| [ X      ] | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|------------|---------------------------------------------------------------------------------------------------|

|   | For      the quarterly period ended .............................................  June      30, 2009 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [     ] | 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.                    |
|--------------------------------------------------------------------|
| (Exact      name of registrant as specified in its  charter)  |

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

|   | Large accelerated      filer    | _____  |   | Accelerated      filer          |          X      |   |
|--------|------------------------------------------------|-------------|--------|--------------------------------------|---------------------------------------------------------|--------|
|   | Non-accelerated      filer           | _____  |   | Smaller reporting      company  | _____                                              |   |

| Title of      class:                  |   | As of June 30,      2009 |
|---------------------------------------|--------|--------------------------|
| Common stock, no par      value  |   | 6,294,898      *    |
|                                  |   |                     |

|   | *  Includes      288,419 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 1,167 restricted shares granted under the      Rainier Pacific Financial Group, Inc. 2004 Management Recognition Plan      that have not yet vested. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| PART      I  -     | FINANCIAL      INFORMATION                                                                                | Page                                                                              |
|------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|                         |                                                                                                      |                                                                              |   |
| ITEM      1 -                | Financial      Statements.                                                                                |                                                                              |
|                         |                                                                                                      |                                                                              |   |
|                         | Consolidated      Statements of Financial Condition at                                                    |                                                                              |
|                         |                                                                                                      | June      30, 2009 and December 31, 2008                                          | 2 |
|                         | Consolidated      Statements of Operations for the                                                        |                                                                              |
|                         |                                                                                                      | Three      Months Ended and Six Months Ended June 30, 2009 and 2008               | 3 |
|                         | Consolidated      Statements of Shareholders’ Equity for the                                        |                                                                              |
|                         |                                                                                                      | Six      Months Ended June 30, 2009 andTwelve      Months Ended December 31, 2008 |  4 |
|                         | Consolidated      Statements of Cash Flows for the                                                        |                                                                              |
|                         |                                                                                                      | Six      Months Ended June 30, 2009 and 2008                                      | 5 |
|                         | Selected      Notes to Unaudited Interim Consolidated Financial Statements                                | 7                                                                                 |
|                         |                                                                                                      |                                                                              |   |
| ITEM      2 -                | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations.    |                                                                              |
|                         |                                                                                                      |                                                                              |   |
|                         | Forward-Looking      Statements                                                                           | 17                                                                                |
|                         | Comparison      of Financial Condition at    June      30, 2009 and December 31, 2008 | 18                                                                                |
|                         | Comparison      of Operating Results for the                                                              |                                                                              |
|                         | Three Months Ended June 30,      2009 and 2008                                                            | 22                                                                                |
|                         | Comparison      of Operating Results for the                                                              |                                                                              |
|                         | Six Months Ended June 30, 2009      and 2008                                                              | 26                                                                                |
|                         | Liquidity      and Capital Resources                                                                      | 30                                                                                |
|                         |                                                                                                      |                                                                              |   |
| ITEM      3 -                | Quantitative      and Qualitative Disclosures about Market Risk                                           | 31                                                                                |
|                         |                                                                                                      |                                                                              |
| ITEM      4 -                | Controls      and Procedures                                                                              | 31                                                                                |
|                         |                                                                                                      |                                                                              |   |
| PART      II -               | OTHER      INFORMATION                                                                                    |                                                                              |
|                         |                                                                                                      |                                                                              |   |
| ITEM      1 -                | Legal      Proceedings                                                                                    | 32                                                                                |
| ITEM      1A -               | Risk      Factors                                                                                         | 32                                                                                |
| ITEM      2 -                | Unregistered      Sales of Equity Securities and Use of Proceeds                                          | 33                                                                                |
| ITEM      3 -                | Defaults      Upon Senior Securities                                                                      | 34                                                                                |
| ITEM      4 -                | Submission      of Matters to a Vote of Security Holders                                                  | 34                                                                                |
| ITEM      5 -                | Other      Information                                                                                    | 34                                                                                |
| ITEM      6 -                | Exhibits                                                                                                  | 34                                                                                |
|                         |                                                                                                      |                                                                              |   |
| SIGNATURES                   | 35                                                                                                        |
|                         |                                                                                                      |
| EXHIBIT      INDEX           |                                                                                                      |
|         Exhibit 31 | 37                                                                                                        |
|         Exhibit 32 | 38                                                                                                        |

----

|                                                                                                       ASSETS  |                   |   |                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|--------|----------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  At      June 30, |   | At      December 31,  |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 2009                   |   | 2008                       |   |   |
| ASSETS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                   |   |                       |   |   |
| Cash and cash      equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | $      | 8,758                      |   |   | $ | 8,811 |   |
|     Interest-bearing      deposits with banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                   |   | 47,666                     |   |   |   | 29,425 |   |
| Securities      available-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                   |   | 36,280                     |   |   |   | 14,895 |   |
| Securities held-to-maturity      (fair value at June 30, 2009: $29,774; atDecember      31, 2008: $34,162)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   |   | 29,167                     |   |   |   | 33,984 |   |
| Federal Home Loan Bank of      Seattle (“FHLB”) stock, at cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   |   | 13,712                     |   |   |   | 13,712 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| Loans      held-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                   |   | -                          |   |   |   | 1,505 |   |
| Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   |   | 615,833                    |   |   |   | 670,776 |   |
| Less allowance for loan      losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                   |   | (11,719                    | )  |   |   | (13,329 | ) |
| Total loans,    net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                   |   | 604,114                    |   |   |   | 658,952 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| Premises and equipment,      net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   |   | 33,298                     |   |   |   | 33,770 |   |
| Accrued interest      receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   |   | 3,071                      |   |   |   | 3,535 |   |
| Real estate    owned                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   | 8,077                      |   |   |   | 6,796 |   |
| Deferred tax asset,      net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   |   | 31,330                     |   |   |   | 37,551 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   |   | 5,918                      |   |   |   | 5,802 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| TOTAL ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   | $      | 821,391                    |   |   | $ | 847,233 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| LIABILITIES      AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| LIABILITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   |   |                       |   |   |   |   |   |   |
| Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                   |   |                       |   |   |   |   |   |   |
| Non-interest      bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   | $      | 43,447                     |   |   | $ | 40,331 |   |
| Interest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   |   | 445,512                    |   |   |   | 478,908 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| Total deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   |   | 488,959                    |   |   |   | 519,239 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| Borrowed funds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   |   | 281,421                    |   |   |   | 291,217 |   |
| Corporate drafts      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                   |   | 1,498                      |   |   |   | 1,554 |   |
| Accrued compensation and      benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                   |   | 1,163                      |   |   |   | 1,745 |   |
| Other    liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   | 6,409                      |   |   |   | 4,184 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| TOTAL    LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   | 779,450                    |   |   |   | 817,939 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |
| SHAREHOLDERS’      EQUITY:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   |   |                       |   |   |   |   |   |   |
| Common stock, no par value:      49,000,000 shares authorized;6,294,898 shares issued and      6,005,312 shares outstanding atJune 30, 2009; and 6,295,298      shares issued and 5,968,393 sharesoutstanding at December 31,      2008                                                                                                                                                                                                                                                                                                                                                                            |                   |   | 51,163                     |   |   |   | 51,303 |   |
| Unearned Employee Stock      Ownership Plan (“ESOP”) shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                   |   | (2,884                     | ) |   |   | (3,224 | ) |   |   |   |   |
| Accumulated other      comprehensive income/(loss) (“OCI (loss)”), net of tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |   | (37,843                    | ) |   |   | (47,206 | ) |   |   |   |   |
| Retained    earnings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   | 31,505                     |   |   |   | 28,421 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |   |   |   |
| TOTAL SHAREHOLDERS’      EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   |   | 41,941                     |   |   |   | 29,294 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   |   |                       |   |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES AND      SHAREHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | $      | 821,391                    |   |   | $ | 847,233 |   |

