, from 3.03% for the same period in 2006 as a result of the impact of rising short-term rates and a slightly inverted yield curve which caused our liability costs to rise more rapidly than our yields on earning assets.  A $12.8 million increase in the average balance of interest-earning assets for the three months ended March 31, 2007 nearly offset the impact of this margin compression and resulted in a net interest income for the first quarter of 2007 relatively equal to the first quarter of 2006.

Interest Income.  Our interest income increased $1.5 million, or 11.9%, to $14.2 million for the three months ended March 31, 2007 from $12.7 million for the three months ended March 31, 2006. Interest earned on loans for the three months ended March 31, 2007 and 2006 was $11.6 million and $10.0 million, respectively.  The average yield on total loans was 7.24% for the three months ended March 31, 2007 compared to 6.79% for the same period in 2006 reflecting the increase in interest rates.  The average balance of total loans also increased by $52.6 million to $643.8 million for the three months ended March 31, 2007 from $591.2 million for the same period in 2006.  A significant portion of the loan portfolio consists of real estate secured loans which do not immediately re-price when interest rates change.  Construction loans, home equity lines of credit, credit card loans, and our commercial/business loans, however, generally re-price when short-term interest rates change.  The increase in yield on these loan products, combined with the increase in average balance of loans, were the primary contributors to the increased interest income on loans.

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Interest income on investment securities (including mortgage-backed securities) decreased $50,000, or 1.9%, to $2.6 million for the three months ended March 31, 2007 from $2.7 million for the three months ended March 31, 2006 as a result of a lower average balance, partially offset by higher yields earned.  The average balances of investment securities for the three months ended March 31, 2007 and 2006 were $196.6 million and $231.2 million, respectively.  The average yield on investment securities increased to 5.32% for the three months ended March 31, 2007 from 4.72% for the three months ended March 31, 2006, primarily as a result of $83.1 million of floating rate trust preferred securities repricing upward in connection with increased short-term interest rates.

Interest Expense.  Our interest expense increased $1.5 million, or 24.2%, to $7.9 million for the three months ended March 31, 2007 from $6.3 million for the three months ended March 31, 2006.  In addition to an increase in the average balances of our deposits and borrowings, rising market rates increased our deposit and borrowing costs.



Interest expense on deposits increased $1.1 million, or 37.1%, to $4.1 million for the three months ended March 31, 2007 from $3.0 million for the three months ended March 31, 2006.  The average cost of deposits increased 95 basis points to 3.89% for the three months ended March 31, 2007 from 2.94% for the three months ended March 31, 2006.  This increase in deposit costs for the three months ended March 31, 2007 was primarily a result of average balance increases of $28.2 million in higher rate money market accounts, partially offset by a $12.1 million decrease in the average balance of certificates of deposits.  In addition, interest expense was higher as a result of increased short-term interest rates and our increases in rates to match the rates offered by our competitors.

Interest expense on borrowed funds increased $418,000, or 12.6%, to $3.7 million for the three months ended March 31, 2007 from $3.3 million for the three months ended March 31, 2006, despite an $8.4 million decrease in the average balance of borrowed funds.  The average balances of borrowed funds were $342.3 million for the quarter ended March 31, 2007, compared to $350.7 million for the three months ended March 31, 2006. The primary reason for the increase is a 60 basis point increase in the cost of borrowings to 4.44% for the three months ended March 31, 2007 from 3.84% for the same period in 2006 as a result of higher short-term interest rates.

Provision for Loan Losses.   The following table sets forth an analysis of our allowance for loan losses at the dates and for the periods indicated (dollars in thousands):



|                                 | Three Months Ended March 31, |  | $ Increase (Decrease) |  | % Increase (Decrease) 
|-------------------------------- | ---------------------------- |  | --------------------- |  | ----------------------
|                                 | 2007                         |  | 2006                  |  |                       
|Allowance at beginning of period | $        8,283               |  | $         8,597       |  | $                (314)
|Provision for loan losses        | 150                          |  | 150                   |  | -                     
|Recoveries                       | 86                           |  | 84                    |  | 2                     
|Charge-offs                      | (243)                        |  | (344)                 |  | 101                   
|Allowance at end of period       | $        8,276               |  | $         8,487       |  | $               (211) 

