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A number of professional investors vied with former members of Rainier Pacific Credit Union last week for shares in the red hot offering of the credit union-turned savings bank now known as Rainier Pacific Financial Group.

Shares in the converted credit union, just the seventh credit union convert to go public, shot up 70% to $17 on the first day of trading, one of the few initial public offerings this year. The shares trade on the Nasdaq under the symbol RPFG.

The initial offering made quick profits for directors and officers of the $715-million Fife, Wash., thrift, who subscribed to 980,000 shares at the initial $10 offering price, earning them a cool $7 million the first day of trading.

But they weren't the only ones to cash in, as almost half the shares were subscribed to by former credit union members, earning them a $55 million windfall, as well.

"We thought it was a unique way to honor our credit union heritage," said John Hall, president and CEO of Rainier Pacific. "We decided to honor our credit union members with the best subscription rights possible. Se we decided to extend it all the way back to Dec. 31, 2000, the last day it was a credit union. We did something unique. We felt it was appropriate and honest to give them the best subscription rights."

Those former credit union members won the race for the easy cash with professional investors, who flooded Rainier Pacific with almost $200 million in new deposits between March 31 and June 30, the final day entitling them to tier three subscription rights at $10 a share. Many of the professionals were limited in their subscriptions because of the demand of the former credit union members, according to Hall.

Tier two subscription rights went to the thrift's employee stock ownership plan, which purchased 1.14 million of the newly issued shares.

The extension of subscription rights to Rainier Pacific CU depositor/members as long as 34 months ago, was an unusual offer, according to knowledgeable observers. "It was a long way back," said Evan Thomas, an analyst with SNL Securities, which follows thrift stocks. "It's unusual for an ordinary offering for a mutual to go back that far. Usually they go 12 or 15 months back."

The competition between the former members and the professional investors created a situation with too much investment capital chasing too few shares, forcing a run-up in the stock on the first day of trading, said Thomas. "It was largely driven by the market," said Thomas of the quick appreciation.

The flood of funds from professional investors, those who see opportunity in stock conversions, almost doubled Rainier Pacific's assets from $383 million to $715 million, while deposits soared from $307 million to $493 million between March 31 and June 30.

Deposits were flowing in from New York, New Jersey, Florida and California. "All the people who read the investment newsletters were moving their funds to get in on the subscription rights," said Hall.

The $79 million raised by Rainier Pacific will be used to help finance an expansion of the thrift's branch network from 11 to 14 branches and to expand the thrift's securities and insurance subsidiary, something Rainier Pacific had difficulty doing when the credit union ran it as a CUSO, according to Hall. It also plans an expansion of its commercial real estate lending business to include both cash management and depository services.

The decision to convert from a credit union, he said, was based on the desire to open membership to the general community, to expand products and services, and to raise capital more readily to fund expansion.

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