----

|                                                                 |   | Three      Months EndedJune      30, |      |   | Six      Months EndedJune      30, |   |
|----------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|------------------------------------|--------|
|                                                                 |   | 2009                                 |      |   | 2008                               |   |   | 2009 |   |   | 2008 |   |
| INTEREST      INCOME                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                    | 9,534     |   |                               | $      | 11,191 |   |   | $ | 19,776 |   |   | $ | 22,468 |   |
| Securities      available-for-sale                                   |   |                                 | 595       |   |                               |   | 1,276 |   |   |   | 1,429 |   |   |   | 3,133 |   |
| Securities      held-to-maturity                                     |   |                                 | 330       |   |                               |   | 420 |   |   |   | 683 |   |   |   | 871 |   |
| Interest-bearing      deposits                                       |   |                                 | 32        |   |                               |   | 6 |   |   |   | 51 |   |   |   | 33 |   |
| FHLB      dividends                                                  |   |                                 | -         |   |                               |   | 48 |   |   |   | - |   |   |   | 82 |   |
| Total      interest income                                           |   |                                 | 10,491    |   |                               |   | 12,941 |   |   |   | 21,939 |   |   |   | 26,587 |   |
| INTEREST      EXPENSE                                                |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                             |   |                                 | 2,075     |   |                               |   | 2,979 |   |   |   | 4,707 |   |   |   | 6,566 |   |
| Borrowed      funds                                                  |   |                                 | 3,232     |   |                               |   | 3,524 |   |   |   | 6,458 |   |   |   | 7,040 |   |
| Total      interest expense                                          |   |                                 | 5,307     |   |                               |   | 6,503 |   |   |   | 11,165 |   |   |   | 13,606 |   |
| Net      interest income                                             |   |                                 | 5,184     |   |                               |   | 6,438 |   |   |   | 10,774 |   |   |   | 12,981 |   |
| PROVISION      FOR LOAN LOSSES                                       |   |                                 | 4,000     |   |                               |   | 550 |   |   |   | 6,300 |   |   |   | 700 |   |
| Net interest income after      provision for loan losses             |   |                                 | 1,184     |   |                               |   | 5,888 |   |   |   | 4,474 |   |   |   | 12,281 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST      INCOME                                             |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Deposit      service fees                                            |   |                                 | 868       |   |                               |   | 908 |   |   |   | 1,666 |   |   |   | 1,747 |   |
| Loan      service fees                                               |   |                                 | 214       |   |                               |   | 287 |   |   |   | 445 |   |   |   | 602 |   |
| Insurance      service fees                                          |   |                                 | 503       |   |                               |   | 529 |   |   |   | 1,090 |   |   |   | 1,079 |   |
| Investment      service fees                                         |   |                                 | 175       |   |                               |   | 121 |   |   |   | 350 |   |   |   | 285 |   |
| Real      estate lease income                                        |   |                                 | 177       |   |                               |   | 262 |   |   |   | 434 |   |   |   | 508 |   |
| Gain      on sale of securities, net                                 |   |                                 | -         |   |                               |   | - |   |   |   | - |   |   |   | 11 |   |
| Gain      on sale of loans, net                                      |   |                                 | 874       |   |                               |   | 450 |   |   |   | 4,435 |   |   |   | 685 |   |
| Gain      (loss) on sale of other real estate owned                  |   |                                 | (8        | )      |                               |   | 7 |   |   |   | (10 | ) |   |   | 7 |   |
| Loss      on sale of premises and equipment, net                     |   |                                 | (2        | )      |                               |   | (1 | ) |   |   | (3 | ) |   |   | (1 | ) |
| Other      operating income                                          |   |                                 | 40        |   |                               |   | 38 |   |   |   | 84 |   |   |   | 499 |   |
| Total      non-interest income                                       |   |                                 | 2,841     |   |                               |   | 2,601 |   |   |   | 8,491 |   |   |   | 5,422 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST      EXPENSE                                            |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Compensation      and benefits                                       |   |                                 | 3,641     |   |                               |   | 4,042 |   |   |   | 7,266 |   |   |   | 8,102 |   |
| Office      operations                                               |   |                                 | 927       |   |                               |   | 937 |   |   |   | 1,883 |   |   |   | 1,892 |   |
| Occupancy                                                            |   |                                 | 630       |   |                               |   | 616 |   |   |   | 1,268 |   |   |   | 1,230 |   |
| Loan      servicing                                                  |   |                                 | 119       |   |                               |   | 123 |   |   |   | 254 |   |   |   | 232 |   |
| Outside      and professional services                               |   |                                 | 264       |   |                               |   | 248 |   |   |   | 749 |   |   |   | 696 |   |
| Marketing                                                            |   |                                 | 274       |   |                               |   | 218 |   |   |   | 531 |   |   |   | 502 |   |
| Federal      deposit insurance premiums                              |   |                                 | 1,261     |   |                               |   | 65 |   |   |   | 1,755 |   |   |   | 130 |   |
| Other      operating expenses                                        |   |                                 | 655       |   |                               |   | 651 |   |   |   | 1,454 |   |   |   | 1,074 |   |
| Total      non-interest expense                                      |   |                                 | 7,771     |   |                               |   | 6,900 |   |   |   | 15,160 |   |   |   | 13,858 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| IMPAIRMENT      ON SECURITIES                                        |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Total      other-than-temporary impairment losses                    |   |                                 | (2,035    | )      |                               |   | - |   |   |   | (3,468 | ) |   |   | - |   |
| Portion      of gains (losses) recognized in OCI (loss)              |   |                                 | 227       |   |                               |   | - |   |   |   | (6,823 | ) |   |   | - |   |
|   Net      impairment losses                               |   |                                 | (1,808    | )      |                               |   | - |   |   |   | (10,291 | ) |   |   | - |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      (LOSS) BEFORE PROVISION (BENEFIT) FOR FEDERAL INCOME TAX |   |                                 | (5,554    | )      |                               |   | 1,589 |   |   |   | (12,486 | ) |   |   | 3,845 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION      (BENEFIT) FOR FEDERAL INCOME TAX                      |   |                                 | (1,854    | )      |                               |   | 572 |   |   |   | (4,173 | ) |   |   | 1,384 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME (LOSS)                                               |   | $                                    | (3,700    | )      |                               | $      | 1,017 |   |   | $ | (8,313 | ) |   | $ | 2,461 |   |
|                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      (LOSS) PER COMMON SHARE                                |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   | $                                    | (0.62     | )      |                               | $      | 0.17 |   |   | $ | (1.39 | ) |   | $ | 0.41 |   |
| Diluted                                                              |   | $                                    | (0.62     | )      |                               | $      | 0.17 |   |   | $ | (1.39 | ) |   | $ | 0.41 |   |
| Weighted      average shares outstanding – Basic               |   |                                 | 5,993,150 | (1)    |                               |   | 5,987,866 | (2) |   |   | 5,983,869 | (1) |   |   | 5,985,629 | (2) |
| Weighted      average shares outstanding – Diluted             |   |                                 | 5,993,150 |   |                               |   | 5,987,866 |   |   |   | 5,983,869 |   |   |   | 5,985,629 |   |

| (1)            | Weighted      average shares outstanding – Basic includes 268,173 vested and ratably      earned shares of the 269,340 restricted shares granted and issued under      the 2004 Management Recognition Plan (“MRP”), net of forfeited      shares. |
|-----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)            | Weighted      average shares outstanding – Basic includes 262,877 vested and ratably      earned shares of the 326,300 restricted shares granted and issued under      the MRP, net of forfeitedshares. |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                   |   | Common      Stock |   | UnearnedESOP                          |   | Retained                         | AccumulatedOtherComprehensive |                                  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|---------------------------------------|--------|----------------------------------|-------------------------------|---------------------------------------|
|                                                                                                                                                                                   |   | Shares            |   | Amount                                |   | Shares                           |                          | Earnings                              |   | Loss |   | Total |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Balance,      December 31, 2007                                                                                                                                                        |   | 6,466,633    |   | $         50,458  |   | $         (3,903) |                          | $         44,840  |   | $         (4,575) |   | $         86,820 |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Common stock      repurchased                                                                                                                                                          |   | (114,175)         |   | (983)                                 |   |                             |                          |                                  |   |   |   | (983) |
| MRP      forfeitures                                                                                                                                                                   |   | (57,160)          |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Earned ESOP shares      released                                                                                                                                                       |   |              |   |                                  |   | 679                         |                          |                                  |   |   |   | 679  |
| ESOP activity -      Change in value of shares          committed      to be released                                                |   |              |   | (52)                                  |   |                             |                          |                                  |   |   |   | (52) |
| Dividends      paid                                                                                                                                                                    |   |              |   |                                  |   |                             |                          | (1,804)                               |   |   |   | (1,804) |
| Amortization of      compensation related to MRP                                                                                                                                       |   |              |   | 1,542                            |   |                             |                          |                                  |   |   |   | 1,542  |
| Amortization of      compensation related to the                Stock Option Plan (“SOP”)                                |   |              |   | 338                              |   |                             |                          |                                  |   |   |   | 338  |
| Comprehensive income      (loss):                                                                                                                                                      |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Net      loss                                                                                                                                                                          |   |              |   |                                  |   |                             |                          | (14,615)                              |   |   |   | (14,615) |
| Unrealized loss on      securities, net oftax benefit of $21,961                                                                                                                       |   |              |   |                                  |   |                             |                          |                                  |   | (42,631) |   | (42,631) |
| Total comprehensive      income (loss)                                                                                                                                                 |   |              |   |                                  |   |                             |                          |                                  |   |   |   | (57,246) |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Balance,      December 31, 2008                                                                                                                                                        |   | 6,295,298    |   | 51,303                           |   | (3,224)                          |                          | 28,421                           |   | (47,206) |   | 29,294  |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                        |   |   |   |   |
| Cumulative effect      adjustment for OTTI/                 credit loss, net of tax of $5,871(1)                                |   |              |   |                                  |   |                             |                          | 11,397                           |   | (11,397) |   | -  |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Balance,      January 1, 2009                                                                                                                                                          |   | 6,295,298    |   | 51,303                           |   | (3,224)                          |                          | 39,818                           |   | (58,603) |   | 29,294  |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| MRP      forfeitures                                                                                                                                                                   |   | (400)             |   |                                  |   |                             |                          |                                  |   |   |   |   |
|     Earned      ESOP shares released                                                                                                                               |   |              |   |                                  |   | 340                         |                          |                                  |   |   |   | 340  |
|     ESOP      activity - Change in value of sharescommitted to be    released                                                                                      |   |              |   | (207)                                 |   |                             |                          |                                  |   |   |   | (207) |
| Amortization of      compensation related to MRP                                                                                                                                       |   |              |   | 49                               |   |                             |                          |                                  |   |   |   | 49  |
| Amortization of      compensation related to SOP                                                                                                                                       |   |              |   | 18                               |   |                             |                          |                                  |   |   |   | 18  |
| Comprehensive      income:                                                                                                                                                             |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Net      loss                                                                                                                                                                          |   |              |   |                                  |   |                             |                          | (8,313)                               |   |   |   | (8,313) |
| Unrealized gain on      available-for-sale                 securities,      net of tax of $10,694 |   |              |   |                                  |   |                             |                          |                                  |   | 20,706  |   | 20,760  |
| Total comprehensive      income                                                                                                                                                        |   |              |   |                                  |   |                             |                          |                                  |   |   |   | 12,447  |
|                                                                                                                                                                                   |   |              |   |                                  |   |                             |                          |                                  |   |   |   |   |
| Balance,      June 30, 2009                                                                                                                                                            |   | 6,294,898    |   | $    51,163       |   | $         (2,884) |                          | $         31,505  |   | $        (37,843) |   | $         41,941  |