Our provision for loan losses was unchanged at $150,000 for the three month periods ended March 31, 2007 and 2006.  The provision was recorded at a level considered appropriate to ensure that the allowance for loan losses was adequate to address the inherent credit risk in the loan portfolio.  At March 31, 2007, the allowance for loan losses was relatively unchanged from December 31, 2006 at $8.3 million; however, the allowance was $211,000 less than the March 31, 2006 balance of $8.5 million.  The allowance for loan losses as a percent of total loans at March 31, 2007 was unchanged from 1.30% at December 31, 2006, and was lower than the 1.42% at March 31, 2006.  The decrease in the allowance ratio over the last year was deemed appropriate because of the reduced risk in the portfolio attributable to the growth in real estate secured loans, which have historically experienced a very low level of losses, a decreased balance of consumer loans (excluding home equity loans), which have historically experienced higher losses, and improved credit quality of the loan portfolio as evidenced by lower net charge-offs.

Management believes our allowance for loan losses as of March 31, 2007 was adequate to absorb the known and inherent risks of loss in the loan portfolio at that date. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of information available to them at the time of their examination.



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Non-interest Income.  The following table sets forth information regarding our non-interest income for the periods indicated (dollars in thousands):



|                                                 | Three Months Ended March 31, |  | $ Increase (Decrease) |  | % Increase (Decrease)
|------------------------------------------------ | ---------------------------- |  | --------------------- |  | ---------------------
|                                                 | 2007                         |  | 2006                  |  |                      
|Deposit service fees                             | $              826           |  | $         804         |  | $                  22
|Loan service fees                                | 292                          |  | 260                   |  | 32                   
|Insurance service fees                           | 543                          |  | 516                   |  | 27                   
|Investment service fees                          | 113                          |  | 121                   |  | (8)                  
|Real estate lease income                         | 294                          |  | 283                   |  | 11                   
|Gain on sale of loans, net                       | 136                          |  | 6                     |  | 130                  
|Gain on sale of premises and 
   
equipment, net | 10                           |  | -                     |  | 10                   
|Other operating income                           | 28                           |  | 30                    |  | (2)                  
|Total non-interest income                        | $         2,242              |  | $       2,020         |  | $                222 

Our non-interest income for the three months ended March 31, 2007 increased $222,000, or 11.0%, to $2.2 million from $2.0 million for the three months ended March 31, 2006.  This increase was primarily a result of a $130,000 increase in net gains on sale of loans.  The increase in gains on the sale of loans was attributable to an increase in the number of single-family mortgages sold, including the recognition of the associated mortgage servicing asset of $56,000 during the first quarter of 2007.  Additionally, loan services fees increased $32,000 as a result of the increase in the size of the loan portfolio.  All other categories of non-interest income reflected a net increase of $60,000.

Non-interest Expense.  The following table sets forth information regarding our non-interest expense for the periods indicated (dollars in thousands):



|                                  | Three Months Ended March 31, |  | $ Increase (Decrease) |  | % Increase (Decrease)
|--------------------------------- | ---------------------------- |  | --------------------- |  | ---------------------
|                                  | 2007                         |  | 2006                  |  |                      
|Compensation and benefits         | $       3,993                |  | $        4,030        |  | $              (37)  
|Office operations                 | 986                          |  | 1,298                 |  | (312)                
|Occupancy                         | 635                          |  | 640                   |  | (5)                  
|Loan servicing                    | 110                          |  | 117                   |  | (7)                  
|Outside and professional services | 432                          |  | 419                   |  | 13                   
|Marketing                         | 243                          |  | 229                   |  | 14                   
|Other operating expenses          | 710                          |  | 548                   |  | 162                  
|Total non-interest expense        | $       7,109                |  | $       7,281         |  | $           (172)    



Non-interest expense decreased $172,000, or 2.4%, to $7.1 million for the three months ended March 31, 2007 from $7.3 million for the three months ended March 31, 2006. The decrease was primarily attributable to lower office operations expense of $312,000 and compensation and benefits of $37,000, partially offset by a $162,000 increase in other operating expense.

