LOS ANGELES--(BUSINESS WIRE)--
Nara Bancorp, Inc. (the "Company") (NASDAQ: NARA), the holding company
of Nara Bank (the "Bank") reported a net loss of $9.9 million, or
($0.39) per diluted share, for fourth quarter 2008, compared to net
income of $8.3 million, or $0.32 per diluted share, for fourth quarter
2007, and $5.0 million, or $0.19 per diluted share, for third quarter
2008. For the full year 2008, net income was $2.8 million, or $0.09 per
diluted share.
Min Kim, President and Chief Executive Officer, said, "As economic
conditions weakened in the fourth quarter, we took aggressive actions to
maintain the strength of our balance sheet. These actions included
raising $67 million in capital through the TARP program, aggressively
recognizing losses and recording immediate charge-offs where it was
appropriate, and increasing our allowance for loan losses to 2.07% of
total loans as of December 31, 2008. Our provision for loan losses of
$28 million led to the net loss for the fourth quarter; however, we
believe our balance sheet remains strong and we are well positioned to
manage through a prolonged economic slowdown."
Financial Highlights
2008 Fourth Quarter 2007 Fourth Quarter 2008 Third Quarter
(Dollars in thousands)
Net Income (Loss) $ (9,853 ) $ 8,339 $ 4,982
Diluted (Loss) $ (0.39 ) $ 0.32 $ 0.19
Earnings Per Share
Net interest $ 22,702 $ 25,125 $ 24,753
income
Net interest 3.71 % 4.43 % 4.02 %
margin
Non-interest $ 2,058 $ 5,968 $ 4,011
income
Non-interest $ 13,747 $ 13,856 $ 13,991
expense
Net Loans $ 2,055,024 $ 1,988,694 $ 2,069,527
receivable
Deposits $ 1,938,603 $ 1,833,346 $ 1,946,843
Non-performing $ 37,580 $ 16,592 $ 30,501
loans
ALLL to total 2.07 % 1.00 % 1.33 %
loans
ALLL to
non-performing 116 % 121 % 91 %
loans
Provision for loan $ 28,000 $ 3,650 $ 6,180
losses
Efficiency ratio 55.52 % 44.56 % 48.64 %
Operating Results for Fourth Quarter
2008
Net Interest Income and Net Interest Margin. Fourth
quarter 2008 net interest income before provision for loan losses was
$22.7 million, a decrease of 10% from fourth quarter 2007. Fourth
quarter 2008 net interest margin (net interest income divided by average
interest-earning assets) decreased 72 basis points to 3.71% from 4.43%
in the fourth quarter of 2007. The decline in net interest margin was
partially offset by average interest-earning asset growth of 7.9%.
The weighted average yield on the loan portfolio for fourth quarter 2008
decreased 180 basis points to 6.75% from 8.55% for the same period last
year. The decrease was the result of the prime rate-based portion of the
loan portfolio repricing downward as market interest rates continued to
decline, due to further reductions in interest rates by the Federal
Reserve throughout 2008. The prime rate decreased 400 basis points
throughout 2008. This was partially mitigated by the 50% of fixed rate
loans in the portfolio at December 31, 2008. At December 31, 2007, fixed
rate loans were 52% of the loan portfolio. The weighted average yield on
the variable rate and fixed rate portfolios (excluding loan discount
accretion) at December 31, 2008 was 4.65% and 7.62%, respectively,
compared to 8.34% and 7.71% at December 31, 2007.
The weighted average yield on securities available for sale for fourth
quarter 2008 decreased 61 basis points to 4.65% from 5.26% for the same
period last year. The decrease was primarily due to variable rate Agency
CMO investment securities repricing downward as one month LIBOR rates
declined. The variable rate agency CMO portfolio was $111 million at
December 31, 2008, compared to $88 million at the prior year-end.
The weighted average cost of deposits for fourth quarter 2008 decreased
111 basis points to 2.74% from 3.85% for the same period last year. The
cost of time deposits decreased 195 basis points to 3.16% from 5.11%,
contributing to a substantial portion of the decrease.
The weighted average cost of FHLB advances for fourth quarter 2008
decreased 67 basis points to 3.65% from 4.32% for fourth quarter 2007,
reflecting the decline in market interest rates.