| (1)   | The      impact of adopting FASB Staff Position (FSP) SFAS 115-2 and SFAS 124-2,      Recognition and      Presentation of Other-than-Temporarily Impairments, was to increase      the beginning balance of retained earnings and reduce the beginning      balance of other comprehensive income/(loss) by $17.3 million (or $11.4      million after tax) as of January 1,2009. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                   |   | Six      Months Ended June 30, |    |
|----------------------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                                   |   | 2009                           |    |   | 2008 |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                              |   |                           |    |   |   |   |
| Net income    (loss)                                                                   |   | $                              | (8,313  | ) |   | $ | 2,461 |   |
| Adjustments to reconcile net      income (loss) to net cash from operating activities: |   |                           |    |   |   |   |   |   |
| Depreciation                                                                           |   |                           | 1,135   |   |   |   | 1,177 |   |
| Impairment losses on      securities, net                                              |   |                           | 10,291  |   |   |   | - |   |
| Provision for loan      losses                                                         |   |                           | 6,300   |   |   |   | 700 |   |
| Deferred income      tax                                                               |   |                           | -       |   |   |   | 50 |   |
| Gain on sale of securities,      net                                                   |   |                           | -       |   |   |   | (11 | ) |
| Loss (gain) on sale of real      estate owned (“REO”)                      |   |                           | 10      |   |   |   | (7 | ) |
| Loss on sale of premises and      equipment, net                                       |   |                           | 3       |   |   |   | 1 |   |
| Gain on sale of loans,      net                                                        |   |                           | (4,435  | ) |   |   | (685 | ) |
| Amortization of premiums and      discounts on securities                              |   |                           | 118     |   |   |   | 697 |   |
| Amortization of intangible      assets                                                 |   |                           | 183     |   |   |   | 147 |   |
| Compensation for restricted      stock awards                                          |   |                           | 49      |   |   |   | 566 |   |
| Compensation for stock      options                                                    |   |                           | 18      |   |   |   | 122 |   |
| Change in operating assets and      liabilities, net:                                  |   |                           |    |   |   |   |   |   |
| Accrued interest      receivable                                                       |   |                           | 464     |   |   |   | 580 |   |
| Other assets                                                                           |   |                           | (5,098  | ) |   |   | 571 |   |
| Corporate drafts      payable                                                          |   |                           | (56     | ) |   |   | (400 | ) |
| Other    liabilities                                                                   |   |                           | 1,643   |   |   |   | (1,481 | ) |
|                                                                                   |   |                           |    |   |   |   |   |   |
| Net cash provided from      operating activities                                       |   |                           | 2,312   |   |   |   | 4,488 |   |
|                                                                                   |   |                           |    |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                              |   |                           |    |   |   |   |   |   |
| Increase in interest-bearing      deposits with banks                                  |   |                           | (18,241 | ) |   |   | (449 | ) |
| Activity in securities      available-for-sale:                                        |   |                           |    |   |   |   |   |   |
| Sales                                                                                  |   |                           | -       |   |   |   | 9,232 |   |
| Maturities, prepayments, and      calls                                                |   |                           | 46      |   |   |   | 7,071 |   |
| Activity in securities      held-to-maturity:                                          |   |                           |    |   |   |   |   |   |
| Sales                                                                                  |   |                           | -       |   |   |   | 3,702 |   |
| Maturities, prepayments, and      calls                                                |   |                           | 4,777   |   |   |   | 4,124 |   |
| Increase in loans,      net                                                            |   |                           | (38,177 | ) |   |   | (64,821 | ) |
| Proceeds from sales of      loans                                                      |   |                           | 89,194  |   |   |   | 36,456 |   |
| Proceeds from sales of      REO                                                        |   |                           | 645     |   |   |   | 1,129 |   |
| Purchases of premises and      equipment                                               |   |                           | (666    | ) |   |   | (1,652 | ) |
| Proceeds from sales of      premises and equipment                                     |   |                           | -       |   |   |   | 1 |   |
|                                                                                   |   |                           |    |   |   |   |   |   |
| Net cash provided from (used      in) investing activities                             |   |                           | 37,578  |   |   |   | (5,207 | ) |
|                                                                                   |   |                           |    |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                              |   |                           |    |   |   |   |   |   |
| Net increase (decrease) in      deposits                                               |   |                           | (30,280 | ) |   |   | 2,238 |   |
| Advances on borrowed      funds                                                        |   |                           | 22,753  |   |   |   | 134,427 |   |
| Repayments of borrowed      funds                                                      |   |                           | (32,549 | ) |   |   | (130,643 | ) |
| Repayment of ESOP      debt                                                            |   |                           | 340     |   |   |   | 340 |   |
| Cash payments related to      acquisition of insurance agencies                        |   |                           | -       |   |   |   | (1,121 | ) |
| Change in value of ESOP shares      committed to be released                           |   |                           | (207    | ) |   |   | 106 |   |
| Dividends paid                                                                         |   |                           | -       |   |   |   | (904 | ) |
| Common stock      repurchased                                                          |   |                           | -       |   |   |   | (616 | ) |
|                                                                                   |   |                           |    |   |   |   |   |   |
| Net cash provided from (used      in) financing activities                             |   |                           | (39,943 | ) |   |   | 3,827 |   |
|                                                                                   |   |                           |    |   |   |   |   |   |
| NET      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |   |                           | (53     | ) |   |   | 3,108 |   |
|                                                                                   |   |                           |    |   |   |   |   |   |
| CASH      AND CASH EQUIVALENTS, at beginning of period                                 |   |                           | 8,811   |   |   |   | 8,724 |   |
|                                                                                   |   |                           |    |   |   |   |   |   |
| CASH      AND CASH EQUIVALENTS, at end of period                                       |   | $                              | 8,758   |   |   | $ | 11,832 |   |

----

|                                                             |   | Six      Months Ended June 30, |    |
|------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                             |   | 2009                           |    |   | 2008 |   |
| SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION           |   |                           |    |   |   |   |
| Cash payments    for:                                            |   |                           |    |   |   |   |
| Interest                                                         |   | $                              | 10,496  |   |   | $ | 13,683 |   |
|                                                             |   |                           |    |   |   |   |   |   |
| Income taxes                                                     |   | $                              | 300     |   |   | $ | 1,215 |   |
|                                                             |   |                           |    |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURES OF NON-CASH INVESTING ACTIVITIES   |   |                           |    |   |   |   |   |   |
|                                                             |   |                           |    |   |   |   |   |   |
| Loans charged-off to the      allowance for loan losses          |   | $                              | 7,910   |   |   | $ | 508 |   |
|                                                             |   |                           |    |   |   |   |   |   |
| Loans foreclosed upon with      repossessions transferred to REO |   | $                              | 1,956   |   |   | $ | 1,566 |   |
|                                                             |   |                           |    |   |   |   |   |   |
| Unrealized losses on      available-for-sale securities          |   | $                              | (31,454 | ) |   | $ | (20,221 | ) |
|                                                             |   |                           |    |   |   |   |   |   |

----

----

| ·           | FSP      SFAS 115-2 and SFAS 124-2, Recognition and Presentation      of Other-than-Temporary Impairments (“FSP 115-2”) provides      additional guidance designed to create greater clarity and consistency in      accounting for and presenting impairment losses on      securities.    This FSP is effective for interim      reporting periods ending after June 15, 2009, with early adoption      permitted for periods ending after March 15, 2009.  The Company      elected early adoption of this FSP in its interim consolidated financial      statements for the three months ended March 31,  2009. |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·           | FSP      SFAS 157-4 Determining      Fair Value When the Volume and Level of Activity for the Assets or      Liability Have Significantly Decreased and Identifying Transactions That      Are Not Orderly (“FSP 157-4”) provides guidelines for making fair      value measurements more consistent with the principles presented in SFAS      157, Fair Value      Measurements.  FSP 157-4 provides additional guidance for      estimating fair value when the volume and level of activity for the asset      or liability has significantly decreased.  FSP 157-4 emphasizes      that even if there has been a significant decrease in the volume and level      of activity for the asset or liability and regardless of the valuation      technique(s) used, the objective of a fair value measurement remains the      same.  Fair value is the price that would be received to sell an      asset or paid to transfer a liability in an orderly transaction (that is,      not a forced liquidation or distressed sale) between market participants      at the measurement date under current market conditions.  FSP      157-4 is effective for all periods ending after June 15, 2009, and shall      be applied prospectively.  Early adoption is permitted for all      periods ending after March 15, 2009, and the Company elected early      adoption of this FSP in its interim consolidated financial statements for      the three months ended March 31, 2009 (see Note 9  below). |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·           | FSP      SFAS 107-1 and APB 28-1, Interim Disclosures about Fair      Value of Financial Instruments enhances consistency in financial      reporting by increasing the frequency of fair value      disclosures.  This FSP was effective for interim reporting      periods ending after June 15, 2009, with early adoption permitted for      periods ending after March 15, 2009.  The Company did not elect      early adoption of this FSP (see Note 9 below for more      information). |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                  |   | Three      Months Ended |   |   | Six      Months Ended |   |
|---------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                  |   | June      30,           |   |   | June      30,         |   |
|                                  |   | 2009                    |   |   | 2008                  |   |   | 2009 |   |   | 2008 |   |
| Allowance      at beginning of period |   | $                       | 8,456  |   |                  | $      | 7,979 |   |   | $ | 13,      329 |   |   | $ | 8,079 |   |
|                                  |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan      losses        |   |                    | 4,000  |   |                  |   | 550 |   |   |   | 6,300 |   |   |   | 700 |   |
| Recoveries                            |   |                    | 24     |   |                  |   | 66 |   |   |   | 62 |   |   |   | 138 |   |
| Charge-offs                           |   |                    | (761   | )      |                  |   | (324 | ) |   |   | (7,972 | ) |   |   | (646 | ) |
|                                  |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      at end of period       |   | $                       | 11,719 |   |                  | $      | 8,271 |   |   | $ | 11,719 |   |   | $ | 8,271 |   |

----

----

|                              |   | Number      of Options |    |   | Weighted-Average      Price Exercise Price |   | Aggregate      Intrinsic      Value (1) |
|-----------------------------------|--------|-----------------------------|---------|--------|--------------------------------------------|--------|-----------------------------------------|
| Balance      at December 31, 2008 |   |                        | 560,800 |   |                                       | $      | 16.55                                   |   |   |
|                              |   |                        |    |   |                                       |   |                                    |   |   |
| Granted                           |   |                        | -       |   |                                       |   | -                                       |   |   |
| Exercised                         |   |                        | -       |   |                                       |   | -                                       |   |   |
| Cancelled/Forfeited               |   |                        | (13,000 | )      |                                       |   | 18.55                                   |   |   |
|                              |   |                        |    |   |                                       |   |                                    |   |   |
| Balance      at June 30, 2009     |   |                        | 547,800 |   |                                       | $      | 16.50                                   |   | $                                           - |

| Year      of Grant |   | Number      of Outstanding      Options |   | Weighted-AverageRemainingContractual      Lifein      Years |   | Weighted-AverageExercise      Price of      Outstanding Options |   | NumberExercisable |   | Weighted-AverageExercise      Priceof      ExercisableOptions |
|--------------------|--------|-----------------------------------------|--------|-------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-------------------|--------|---------------------------------------------------------------|
| 2004               |   | 501,800                                 |   | 5.00                                                        |   | $     16.26                            |   | 501,800           |   | $    16.26                                |
| 2005               |   | 15,600                                  |   | 6.25                                                        |   | 16.72                                                           |   | 9,360             |   | 16.72                                                         |
| 2007               |   | 30,400                                  |   | 8.00                                                        |   | 20.40                                                           |   | 12,160            |   | 20.40                                                         |
|               |   | 547,800                                 |   | 5.20                                                        |   | $     16.55                            |   | 523,320           |   | $    16.34                                |