Office operations expense decreased $312,000, or 24.0%, to $986,000 for the three months ended March 31, 2007 from $1.3 million for the three months ended March 31, 2006.  The decrease was primarily attributable to a $340,000 reduction in depreciation expense as a significant portion of our software and computer equipment became fully depreciated during the fourth quarter of 2006.  Partially offsetting this reduction was an increase in other operating expense of $162,000, or 29.6%, primarily as a result of $93,000 in fees related to a regulatory examination by the Washington State Department of Financial Institutions during the three months ended March 31, 2007.  All other non-interest expenses decreased by a net amount of $22,000 for the three months ended March 31, 2007 compared to the same period in 2006.

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Average Balances, Interest and Average Yield/Costs.  The following table sets forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields and costs, net interest income, interest rate spread, and net interest margin.  Average balances have been calculated using the average of daily balances during the period (amounts in thousands).



|                                         | Three Months Ended    |  | Three Months Ended |  |                        |  |                   
|---------------------------------------- | --------------------- |  | ------------------ |  | ---------------------- |  | ------------------
|                                         | March 31, 2007        |  | March 31, 2006     |  |                        |  |                   
|                                         | Average Balance       |  | Average Yield/Cost |  | Average Balance        |  | Average Yield/Cost
|INTEREST-EARNING ASSETS:                 |                       |  |                    |  |                        |  |                   
|Total loans                              | $     643,796         |  | 7.24%              |  | $       591,183        |  | 6.79%             
|Mortgage-backed securities               | 62,367                |  | 4.32               |  | 77,126                 |  | 4.14              
|Investment securities                    | 134,221               |  | 5.79               |  | 154,112                |  | 4.86              
|Federal Home Loan Bank stock             | 13,712                |  | 0.40               |  | 13,712                 |  | -                 
|Interest-bearing deposits in other banks | 793                   |  | 5.17               |  | 5,931                  |  | 4.34              
|Total interest-earning assets            | 854,889               |  | 6.69               |  | 842,064                |  | 6.07              
|                                         |                       |  |                    |  |                        |  |                   
|Non-interest-earning assets              | 49,913                |  |                    |  | 45,921                 |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Total assets                             | $    904,802          |  |                    |  | $       887,985        |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Interest-bearing liabilities:            |                       |  |                    |  |                        |  |                   
|Savings accounts                         | $      32,042         |  | 0.30%              |  | $         36,952       |  | 0.26%             
|Interest-bearing checking accounts       | 40,708                |  | 1.93               |  | 36,100                 |  | 1.71              
|Money market deposit accounts            | 117,015               |  | 3.67               |  | 88,796                 |  | 2.39              
|Certificates of deposit                  | 239,037               |  | 4.81               |  | 251,131                |  | 3.72              
|Total deposits                           | 428,802               |  | 3.89               |  | 412,979                |  | 2.94              
|                                         |                       |  |                    |  |                        |  |                   
|Federal Home Loan Bank advances          | 342,269               |  | 4.44               |  | 350,645                |  | 3.84              
|                                         |                       |  |                    |  |                        |  |                   
|Total interest-bearing liabilities       | 771,071               |  | 4.13               |  | 763,624                |  | 3.36              
|                                         |                       |  |                    |  |                        |  |                   
|Non-interest bearing liabilities:        |                       |  |                    |  |                        |  |                   
|Non-interest bearing checking            | 32,833                |  |                    |  | 28,833                 |  |                   
|Other                                    | 12,402                |  |                    |  | 10,695                 |  |                   
|Total non-interest bearing liabilities   | 45,235                |  |                    |  | 39,528                 |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Total liabilities                        | 816,306               |  |                    |  | 803,152                |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Equity                                   | 88,496                |  |                    |  | 84,833                 |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Total liabilities and equity             | $     904,802         |  |                    |  | $      887,985         |  |                   
|                                         |                       |  |                    |  |                        |  |                   
|Net interest income                      | $               6,386 |  |                    |  | $                6,400 |  |                   
|Interest rate spread(1)                  |                       |  | 2.56%              |  |                        |  | 2.71%             
|Net interest margin (2)                  | 2.96%                 |  |                    |  | 3.03%                  |  |                   

(

(2)  Net interest margin, otherwise known as net yield on interest-earning assets, is calculated as net interest income divided by average interest-earning assets.