|                                                                                                                                                                                                                                                                                 |   | Three      Months EndedJune      30, |      |   | Six      Months EndedJune      30, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                                                                                 |   | 2009                                 |      |   | 2008                               |   |   | 2009 |   |   | 2008 |   |
| Numerator:                                                                                                                                                                                                                                                                           |   |                                 |      |   |                               |   |   |   |   |   |   |   |
| Net income    (loss)                                                                                                                                                                                                                                                                 |   | $                                    | (3,700    | )      |                               | $      | 1,017 |   |   | $ | (8,313 | ) |   | $ | 2,461 |   |
|                                                                                                                                                                                                                                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                                                                                                                                                                                         |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Denominator for basic earnings      per share:                                                                                                                                                                                                                                       |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average      shares                                                                                                                                                                                                                                                         |   |                                 | 5,993,150 |   |                               |   | 5,987,866 |   |   |   | 5,983,869 |   |   |   | 5,985,629 |   |
| Effect of dilutive common      stock equivalents:                                                                                                                                                                                                                                    |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Stock options                                                                                                                                                                                                                                                                        |   |                                 | -         |   |                               |   | - |   |   |   | - |   |   |   | - |   |
| MRP restricted      stock                                                                                                                                                                                                                                                            |   |                                 | -         |   |                               |   | - |   |   |   | - |   |   |   | - |   |
| Denominator for diluted      earnings per share:                                                                                                                                                                                                                                     |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares and      assumed conversion of                             dilutive      stock options and restricted stock |   |                                 | 5,993,150 |   |                               |   | 5,987,866 |   |   |   | 5,983,869 |   |   |   | 5,985,629 |   |
|                                                                                                                                                                                                                                                                                 |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic      earnings (loss) per share                                                                                                                                                                                                                                                 |   | $                                    | (0.62     | )      |                               | $      | 0.17 |   |   | $ | (1.39 | ) |   | $ | 0.41 |   |
| Diluted      earnings (loss) per share                                                                                                                                                                                                                                               |   | $                                    | (0.62     | )      |                               | $      | 0.17 |   |   | $ | (1.39 | ) |   | $ | 0.41 |   |

----

|                                      |   |                 |    |   |                     |   |
|-------------------------------------------|--------|----------------------|---------|--------|--------------------------|--------|
|                                      |   | Carrying      Amount |    |   | EstimatedFair      Value |   |
| Financial      assets                     |   |                 |    |   |                     |   |
| Cash      and cash equivalents            |   | $                    | 8,758   |   |                     | $      | 8,758 |   |
| Interest      bearing deposits with banks |   |                 | 47,666  |   |                     |   | 47,666 |   |
| Securities                                |   |                 | 65,447  |   |                     |   | 66,054 |   |
| FHLB      stock                           |   |                 | 13,712  |   |                     |   | 13,712 |   |
| Loans      receivable, net (1)            |   |                 | 604,114 |   |                     |   | 643,617 |   |
|                                      |   |                 |    |   |                     |   |   |   |
| Financial      liabilities                |   |                 |    |   |                     |   |   |   |
| Deposits                                  |   | $                    | 488,959 |   |                     | $      | 490,152 |   |
| Borrowed      funds                       |   |                 | 281,421 |   |                     |   | 308,373 |   |
| Corporate      drafts payable             |   |                 | 1,498   |   |                     |   | 1,498 |   |

| (1)          | The      “carrying amounts” include $31.8 million in nonperforming loans for which      their estimated fair value was determined in a manner consistent with all      other loans. |
|-----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Measured      on a recurring basis:                     |   | Quoted      Prices in Active      Markets for Identical      Assets(Level      1) |   | Significant      Other Observable      Inputs(Level      2)                |   | Significant      Unobservable      Inputs(Level      3) |   | Assets      at Fair Value                   |
|---------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|---------------------------------------------|
| Available-for-sale      securities:                     |   |                                                                              |   |                                                                       |   |                                                    |   |                                        |
|                                                    |   |                                                                              |   |                                                                       |   |                                                    |   |                                        |
|      At      December 31, 2008 |   | $            -        |   | $            - |   | $    14,895                         |   | $           14,895 |
|                                                    |   |                                                                              |   |                                                                       |   |                                                    |   |                                        |
|      At      June 30, 2009     |   | $            -        |   | $            - |   | $    36,280                         |   | $           36,280 |

| ·           | a      review of any market activity in the securities or similar securities, and      considered the sale price, including distressed sales, as a starting      indication of the securities’value; |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·           | a      review of the defaults and deferrals by the underlying issuers for each of      the securities; |
|--------------------------------------|--------------------------------------------------------------------------------------------------------|

| ·           | a      review of any rating agency research reports and rating      indications; |
|--------------------------------------|----------------------------------------------------------------------------------|

| ·           | a      review of the expected cash flows for relative value and to determine if      any payments will be missed; and |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·           | a      review of the underlying collateral and credits, and for overlap of      issuers. |
|--------------------------------------|------------------------------------------------------------------------------------------|

----

|                                                                     |   | SecuritiesAvailable-for-Sale(Level      3) |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                     |   |                                       |   |
| Beginning      Balance at March 31, 2009                                 |   | $                                          | 28,233 |   |
|    Transfers      into Level 3 (1)                        |   |                                       | 277    |   |
|    Total      realized losses on OTTI securities (2)      |   |                                       | (1,808 | ) |
|    Total      unrealized net gains on OTTI securities     |   |                                       | (227   | ) |
|    Total      unrealized net gains on non-OTTI securities |   |                                       | 9,805  |   |
|    Purchases                                              |   |                                       | -      |   |
|    Paydowns      and Maturities                           |   |                                       | -      |   |
| Ending      Balance at June 30, 2009                                     |   | $                                          | 36,280 |   |
|                                                                     |   |                                       |   |   |

|                                                                     |   | SecuritiesAvailable-for-Sale(Level      3) |    |
|--------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                     |   |                                       |    |
| Beginning      Balance at December 31, 2008                              |   | $                                          | 14,895  |   |
|    Transfers      into Level 3 (1)                        |   |                                       | 464     |   |
|    Total      realized losses on OTTI securities (2)      |   |                                       | (10,291 | ) |
|    Total      unrealized net gains on OTTI securities     |   |                                       | 6,823   |   |
|    Total      unrealized net gains on non-OTTI securities |   |                                       | 24,435  |   |
|    Purchases                                              |   |                                       | -       |   |
|    Paydowns      and Maturities                           |   |                                       | (46     | ) |
| Ending      Balance at June 30, 2009                                     |   | $                                          | 36,280  |   |
|                                                                     |   |                                       |    |   |

----

|                 |                    |                   |                                                                     |                                    | OTTI      Credit Losses                                                    |                                                             |                                               |                             |
|----------------------|-------------------------|------------------------|--------------------------------------------------------------------------|-----------------------------------------|----------------------------------------------------------------------------|------------------------------------------------------------------|----------------------------------------------------|----------------------------------|
| PreTSL      Security | Original      Rating(1) | Current      Rating(1) |         Payment            in Kind(2) |           Par Value |        For the Six        Months Ended        June 30, 2009 |        Cumulative        (History-to-       Date) |         Amortized         Cost |        Fair Value           |         Unrealized         Loss |
| IV                   | A3                      | Ca                     | No                                                                       | $   487,977              | $      (67,545)                              | $       (67,545)              | $   419,736                         | $    349,782 | $      (69,954) |
| VI                   | A1                      | Caa1                   | Yes                                                                      | 193,923                                 | (62,322)                                                                   | (62,322)                                                         | 131,891                                            | 146,121                          | 14,230 |
| VII                  | A1                      | Ca                     | Yes                                                                      | 6,500,000                               | (1,023,899)                                                                | (2,872,917)                                                      | 3,591,301                                          | 2,416,050                        | (1,175,251) |
| VIII                 | A2                      | Ca                     | No                                                                       | 15,000,000                              | (8,774,041)                                                                | (10,749,458)                                                     | 4,124,071                                          | 943,500                          | (3,180,571) |
| IX                   | A2                      | Ca                     | No                                                                       | 5,000,000                               | (218,380)                                                                  | (218,380)                                                        | 4,781,620                                          | 2,778,000                        | (2,003,620) |
| X                    | A2                      | Ca                     | No                                                                       | 4,000,000                               | (93,600)                                                                   | (709,200)                                                        | 3,286,194                                          | 1,344,000                        | (1,942,194) |
| XI                   | A2                      | Ca                     | No                                                                       | 2,000,000                               | -                                                                          | -                                                                | 2,000,000                                          | 945,000                          | (1,055,00) |
| XII                  | A2                      | Ca                     | No                                                                       | 11,000,000                              | -                                                                          | -                                                                | 11,000,143                                         | 4,857,600                        | (6,142,543) |
| XIII                 | A2                      | Ca                     | No                                                                       | 4,000,000                               | -                                                                          | -                                                                | 4,000,000                                          | 1,906,000                        | (2,094,000) |
| XIV                  | A2                      | Ca                     | No                                                                       | 9,570,000                               | -                                                                          | -                                                                | 9,570,717                                          | 5,562,084                        | (4,008,633) |
| XV                   | A2                      | Ca                     | Yes                                                                      | 15,555,800                              | -                                                                          | -                                                                | 15,574,558                                         | 5,256,305                        | (10,318,253) |
| XVI                  | A2                      | Ca                     | Yes                                                                      | 13,052,360                              | -                                                                          | -                                                                | 13,078,623                                         | 2,927,644                        | (10,150,979) |
| XVII                 | A2                      | Ca                     | Yes                                                                      | 9,298,790                               | -                                                                          | -                                                                | 9,305,396                                          | 2,974,684                        | (6,330,712) |
| XVIII                | A2                      | Ca                     | Yes                                                                      | 2,963,835                               | (51,012)                                                                   | (51,012)                                                         | 2,932,776                                          | 845,682                          | (2,087,094) |
| XIX                  | A2                      | Ca                     | Yes                                                                      | 9,814,232                               | -                                                                          | -                                                                | 9,821,094                                          | 3,027,690                        | (6,793,404) |
|                 |                    |                   |                                                                     | $108,436,917                            |  $(10,290,799)                                                        | $(14,730,834)                                                    | $93,618,120                                        | $36,280,142                      | $(57,337,978) |
|                 |                    |                   |                                                                     |                                    |                                                                       |                                                             |                                               |                             |   |

| (1)   | Ratings      presented are those of Moodys InvestorServices. |
|-----------------|--------------------------------------------------------------|

| (2)   | The      structure of these securities allows for the deferral of interest payments      by the underlying issuers for up to 20 consecutive      quarters.  “Payment in kind” refers to the investors’ right to      capitalize interest on the par value of the security experiencing interest      payment deferrals. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Measured      on a non-recurring basis: |   | Quoted      Prices in Active      Markets for Identical      Assets(Level      1) |   | Significant      Other Observable Inputs(Level      2)                     |   | Significant      Unobservable      Inputs(Level      3) |   | Assets      at Fair Value |
|-----------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|---------------------------|
|                                    |   |                                                                              |   |                                                                       |   |                                                    |   |                      |
| Impaired      loans                     |   | $            -        |   | $            - |   | $     27,314                   |   | $27,314                   |
| Real      estate owned                  |   |  -                                                                           |   |  -                                                                    |   | 8,077                                                   |   | 8,077                     |
|    Total                 |   | $            -        |   | $            - |   | $     35,391                   |   | $35,391                   |

----

----

|                                                                        |   |  At      June 30, |    |   | At      December 31,  |   |    | $      Increase  |   |   | %      Increase   |   |
|-----------------------------------------------------------------------------|--------|------------------------|---------|--------|----------------------------|--------|---------|-----------------------|--------|--------|-----------------------------|--------|
|                                                                        |   | 2009              |    |   | 2008                  |   |    | (Decrease)       |   |   | (Decrease)             |   |
|                                                                        |   |                   |    |   |                       |   |    |                  |   |   |                        |   |
| Total assets                                                                |   | $                      | 821,391 |   |                       | $      | 847,233 |                  |   | $      | (25,842                     | )      |   |   | (3.1 | )% |
| Investment securities (1)                                                   |   |                   | 65,447  |   |                       |   | 48,879  |                  |   |   | 16,568                      |   |   |   | 33.9 |   |
| Interest-bearing deposits with      banks                                   |   |                   | 47,666  |   |                       |   | 29,425  |                  |   |   | 18,241                      |   |   |   | 62.0 |   |
| Loans, net                                                                  |   |                   | 604,114 |   |                       |   | 658,952 |                  |   |   | (54,838                     | )      |   |   | (8.3 | ) |
| Deposits                                                                    |   |                   | 488,959 |   |                       |   | 519,239 |                  |   |   | (30,280                     | )      |   |   | (5.8 | ) |
| Borrowed funds                                                              |   |                   | 281,421 |   |                       |   | 291,217 |                  |   |   | (9,796                      | )      |   |   | (3.4 | ) |
| Total shareholders’      equity                                       |   |                   | 41,941  |   |                       |   | 29,294  |                  |   |   | 12,647                      |   |   |   | 43.2 |   |
|                                                                        |   |                   |    |   |                       |   |    |                  |   |   |                        |   |   |   |   |   |
|      (1) Includes mortgage-backed      securities  |   |                   |    |   |                       |   |    |                  |   |   |                        |   |   |   |   |   |

|                                 | At      June 30, 2009                                               |   | At      December 31, 2008                                                                         |   | $      Increase (Decrease)                                    |   | %      Increase (Decrease)                    |
|--------------------------------------|---------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|-----------------------------------------------|
|                                 | Amount                                                              |   | Percent                                                                                           |   | Amount                                                        |   | Percent                                       |   |   |
| Real      estate:                    |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| One-to four-family      residential  |    $           52,463  |   | 8.5%                                                                                              |   |    $          56,325  |   | 8.4%                                          |   |    $           (3,862) |   | (6.9)% |
| Five or more family      residential | 141,794                                                        |   | 23.0                                                                               |   | 148,949                                                  |   | 22.2                           |   | (7,155) |   | (4.8)    |
| Commercial                           | 253,981                                                        |   | 41.3                                                                               |   | 253,801                                                  |   | 37.7                           |   | 180  |   | 0.1     |
| Total real    estate                 | 448,238                                                        |   | 72.8                                                                               |   | 459,075                                                  |   | 68.3                           |   | (10,837) |   | (2.4)    |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Real      estate construction:       |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| One-to four-family      residential  | 55,529                                                         |   | 9.0                                                                                |   | 71,424                                                   |   | 10.6                           |   | (15,895) |   | (22.3)    |
| Five or more family      residential | 495                                                            |   | 0.1                                                                                |   | 483                                                      |   | 0.1                            |   | 12  |   | 2.5     |
| Commercial                           | 11,004                                                         |   | 1.8                                                                                |   | 9,953                                                    |   |     1.5    |   | 1,051  |   | 10.6     |
| Total real estate      construction  | 67,028                                                         |   | 10.9                                                                               |   | 81,860                                                   |   | 12.2                           |   | (14,832) |   | (18.1)    |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Consumer:                            |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Automobile                           | 8,645                                                          |   | 1.4                                                                                |   | 11,818                                                   |   | 1.8                            |   | (3,173) |   | (26.8)          |
| Home equity                          | 38,143                                                         |   | 6.2                                                                                |   | 42,442                                                   |   | 6.3                            |   | (4,299) |   | (10.1)          |
| Credit cards                         | -                                                              |   |             -          |   | 23,192                                                   |   | 3.4                            |   | (23,192) |   | (100.0)          |
| Other                                | 7,384                                                          |   | 1.2                                                                                |   | 8,132                                                    |   | 1.2                            |   | (748) |   | (9.2)          |
| Total consumer                       | 54,172                                                         |   | 8.8                                                                                |   | 85,584                                                   |   | 12.7                           |   | (31,412) |   | (36.7)          |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Commercial      business             | 46,395                                                         |   | 7.5                                                                                |   | 45,762                                                   |   | 6.8                       |   | 633  |   | 1.4           |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Total      loans                     | 615,833                                                        |   | 100.0%                                                                                            |   | 672,281                                                  |   | 100.0%                                        |   | (56,448) |   | (8.4)          |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Less allowance for loan      losses  | (11,719)                                                            |   |                                                                                              |   | (13,329)                                                      |   |                                          |   | 1,610 |   | (12.1)          |
|                                 |                                                                |   |                                                                                              |   |                                                          |   |                                          |   |   |   |   |
| Loans,      net                      | $         604,114                               |   |                                                                                              |   | $         658,952                         |   |                                          |   | $           (54,838) |   | (8.3)% |

----

|                                         |                            |   |                            |   | $      Increase (Decrease)            |               | %      Increase (Decrease)                                                                                                      |
|----------------------------------------------|---------------------------------|--------|---------------------------------|--------|---------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                         | At      June 30, 2009      |   | At      December 31, 2008       |   |                                  |
| Available-for-sale:                          |                            |   |                            |   |                                  |               |                                                                                                                            |
| Trust preferred CDO      securities          | $    36,280 |   | $    14,895 |   | $    21,385  |               | 143.6%                                                                                                                          |
| Total      available-for-sale                | 36,280                          |   | 14,895                          |   | 21,385                           |               | 143.6                                                                                                       |
|                                         |                            |   |                            |   |                                  |               |                                                                                                                            |
| Held-to-maturity:                            |                            |   |                            |   |                                  |               |                                                                                                                            |
| Municipal      obligations                   | 9,376                           |   | 11,085                          |   | (1,709)                               |               | (15.4)                                                                                                           |
| Mortgage-backed      securities              | 19,791                          |   | 22,899                          |   | (3,108)                               |               | (13.6)                                                                                                           |
| Total      held-to-maturity                  | 29,167                          |   | 33,984                          |   | (4,817)                               |               | (14.2)                                                                                                           |
|                                         |                            |   |                            |   |                                  |               |                                                                                                                            |
| Total      Investment Securities             | 65,447                          |   | 48,879                          |   | 16,568                           |               | 33.9                                                                                                        |
|                                         |                       |   |                       |   |                                  |               |                                                                                                                            |
| Federal Home Loan Bank of      Seattle stock | 13,712                          |   | 13,712                          |   | -                                |               |                  -     |
|                                         |                            |   |                            |   |                                  |               |                                                                                                                  |
|  Total                                  | $    79,159 |   | $    62,591 |   | $ 16,568                         |          | 26.5%                                                                                                                           |