Liquidity and Capital Resources

Liquidity.
We actively analyze and manage our liquidity with the objectives of maintaining an adequate level of liquidity to ensure the availability of sufficient cash flows to support loan growth, fund deposit withdrawals, fund operations, and our continuing operations, and to satisfy other financial commitments.  See "Consolidated Statements of Cash Flows" contained in Part I, Item 1 - "Financial Statements" of this quarterly report.

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Our primary sources of funds are from customer and brokered deposits, loan repayments, loan sales, maturing investment securities, and borrowed funds.  These sources of funds, together with retained earnings and equity, are used to make loans, acquire investment securities and other assets, and fund continuing operations.  While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by the level of interest rates, economic conditions, and competition.  We believe that our current liquidity position and cash flows from our forecasted operating results are sufficient to fund all of our existing commitments.

At March 31, 2007, we were in compliance with the collateral requirements of all of our borrowed funds arrangements.  We maintained a credit facility with the FHLB equal to 50% of total assets, with an unused portion of the facility amounting to 12.5% of total assets, or $112.9 million.  The Bank also maintains a $100.0 million credit line collateralized by specific investment securities with Fortis Securities, LLC as an additional source of liquidity.  There were no outstanding balances on this credit line at March 31, 2007.  In addition, we held certain available-for-sale investment securities and readily saleable loans for liquidity purposes.

Management believes that we have adequate resources to fund all loan commitments through deposits, borrowings from the FHLB or other sources, and the sale of mortgage loans or investments.  At March 31, 2007, certificates of deposit (excluding individual retirement account certificates of deposit) amounted to $224.3 million or 48.1% of total deposits, including $49.9 million of brokered deposits which are scheduled to mature and be renewed through December 31, 2007.  We have used brokered deposits and borrowed funds to supplement retail deposit funding.  Management also believes that we can adjust the offering rates of savings, money market, and certificates of deposit to retain, increase, or decrease deposits in changing interest rate environments.

Capital.  Consistent with our objective to operate a sound and profitable financial institution, we have maintained and will continue to focus on maintaining a "well capitalized" rating from regulatory authorities.  In addition, we are subject to certain capital requirements set by our regulatory agencies.  As of March 31, 2007, the Bank was classified as a "well capitalized" institution under the criteria established by the Federal Deposit Insurance Corporation and exceeded all minimum capital requirements.  Total equity at the Bank was $86.4 million at March 31, 2007, or 9.55% of total assets on that date.  Our regulatory capital ratios at March 31, 2007, were as follows:  Tier I leverage of 9.33%; Tier I risk-based capital of 11.82%; and total risk-based capital of 12.98%.

ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk



One of our primary financial objectives is to generate ongoing profitability.  The largest contributor to our profitability is net interest income.  Net interest income is the difference between the income we receive on loans and investments and the expenses we incur on deposits and borrowed funds.  Net interest income is affected by the amount of interest-earning assets and interest-bearing liabilities that Rainier Pacific Savings Bank holds, as well as the associated yields and costs.

The asset liability management policy and the committee guide us in managing Rainier Pacific Savings Banks market risk.  A summary of the asset and liability management committee activities is reported to our board of directors monthly and in more detail to the loan and investment committee of the board on a quarterly basis.

Some of the principal strategies that we employ to manage our interest rate sensitivity include: (1) selling long-term fixed-rate mortgage loans; (2) borrowing intermediate- to long-term funds at fixed rates; (3) originating consumer and income property loans with shorter maturities or at variable rates; (4) purchasing securities with shorter maturities or at variable rates; (5) appropriately modifying loan and deposit pricing to capitalize on the then current market opportunities; (6) increasing core deposits, such as savings, checking and money market accounts, in order to reduce our reliance on the traditionally higher cost, more rate sensitive certificates of deposit; and (7) maintaining adequate capital levels for the level of interest rate risk inherent in the balance sheet.  At March 31, 2007, there were no material changes in the Banks market risk from the information provided in the Companys Form 10-K which was filed with the SEC on March 14, 2007.

At March 31, 2007, the Bank had no derivative financial instruments.  In addition, the Bank did not maintain a trading account for any class of financial instruments, nor has it engaged in hedging activities or purchased derivative instruments.  Furthermore, the Bank is not subject to foreign currency exchange rate risk or commodity price risk.



ITEM 4 - Controls and Procedures



Evaluation of Disclosure Controls and Procedures



An evaluation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) was carried out under the supervision and with the participation of the Companys Chief Executive Officer, Chief Financial Officer, and other members of the Companys management team as of the end of the period covered by this quarterly report.  The Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures as currently in effect are effective, in all material respects, in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i)
accumulated and communicated to the Companys management

17

<PAGE>

(including the Chief Executive Officer and Chief Financial Officer) in a
timely manner, and (ii) recorded, processed, summarized, and reported within the
time periods specified in the SECs rules and forms.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting (as defined in 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2007, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  The Company continued, however, to implement suggestions from its internal auditor and independent auditor on ways to strengthen existing controls.  The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud.  A control procedure, no matter how well designed and functioning, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met.  Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any control procedure is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in cost-effective control procedures, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

ITEM 1 - Legal Proceedings

From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business.  As of March 31, 2007, we were not involved in any significant litigation and do not anticipate incurring any material liability as a result of any such litigation.

ITEM 1A**-**Risk Factors



There have been no material changes in the risk factors previously disclosed in the Companys 2006 Form 10-K.

ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds

The Company's common stock is traded on the NASDAQ Global Market under the symbol "RPFG".  As of March 31, 2007, there were 6,569,670 shares of common stock issued, including 441,185 shares held by the ESOP that have not been released, committed, or allocated to participant accounts; and 140,592 restricted shares granted under the MRP that have not yet vested.  During the quarter ended March 31, 2007, the Company did not sell any securities that were not registered under the Securities Act of 1933.

Stock Purchases

A bank holding company, except for certain "well-capitalized" and highly rated bank holding companies, is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10.0% or more of its consolidated net worth.  The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve.

18

<PAGE>

The following table sets forth our purchases of Rainier Pacific Financial Group, Inc. outstanding common stock during the three months ended March 31, 2007:



|Period                              |  | Total Number of Shares Purchased |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |  | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
|----------------------------------- |  | -------------------------------- |  | ---------------------------- |  | ------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------
|                                    |  |                                  |  |                              |  |                                                                                      |  |                                                                               
|January 1, 2007 -  January 31, 2007 |  | -                                |  | $                 -          |  | -                                                                                    |  | 240,620                                                                       
|February 1, 2007 -February 28, 2007 |  | 6,700                            |  | 20.47                        |  | 6,700                                                                                |  | 233,920                                                                       
|March 1, 2007 - March 31, 2007      |  | 10,000                           |  | 20.55                        |  | 10,000                                                                               |  | 223,920                                                                       
|                                    |  |                                  |  |                              |  |                                                                                      |  |                                                                               
|Total                               |  | 16,700                           |  | $       20.52                |  | 16,700                                                                               |  |                                                                               

|    |                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On February 22, 2006, we announced our intention to purchase an additional 5% (i.e., 307,000) of Rainier Pacific Financial Group, Inc. outstanding shares of common stock.  On February 21, 2007, we announced a 12-month extension of this repurchase program.  At March 31, 2007, there were 223,920 shares remaining to be purchased under this repurchase program.

ITEM 3 - Defaults Upon Senior Securities



Not applicable.



ITEM 4 - Submission of Matters to a Vote of Security Holders



Not applicable.

ITEM 5 - Other Information



Not applicable.