----

|                                                                                                              |   | At      June 30, 2009 |   |   | At      December 31, 2008 |   |   | $      Increase |   |   | %      Increase  |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------|---------------------------|--------|--------|-----------------|--------|--------|------------------|--------|
|                                                                                                              |   | Amount                |   |   | Percent      (1)          |   |   | Amount          |   |   | Percent      (1) |   |   | (Decrease) |   |   | (Decrease) |   |
| Loans      90 days or more past due or non-accrual loans:                                                         |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |
| Real estate                                                                                                       |   | $                     | -      |   |                      |   | -      | %               |   | $      | -                |   |   |   | - | %  |   | $ | - |   |   |   | - | % |
| Real estate      construction                                                                                     |   |                  | 29,265 |   |                      |   | 4.75   |            |   |   | 24,042           |   |   |   | 3.58 |   |   |   | 5,223 |   |   |   | 21.7 |   |
| Consumer                                                                                                          |   |                  | 225    |   |                      |   | 0.04   |            |   |   | 488              |   |   |   | 0.07 |   |   |   | (263 | ) |   |   | (53.9 | ) |
| Commercial      business                                                                                          |   |                  | 2,300  |   |                      |   | 0.37   |            |   |   | 14               |   |   |   | 0.00 |   |   |   | 2,286 |   |   |   | 16,328.6 |   |
| Total non-performing      loans                                                                                   |   |                  | 31,790 |   |                      |   | 5.16   | %               |   |   | 24,544           |   |   |   | 3.65 | %     |   |   | 7,246 |   |   |   | 29.5 |   |
|                                                                                                              |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      non-performing assets                                                                                  |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate    owned                                                                                              |   |                  | 8,077  |   |                      |   |   |            |   |   | 6,796            |   |   |   |   |   |   |   | 1,281 |   |   |   | 18.8 |   |
| Other repossessed      assets                                                                                     |   |                  | 10     |   |                      |   |   |            |   |   | 38               |   |   |   |   |   |   |   | (28 | ) |   |   | (73.7 | ) |
| Total other non-performing      assets                                                                            |   |                  | 8,087  |   |                      |   |   |            |   |   | 6,834            |   |   |   |   |   |   |   | 1,253 |   |   |   | 18.3 |   |
|                                                                                                              |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      non-performing assets                                                                                  |   | $                     | 39,877 |   |                      |   |   |            |   | $      | 31,378           |   |   |   |   |   |   | $ | 8,499 |   |   |   | 27.1 | % |
|                                                                                                              |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      non-performing assets as a percentage of             total assets        |   |                  | 4.85   | %      |                      |   |   |            |   |   | 3.70             | %      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                              |   |                  |   |   |                      |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      greater than 30 days delinquent as             percentage of total loans |   |                  | 5.49   | %      |                      |   |   |            |   |   | 4.00             | %      |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                  | At      June 30, 2009                             |   | At      December 31, 2008    |   | $      Increase (Decrease)                        |   | %      Increase (Decrease) |
|---------------------------------------|---------------------------------------------------|--------|------------------------------|--------|---------------------------------------------------|--------|----------------------------|
|                                  | Amount                                            |   | Percent                      |   | Amount                                            |   | Percent                    |   |   |
|                                  |                                              |   |                         |   |                                              |   |                       |   |   |   |   |
| Non-interest-bearing      checking    | $            43,447 |   | 8.9%                         |   | $            40,331 |   | 7.8%                       |   | $                 3,116  |   | 7.7%  |
| Interest-bearing      checking        | 40,249                                            |   | 8.2      |   | 36,468                                            |   | 7.0         |   | 3,781  |   | 10.4           |
| Savings      accounts                 | 32,033                                            |   | 6.6      |   | 28,197                                            |   | 5.4         |   | 3,836  |   | 13.6           |
| Money      market accounts            | 150,785                                           |   | 30.8     |   | 145,311                                           |   | 28.0        |   | 5,474  |   | 3.8           |
| IRA      accounts                     | 5,594                                             |   | 1.1      |   | 6,382                                             |   | 1.2         |   | (788) |   | (12.3)          |
| Brokered      certificates of deposit | 30,973                                            |   | 6.4      |   | 87,442                                            |   | 16.9        |   | (56,469) |   | (64.6)          |
| Retail      certificates of deposit   | 185,878                                           |   | 38.0     |   | 175,108                                           |   | 33.7        |   | 10,770  |   | 6.2      |
| Total deposits                        | $           488,959      |   | 100.0%                       |   | $           519,239      |   | 100.0%                     |   | $              (30,280) |   | (5.8)% |
|                                  |                                              |   |                         |   |                                              |   |                       |   |   |   |   |
| Core      deposits                    | $           272,108      |   | 55.6%                        |   | $           256,689      |   | 49.4%                      |   | $                15,419  |   | 6.0%  |
| Non-core      deposits                | 216,851                                           |   | 44.4     |   | 262,550                                           |   | 50.6        |   | (45,699) |   | (17.4)    |
| Total deposits                        | $           488,959      |   | 100.0%                       |   | $           519,239      |   | 100.0%                     |   | $              (30,280) |   | (5.8)% |

----

|                               | Three      Months Ended June 30,                |   | $      Increase (Decrease)                    |   | %      Increase (Decrease) |
|------------------------------------|-------------------------------------------------|--------|-----------------------------------------------|--------|----------------------------|
|                               | 2009                                            |   | 2008                                          |   |                       |
| Net      interest income           | $    5,184             |   | $    6,438                |   | $ (1,254)                  |   | (19.5)% |
| Non-interest      income           | 2,841                                      |   | 2,601                                         |   | 240                   |   | 9.2      |
| Total      revenue                 |      8,025        |   |      9,039           |   | (1,014)                    |   | (11.2)    |
| Provision      for loan losses     |     4,000              |   |        550 |   | 3,450                 |   | 627.3     |
| Non-interest      expense          |       7,771  |   |       6,900     |   | 871                   |   | 12.6     |
| Impairment      loss on securities |     (1,808)                 |   | -                                             |   | (1,808)                    |   | (100.0)    |
| Net      income (loss)             | (3,700)                                         |   | 1,017                                         |   | (4,717)                    |   | (463.8)    |

|                                  | Three      Months Ended June 30,                       |   | $      Increase (Decrease)                             |   | %      Increase (Decrease)                               |
|---------------------------------------|--------------------------------------------------------|--------|--------------------------------------------------------|--------|----------------------------------------------------------|
|                                  | 2009                                                   |   | 2008                                                   |   |                                                     |
| Interest      income:                 |                                                   |   |                                                   |   |                                                     |   |   |
| Loans                                 | $             9,534 |   | $           11,191            |   | $             (1,657) |   | (14.8)% |
| Securities      available-for-sale    | 595                                                    |   | 1,276                                                  |   | (681)                                                    |   | (53.4)     |
| Securities      held-to-maturity      | 330                                                    |   | 420                                                    |   | (90)                                                     |   | (21.4)     |
| Interest-bearing      deposits        | 32                                                     |   | 6                                                      |   | 26                                                  |   | 433.3      |
| Federal Home Loan Bank      dividends | -                                                      |   | 48                                                     |   | (48)                                                     |   | (100.0)     |
| Total interest      income            | 10,491                                                 |   | 12,941                                                 |   | (2,450)                                                  |   | (18.9)     |
|                                  |                                                   |   |                                                   |   |                                                     |   |   |
| Interest      expense:                |                                                   |   |                                                   |   |                                                     |   |   |
| Deposits                              | 2,075                                                  |   | 2,979                                                  |   | (904)                                                    |   | (30.3)          |
| Borrowed funds                        | 3,232                                                  |   | 3,524                                                  |   | (292)                                                    |   | (8.3)          |
| Total interest      expense           | 5,307                                                  |   | 6,503                                                  |   | (1,196)                                                  |   | (18.4)     |
| Net      interest income              | $             5,184 |   | $             6,438 |   | $             (1,254)      |   | (19.5)% |

----

|                                  | Three      Months Ended June 30,                             |   | $      Increase (Decrease)                                   |         | %      Increase (Decrease)                                                   |
|---------------------------------------|--------------------------------------------------------------|--------|--------------------------------------------------------------|--------------|------------------------------------------------------------------------------|
|                                  | 2009                                                         |   | 2008                                                         |         |                                                                         |
| Allowance      at beginning of period | $             8,456  |   | $             7,979  |         | $                477  |   | 6.0% |
| Provision for loan      losses        | 4,000                                                   |   | 550                                                     |    | 3,450                                                                   |   | 627.3    |
| Recoveries                            | 24                                                      |   | 66                                                      |         | (42)                                                                         |   | (63.6)   |
| Charge-offs                           | (761)                                                        |   | (324)                                                        |         | (437)                                                                        |   | 134.9    |
| Allowance      at end of period       | $           11,719             |   | $             8,271  |         | $             3,448                  |   | 41.7% |

----

|                                            | Three      Months Ended June 30,                                     |   | $      Increase (Decrease)                                                 |   | %      Increase (Decrease)                 |
|-------------------------------------------------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|-------------------------------------------------|
|                                            | 2009                                                                 |   | 2008                                                                       |   |                                            |
| Deposit      service fees                       | $      868                             |   | $      908                              |   | $            (40) |   | (4.4)% |
| Loan      service fees                          |         214                  |   |         287                   |   | (73)                                            |   | (25.4)    |
| Insurance      service fees                     |    503                                                |   |    529                                                 |   | (26)                                            |   | (4.9)    |
| Investment      service fees                    |    175                                                |   |    121                                                 |   | 54                                         |   | 44.6          |
| Real      estate lease income                   |    177                                                |   |    262                                                 |   | (85)                                            |   | (32.4)    |
| Gain      on sale of loans, net                 |    874                                                |   |    450                                                 |   | 424                                        |   | 94.2          |
| Gain      (loss) on sale of REO, net            |    (8)                                                |   |    7                                                   |   | (15)                                            |   | (214.3)    |
| Loss      on sale of premises andequipment, net |    (2)                                                |   |    (1)                                                      |   | (1)                                             |   | 100.0     |
| Other      operating income                     |            40 |   |            38  |   | 2                                          |   | 5.3     |
| Total non-interest      income                  | $   2,841                                             |   | $   2,601                                              |   | $      240   |   | 9.2% |

|                                                                           | Three      Months Ended June 30,           |   | $      Increase (Decrease)                             |   | %      Increase (Decrease)                                       |
|--------------------------------------------------------------------------------|--------------------------------------------|--------|--------------------------------------------------------|--------|------------------------------------------------------------------|
|                                                                           | 2009                                       |   | 2008                                                   |   |                                                             |
| Compensation      and benefits                                                 | $           3,641 |   | $             4,042 |   | $             (401)           |   | (9.9)% |
| Office      operations                                                         | 927                                        |   | 937                                                    |   | (10)                                                             |   | (1.1)    |
| Occupancy                                                                      | 630                                        |   | 616                                                    |   | 14                                                          |   | 2.3     |
| Loan      servicing                                                            | 119                                        |   | 123                                                    |   | (4)                                                              |   | (3.3)   |
| Outside      and professional services                                         | 264                                        |   | 248                                                    |   | 16                                                          |   | 6.5    |
| Marketing                                                                      | 274                                        |   | 218                                                    |   | 56                                                          |   | 25.7    |
| Federal      deposit insurance premiums and    assessments | 1,261                                      |   | 65                                                     |   | 1,196                                                       |   | 1,840.0    |
| Other      operating expenses                                                  | 655                                        |   | 651                                                    |   | 4                                                           |   | 0.6    |
| Total non-interest      expense                                                | $           7,771 |   | $             6,900 |   | $               871 |   | 12.6% |