ITEM 6 - Exhibits

|3.1   | Articles of Incorporation of the Registrant (1)                                                                       
|----- | ----------------------------------------------------------------------------------------------------------------------
|3.2   | Bylaws of the Registrant (1)                                                                                          
|10.1  | Form of Employment Agreement for President and Chief Executive Officer (1)                                            
|10.2  | Amended and Restated Employment Agreement between the Company and the Bank and John A. Hall (2)                       
|10.3  | Employment Agreement between the Company and the Bank and Victor J. Toy (2)                                           
|10.4  | Employment Agreement between the Company and the Bank and Joel G. Edwards (2)                                         
|10.5  | Form of Rainier Pacific Savings Bank Employee Severance Compensation Plan (1)                                         
|10.6  | Rainier Pacific 2004 Stock Option Plan (3)                                                                            
|10.7  | Rainier Pacific 2004 Management Recognition Plan (3)                                                                  
|10.8  | Form of Incentive Stock Option Agreement (4)                                                                          
|10.9  | Form of Non-Qualified Stock Option Agreement (4)                                                                      
|10.10 | Form of Restricted Stock Award Agreement (4)                                                                          
|14    | Code Business Conduct and Ethics (5)                                                                                  
|31.1  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                            
|31.2  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                            
|32    | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act



|____ |                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | Filed as an exhibit to the Registrant's Registration Statement on Form S-1 (333-106349).                                                           
|(2)  | Filed as an exhibit to the Registrants Current Report on Form 8-K dated December 20, 2005 and incorporated herein by reference.                    
|(3)  | Filed as an exhibit to the Registrant's Registration Statement on Form S-8 (333-117568) and incorporated herein by reference.                      
|(4)  | Filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference.
|(5)  | Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.      

19

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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|            | Rainier Pacific Financial Group, Inc.       
|----------- | --------------------------------------------
|            |                                             
|            |                                             
|May 2, 2007 | /s/John A. Hall                             
|            | John A. Hall                                
|            | President and Chief Executive Officer       
|            | (Principal Executive Officer)               
|            |                                             
|            |                                             
|            |                                             
|May 2, 2007 | /s/Joel G. Edwards                          
|            | Joel G. Edwards                             
|            | Chief Financial Officer                     
|            | (Principal Financial and Accounting Officer)



20

<PAGE>



EXHIBIT INDEX



|31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                            
|---- | ----------------------------------------------------------------------------------------------------------------------
|31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                            
|32   | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act

21

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EXHIBIT 31.1



Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John A. Hall, certify that:

|1. | I have reviewed this Quarterly Report on Form 10-Q of Rainier Pacific Financial Group, Inc.;                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                       
|2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;                            
|   |                                                                                                                                                                                                                                                                                                                                       
|3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;                                               
|   |                                                                                                                                                                                                                                                                                                                                       
|4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:











|a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;            
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

|   |                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):











|a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                         
|b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.                                                                                               





|                  | /s/John A. Hall                      
|----------------- | -------------------------------------
|Date: May 2, 2007 | John A. Hall                         
|                  | President and Chief Executive Officer



22

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EXHIBIT 31.2



Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joel G. Edwards, certify that:



|1. | I have reviewed this Quarterly Report on Form 10-Q of Rainier Pacific Financial Group, Inc.;                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                       
|2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;                            
|   |                                                                                                                                                                                                                                                                                                                                       
|3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;                                               
|   |                                                                                                                                                                                                                                                                                                                                       
|4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



|a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;            
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

|   |                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):











|a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                         
|b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.                                                                                               



|                   | /s/Joel G. Edwards     
|------------------ | -----------------------
|Date:  May 2, 2007 | Joel G. Edwards        
|                   | Chief Financial Officer





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EXHIBIT 32



Certification of Chief Executive Officer and Chief Financial Officer 
of Rainier Pacific Financial Group, Inc.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006, that:

|1. | the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                 
|2. | the information contained in the report fairly presents, in all material respects, the Companys financial condition and results of operations as of the dates and for the periods presented in the financial statements included in such report.







|/s/John A. Hall                       | /s/Joel G. Edwards     
|------------------------------------- | -----------------------
|John A. Hall                          | Joel G. Edwards        
|President and Chief Executive Officer | Chief Financial Officer



Dated: May 2, 2007



24

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