----

|                                                                                    |   |               Three      Months EndedJune      30, 2009 |    |   |                    Three      Months EndedJune      30, 2008 |   |   |                             |   |   |                                |   |
|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                    |   |        Average      Balance                                                                                              |    |   |        Average      Yield/Cost                                                                                           |   |   |        Average      Balance |   |   |        Average      Yield/Cost |   |   |        $      Increase (Decrease) |   |   |        %      Increase (Decrease) |   |
| INTEREST-EARNING      ASSETS:                                                           |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |
|     Total      loans                                                |   | $                                                                                                                             | 628,529 |   |                                                                                                                          |   | 6.07   | %                                |   | $      | 658,743                             |   |   |   | 6.80 | % |   | $ | (30,214 | ) |   |   | (4.6 | )% |
|     Mortgage-backed      securities                                 |   |                                                                                                                          | 20,723  |   |                                                                                                                          |   | 4.28   |                             |   |   | 40,400                              |   |   |   | 4.28 |   |   |   | (19,677 | ) |   |   | (48.7 | ) |
| Investment      securities                                                              |   |                                                                                                                          | 44,712  |   |                                                                                                                          |   | 6.29   |                             |   |   | 106,106                             |   |   |   | 4.77 |   |   |   | (61,394 | ) |   |   | (57.9 | ) |
| Federal Home Loan Bank      stock                                                       |   |                                                                                                                          | 13,712  |   |                                                                                                                          |   | -      |                             |   |   | 13,712                              |   |   |   | 1.40 |   |   |   | - |   |   |   | - |   |
| Interest-bearing deposits with      banks                                               |   |                                                                                                                          | 50,932  |   |                                                                                                                          |   | 0.25   |                             |   |   | 1,025                               |   |   |   | 2.14 |   |   |   | 49,907 |   |   |   | 4,869.0 |   |
| Total interest-earning      assets                                                      |   |                                                                                                                          | 758,608 |   |                                                                                                                          |   | 5.54   |                             |   |   | 819,986                             |   |   |   | 6.32 |   |   |   | (61,378 | ) |   |   | (7.5 | ) |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning      assets                                                        |   |                                                                                                                          | 80,697  |   |                                                                                                                          |   |   |                             |   |   | 56,790                              |   |   |   |   |   |   |   | 23,907 |   |   |   | 42.1 |   |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                            |   | $                                                                                                                             | 839,305 |   |                                                                                                                          |   |   |                             |   | $      | 876,776                             |   |   |   |   |   |   | $ | (37,471 | ) |   |   | (4.3 | )% |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST-BEARING      LIABILITIES:                                                      |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings    accounts                                                                     |   | $                                                                                                                             | 33,345  |   |                                                                                                                          |   | 0.05   |                             |   | $      | 31,475                              |   |   |   | 0.25 |   |   | $ | 1,870 |   |   |   | 5.9 | % |
| Interest-bearing checking      accounts                                                 |   |                                                                                                                          | 38,501  |   |                                                                                                                          |   | 0.23   |                             |   |   | 36,561                              |   |   |   | 0.69 |   |   |   | 1,940 |   |   |   | 5.3 |   |
| Money market deposit      accounts                                                      |   |                                                                                                                          | 149,202 |   |                                                                                                                          |   | 1.41   |                             |   |   | 117,870                             |   |   |   | 2.24 |   |   |   | 31,332 |   |   |   | 26.6 |   |
| Certificates of      deposit                                                            |   |                                                                                                                          | 230,047 |   |                                                                                                                          |   | 2.65   |                             |   |   | 235,980                             |   |   |   | 3.80 |   |   |   | (5,933 | ) |   |   | (2.5 | ) |
| Total deposits                                                                          |   |                                                                                                                          | 451,095 |   |                                                                                                                          |   | 2.05   |                             |   |   | 421,886                             |   |   |   | 2.84 |   |   |   | 29,209 |   |   |   | 6.9 |   |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal Home Loan Bank      advances                                                    |   |                                                                                                                          | 293,232 |   |                                                                                                                          |   | 4.42   |                             |   |   | 324,023                             |   |   |   | 4.38 |   |   |   | (30,791 | ) |   |   | (9.5 | ) |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Total      interest-bearing liabilities |   |                                                                                                                          | 744,327 |   |                                                                                                                          |   | 2.86   |                             |   |   | 745,909                             |   |   |   | 3.51 |   |   |   | (1,582 | ) |   |   | (0.2 | ) |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST      BEARING LIABILITIES:                                                  |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing      checking                                                      |   |                                                                                                                          | 40,568  |   |                                                                                                                          |   |   |                             |   |   | 36,885                              |   |   |   |   |   |   |   | 3,683 |   |   |   | 10.0 |   |
| Other                                                                                   |   |                                                                                                                          | 11,345  |   |                                                                                                                          |   |   |                             |   |   | 12,594                              |   |   |   |   |   |   |   | (1,249 | ) |   |   | (9.9 | ) |
| Total      non-interest bearing liabilities                                             |   |                                                                                                                          | 51,913  |   |                                                                                                                          |   |   |                             |   |   | 49,479                              |   |   |   |   |   |   |   | 2,434 |   |   |   | 4.9 |   |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total    liabilities                                                                    |   |                                                                                                                          | 796,240 |   |                                                                                                                          |   |   |                             |   |   | 795,388                             |   |   |   |   |   |   |   | 852 |   |   |   | 0.1 |   |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity                                                                                  |   |                                                                                                                          | 43,065  |   |                                                                                                                          |   |   |                             |   |   | 81,388                              |   |   |   |   |   |   |   | (38,323 | ) |   |   | (47.1 | ) |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and      equity                                                       |   | $                                                                                                                             | 839,305 |   |                                                                                                                          |   |   |                             |   | $      | 876,776                             |   |   |   |   |   |   | $ | (37,471 | ) |   |   | (4.3 | )% |
|                                                                                    |   |                                                                                                                          |    |   |                                                                                                                          |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                                                                |   | $                                                                                                                             | 5,184   |   |                                                                                                                          |   |   |                             |   | $      | 6,438                               |   |   |   |   |   |   | $ | (1,254 | ) |   |   | (19.5 | )% |
| Interest      rate spread      (1)                                                      |   |                                                                                                                          |    |   |                                                                                                                          |   | 2.68   | %                                |   |   |                                |   |   |   | 2.81 | % |   |   |   |   |   |   |   |   |
| Net      interest margin (2)                                                            |   |                                                                                                                          | 2.73    | %      |                                                                                                                          |   |   |                             |   |   | 3.13                                | %      |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                               | Six      Months Ended June 30,                                     |   | $      Increase (Decrease)                              |   | %      Increase (Decrease)                     |
|------------------------------------|--------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------|
|                               | 2009                                                               |   | 2008                                                         |   |                                                |
|                               |                                                               |   |                                                         |   |                                                |   |   |
| Net      interest income           | $            10,774             |   | $            12,981            |   | $            (2,207)  |   | (17.0)% |
| Non-interest      income           | 8,491                                                         |   | 5,422                                                        |   | 3,069                                          |   | 56.6      |
| Total      revenue                 |               19,265  |   |               18,403 |   |        862  |   | 4.7      |
| Provision      for loan losses     |      6,300                           |   |        700                |   | 5,600                                          |   | 800.0      |
| Non-interest      expense          |      15,160                          |   |      13,858                         |   |       1,302      |   | 9.4      |
| Impairment      loss on securities | (10,291)                                                           |   | -                                                            |   | (10,291)                                            |   | (100.0)    |
| Net      income (loss)             | (8,313)                                                            |   | 2,461                                                        |   | (10,774)                                            |   | (437.8)    |

|                                        | Six      Months Ended June 30,              |   | $      Increase (Decrease)                  |   | %      Increase (Decrease)                   |
|---------------------------------------------|---------------------------------------------|--------|---------------------------------------------|--------|----------------------------------------------|
|                                        | 2009                                        |   | 2008                                        |   |                                         |
| Interest      income:                       |                                        |   |                                        |   |                                         |   |   |
| Loans                                       | $           19,776 |   | $           22,468 |   | $           (2,692) |   | (12.0)% |
| Securities      available-for-sale          | 1,429                                       |   | 3,133                                       |   | (1,704)                                      |   | (54.4)     |
| Securities      held-to-maturity            | 683                                         |   | 871                                         |   | (188)                                        |   | (21.6)     |
| Interest-bearing      deposits              | 51                                          |   | 33                                          |   | 18                                      |   | 54.5      |
| Federal Home Loan Bank stock      dividends | -                                           |   | 82                                          |   | (82)                                         |   | (100.0)          |
| Total interest      income                  | 21,939                                      |   | 26,587                                      |   | (4,648)                                      |   | (17.5)          |
|                                        |                                        |   |                                        |   |                                         |   |   |
| Interest      expense:                      |                                        |   |                                        |   |                                         |   |   |
| Deposits                                    | 4,707                                       |   | 6,566                                       |   | (1,859)                                      |   | (28.3)          |
| Borrowed funds                              | 6,458                                       |   | 7,040                                       |   | (582)                                        |   | (8.3)     |
| Total interest      expense                 | 11,165                                      |   | 13,606                                      |   | (2,441)                                      |   | (17.9)     |
| Net      interest income                    | $          10,774       |   | $          12,981       |   | $           (2,207) |   | (17.0)% |

----

|                                  | Six      Months Ended June 30,                                |   | $      Increase (Decrease)                                         |   | %      Increase (Decrease)                                         |
|---------------------------------------|---------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                  | 2009                                                          |   | 2008                                                               |   |                                                               |
| Allowance      at beginning of period | $              13,329 |   | $              8,079  |   | $              5,250  |   |      65.0% |
| Provision for loan      losses        | 6,300                                                         |   | 700                                                           |   | 5,600                                                         |   |   800.0          |
| Recoveries                            | 62                                                            |   | 138                                                           |   | (76)                                                               |   | (55.1)         |
| Charge-offs                           | (7,972)                                                       |   | (646)                                                              |   | (7,326)                                                            |   | 1,134.1     |
| Allowance      at end of period       | $              11,719 |   | $              8,271  |   | $              3,448  |   | 41.7% |

----

|                                            | Six      Months Ended June 30,                                             |   | $      Increase (Decrease)                                 |   | %      Increase (Decrease)                                                    |
|-------------------------------------------------|----------------------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------------------------------------------------------------|
|                                            | 2009                                                                       |   | 2008                                                            |   |                                                                          |
| Deposit      service fees                       | $             1,666                |   | $             1,747     |   | $                 (81) |   | (4.6)% |
| Loan      service fees                          |         445                   |   |         602        |   |       (157)                                     |   | (26.1)         |
| Insurance      service fees                     |      1,090                                   |   |      1,079                        |   |      11                                         |   | 1.0          |
| Investment      service fees                    |      350                                     |   |      285                          |   |      65                                         |   | 22.8          |
| Real      estate lease income                   |     434                                           |   |     508                                |   |     (74)                                                  |   | (14.6)         |
| Gain      on sale of securities, net            |     -                                             |   |     11                                 |   |     (11)                                                  |   | (100.0)         |
| Gain      on sale of loans, net                 |     4,435                                         |   |     685                                |   |     3,750                                            |   | 547.4          |
| Gain      (loss) on sale of REO, net            | (10)                                                                       |   | 7                                                          |   |     (17)                                                  |   | (242.9)         |
| Loss      on sale of premises andequipment, net |    (3)                                                      |   |    (1)                                           |   |    (2)                                                         |   | 200.0          |
| Other      operating income                     |            84  |   |          499  |   |        (415)                               |   | (83.2)         |
| Total non-interest      income                  | $             8,491                |   | $             5,422     |   | $        3,069                   |   | 56.6%  |

|                                                                                 | Six      Months Ended June 30,                               |   | $      Increase (Decrease)                             |   | %      Increase (Decrease)                              |
|--------------------------------------------------------------------------------------|--------------------------------------------------------------|--------|--------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                 | 2009                                                         |   | 2008                                                   |   |                                                         |
| Compensation      and benefits                                                       | $              7,266 |   | $             8,102 |   | $              (836) |   | (10.3)% |
| Office      operations                                                               | 1,883                                                        |   | 1,892                                                  |   | (9)                                                          |   | (0.5)          |
| Occupancy                                                                            | 1,268                                                        |   | 1,230                                                  |   | 38                                                      |   | 3.1      |
| Loan      servicing                                                                  | 254                                                          |   | 232                                                    |   | 22                                                      |   | 9.5      |
| Outside      and professional services                                               | 749                                                          |   | 696                                                    |   | 53                                                      |   | 7.6      |
| Marketing                                                                            | 531                                                          |   | 502                                                    |   | 29                                                      |   | 5.8      |
| Federal      deposit insurance premiums and     assessments | 1,755                                                        |   | 130                                                    |   | 1,625                                                   |   | 1,250.0      |
| Other      operating expenses                                                        | 1,454                                                        |   | 1,074                                                  |   | 380                                                     |   | 35.4           |
| Total non-interest      expense                                                      | $            15,160            |   | $           13,858            |   | $            1,302        |   | 9.4%  |

----

|                                                                                    |   |        Six      Months EndedJune      30, 2009 |    |   |        Six      Months EndedJune      30, 2008 |   |   |                             |   |   |                                |   |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|--------|-----------------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                    |   | Average      Balance                           |    |   |        Average      Yield/Cost                 |   |   |        Average      Balance |   |   |        Average      Yield/Cost |   |   |        $      Increase (Decrease) |   |   |        %      Increase (Decrease) |   |
| INTEREST-EARNING      ASSETS:                                                           |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |
| Total loans                                                                             |   | $                                                   | 642,539 |   |                                                |   | 6.17   | %                                |   | $      | 646,191                             |   |   |   | 6.96 | % |   | $ | (3,652 | ) |   |   | (0.6 | )% |
| Mortgage-backed      securities                                                         |   |                                                | 21,516  |   |                                                |   | 4.29   |                             |   |   | 42,329                              |   |   |   | 4.32 |   |   |   | (20,813 | ) |   |   | (49.2 | ) |
| Investment      securities                                                              |   |                                                | 43,736  |   |                                                |   | 7.54   |                             |   |   | 112,077                             |   |   |   | 5.51 |   |   |   | (68,341 | ) |   |   | (61.0 | ) |
| Federal Home Loan Bank      stock                                                       |   |                                                | 13,712  |   |                                                |   | -      |                             |   |   | 13,712                              |   |   |   | 1.20 |   |   |   | - |   |   |   | - |   |
| Interest-bearing deposits in      other banks                                           |   |                                                | 46,646  |   |                                                |   | 0.22   |                             |   |   | 2,403                               |   |   |   | 2.70 |   |   |   | 44,243 |   |   |   | 1,841.2 |   |
| Total interest-earning      assets                                                      |   |                                                | 768,149 |   |                                                |   | 5.73   |                             |   |   | 816,712                             |   |   |   | 6.52 |   |   |   | (48,563 | ) |   |   | (5.9 | ) |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning      assets                                                        |   |                                                | 75,272  |   |                                                |   |   |                             |   |   | 55,737                              |   |   |   |   |   |   |   | 19,535 |   |   |   | 35.0 |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                            |   | $                                                   | 843,421 |   |                                                |   |   |                             |   | $      | 872,449                             |   |   |   |   |   |   | $ | (29,028 | ) |   |   | (3.3 | )% |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST-BEARING      LIABILITIES:                                                      |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings    accounts                                                                     |   | $                                                   | 32,367  |   |                                                |   | 0.07   |                             |   | $      | 30,910                              |   |   |   | 0.26 |   |   | $ | 1,457 |   |   |   | 4.7 | % |
| Interest-bearing checking      accounts                                                 |   |                                                | 36,745  |   |                                                |   | 0.25   |                             |   |   | 36,736                              |   |   |   | 0.69 |   |   |   | 9 |   |   |   | - |   |
| Money market deposit      accounts                                                      |   |                                                | 148,472 |   |                                                |   | 1.67   |                             |   |   | 117,366                             |   |   |   | 2.60 |   |   |   | 31,106 |   |   |   | 26.5 |   |
| Certificates of      deposit                                                            |   |                                                | 246,001 |   |                                                |   | 2.65   |                             |   |   | 233,382                             |   |   |   | 4.19 |   |   |   | 12,619 |   |   |   | 5.4 |   |
| Total deposits                                                                          |   |                                                | 463,585 |   |                                                |   | 2.05   |                             |   |   | 418,394                             |   |   |   | 3.16 |   |   |   | 45,191 |   |   |   | 10.8 |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal Home Loan Bank      advances                                                    |   |                                                | 292,793 |   |                                                |   | 4.45   |                             |   |   | 322,232                             |   |   |   | 4.39 |   |   |   | (29,439 | ) |   |   | (9.1 | ) |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Total      interest-bearing liabilities |   |                                                | 756,378 |   |                                                |   | 2.98   |                             |   |   | 740,626                             |   |   |   | 3.69 |   |   |   | 15,752 |   |   |   | 2.1 |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST      BEARING LIABILITIES:                                                  |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing      checking                                                      |   |                                                | 39,883  |   |                                                |   |   |                             |   |   | 35,322                              |   |   |   |   |   |   |   | 4,561 |   |   |   | 12.9 |   |
| Other                                                                                   |   |                                                | 9,911   |   |                                                |   |   |                             |   |   | 12,676                              |   |   |   |   |   |   |   | (2,765 | ) |   |   | (21.8 | ) |
| Total      non-interest bearing liabilities                                             |   |                                                | 49,794  |   |                                                |   |   |                             |   |   | 47,998                              |   |   |   |   |   |   |   | 1,796 |   |   |   | 3.7 |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total    liabilities                                                                    |   |                                                | 806,172 |   |                                                |   |   |                             |   |   | 788,624                             |   |   |   |   |   |   |   | 17,548 |   |   |   | 2.2 |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity                                                                                  |   |                                                | 37,249  |   |                                                |   |   |                             |   |   | 83,825                              |   |   |   |   |   |   |   | (46,576 | ) |   |   | (55.6 | ) |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and      equity                                                       |   | $                                                   | 843,421 |   |                                                |   |   |                             |   | $      | 872,449                             |   |   |   |   |   |   | $ | (29,028 | ) |   |   | (3.3 | )% |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                                                                |   | $                                                   | 10,774  |   |                                                |   |   |                             |   | $      | 12,981                              |   |   |   |   |   |   | $ | (2,207 | ) |   |   | (17.0 | )% |
| Interest      rate spread      (1)                                                      |   |                                                |    |   |                                                |   | 2.75   | %                                |   |   |                                |   |   |   | 2.83 | % |   |   |   |   |   |   |   |   |
| Net      interest margin (2)                                                            |   |                                                | 2.79    | %      |                                                |   |   |                             |   |   | 3.17                                | %      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                |    |   |                                                |   |   |                             |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

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|                                                                           |   | Votes      Cast |      |   | Votes   |   |     | Total    |   |
|--------------------------------------------------------------------------------|--------|-----------------|-----------|--------|---------|--------|----------|----------|--------|
|                                                                           |   | For             |      |   | Against |   |     | Withheld |   |   | Votes      Cast |   |
| Election      of Directors                                                     |   |            |      |   |    |   |     |     |   |   |   |   |
|      Brian      E. Knutson – 3-year term        |   |            | 4,667,580 |   |    |   | -      - |     |   |   | 542,090 |   |   |   | 5,209,670 |   |
|      Victor      J. Toy – 3-year term           |   |            | 4,730,232 |   |    |   | -      - |     |   |   | 479,838 |   |   |   | 5,210,070 |   |
|      Alfred      H. Treleven, III – 3-year term |   |            | 4,652,986 |   |    |   | -      - |     |   |   | 557,083 |   |   |   | 5,210,069 |   |
|      Bruce      W. Valentine – 1-year term      |   |            | 4,745,045 |   |    |   | -      - |     |   |   | 465,025 |   |   |   | 5,210,070 |   |

|   | 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 | Form      of Rainier Pacific Savings Bank Employee Severance Compensation Plan (1) |
|--------|------|------------------------------------------------------------------------------------|

|   | 10.5 | Rainier      Pacific 2004 Stock Option Plan (3) |
|--------|------|-------------------------------------------------|

|   | 10.6 | Rainier      Pacific 2004 Management Recognition Plan (3) |
|--------|------|-----------------------------------------------------------|

|   | 10.7 | Form      of Incentive Stock Option Agreement (4) |
|--------|------|---------------------------------------------------|

|   | 10.8 | Form      of Non-Qualified Stock Option Agreement (4) |
|--------|------|-------------------------------------------------------|

|   | 10.9 | Form      of Restricted Stock Award Agreement (4) |
|--------|------|---------------------------------------------------|

|   | 14 | Code      Business Conduct and Ethics (5) |
|--------|----|-------------------------------------------|

|   | 31     | Certification      of Chief Executive Officer and 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 Registrant’s 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 byreference.                                     |
|   | (4)  | Filed      as an exhibit to the Registrant’s 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.               |

----

|                      | Rainier Pacific      Financial Group, Inc.                                                                                                                                                                                                                                                                                       |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |                                                                                                                                                                                                                                                                                                                                  |
|                      |                                                                                                                                                                                                                                                                                                                                  |
|                      |                                                                                                                                                                                                                                                                                                                                  |
| August 6,      2009  | /s/John      A.      Hall                                                   |
|                      | John A.      Hall                                                                                                                                                                                                                                                                                                                |
|                      | President and Chief      Executive Officer                                                                                                                                                                                                                                                                                       |
|                      | (Principal Executive      Officer),                                                                                                                                                                                                                                                                                              |
|                      | Interim Chief      Financial Officer                                                                                                                                                                                                                                                                                             |
|                      | (Principal Financial      and Accounting Officer)                                                                                                                                                                                                                                                                                |

----

| 31     | Certification      of Chief Executive Officer and 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 |

| 36         |
|-----------------|