Following are the weighted average data at December 31, 2008 and 2007:
December 31,
2008 2007
Weighted average loan portfolio yield (excluding discounts) 6 .14% 8 .01%
Weighted average securities available-for-sale portfolio yield 4 .08% 5 .37%
Weighted average cost of deposits 2 .59% 3 .74%
Weighted average cost of total interest-bearing deposits 3 .07% 4 .68%
Weighted average cost of FHLB advances 3 .70% 4 .16%
Sequentially, fourth quarter 2008 net interest income before provision
for loan losses decreased $2.1 million, or 8%, from third quarter 2008.
The decrease was primarily attributable to a decline in net interest
margin resulting from rate cuts of 175 basis points by the Federal
Reserve during the quarter. The net interest margin decreased 31 basis
points to 3.71% for fourth quarter 2008 from 4.02% for third quarter
2008. Average interest earning assets decreased by $11 million and
average interest-bearing liabilities increased by $5 million during
fourth quarter 2008.
Interest income reversed for non-accrual loans (net of income
recognized) was $283 thousand, $182 thousand, and $273 thousand for
fourth quarter 2008, fourth quarter 2007, and third quarter 2008,
respectively. Excluding this effect, the net interest margin for fourth
quarter 2008, fourth quarter 2007, and third quarter 2008 was 3.75%,
4.46% and 4.07%, respectively.
Prepayment penalty income for fourth quarter 2008, fourth quarter 2007
and third quarter 2008 was $433 thousand, $560 thousand and $434
thousand, respectively. Excluding the effects of both non-accrual loan
interest income and prepayment penalty income, the net interest margin
for fourth quarter 2008, fourth quarter 2007 and third quarter 2008 was
3.68%, 4.36% and 4.00%, respectively.
Non-interest Income. Fourth quarter 2008 non-interest
income was $2.1 million, a decrease of $3.9 million, or 66% compared to
fourth quarter 2007. The decrease is due to a decline in net gains on
sales of SBA and other loans, loss recognition of $1.0 million on sales
of other real estate owned ("OREO") and a loss of $834 thousand due to a
net mark to market valuation of interest rate swaps.
Net gains on sales of SBA and other loans were $87 thousand for fourth
quarter 2008, a decrease of 95% from $1.7 million for fourth quarter
2007. There were no sales during fourth quarter 2008. The $87 thousand
net gain recognized during fourth quarter 2008 was due to loan discounts
recognized on loans that were paid off. During fourth quarter 2007, the
Company had net gains of $588 thousand on the sales of SBA loans and
$1.1 million on the sale of other loans.
Sequentially, non-interest income decreased 49% from third quarter 2008.
The decrease is primarily due to the $1.0 million loss recognized from
sales of OREO and the mark to market valuation adjustment of $834
thousand on interest rate swaps mentioned earlier.
Non-interest Expense. Fourth quarter 2008 non-interest
expense was $13.7 million, a decrease of 1% from $13.9 million for the
same period last year. Salaries and employee benefits expense decreased
by 11% over the same quarter of the prior year, primarily due to a
decrease in bonus expense. Occupancy expense increased by 14% due to
higher depreciation and amortization costs for the new branches opened
in 2008.
Other non-interest expense increased 34% to $2.2 million for fourth
quarter 2008, compared to $1.6 million for the same period last year.
The increase is primarily due to an increase in credit related expense,
including expenses related to OREO.
Sequentially, non-interest expense for fourth quarter 2008 decreased by
2% from $14.0 million in third quarter 2008, primarily due to lower
salaries and employee benefits expense, advertising and marketing, and
professional fees.
Income Taxes. The effective income tax benefit was 42% for
fourth quarter 2008 compared to the effective income tax rate of 39% for
fourth quarter 2007 and 42% for third quarter 2008.
Balance Sheet Summary
At December 31, 2008, total assets were $2.67 billion, an increase of
11.0% (annualized) from $2.60 billion at September 30, 2008, and an
increase of 10.1% from $2.42 billion at December 31, 2007.
Gross loans receivable were $2.10 billion at both December 31, 2008 and
September 30, 2008. New loan production was $81.3 million during fourth
quarter 2008, compared to $105.7 million during third quarter 2008 and
$188.9 million during the fourth quarter 2007. Given the importance of
liquidity management, the Company focused on loan growth supported by
core deposit growth, in addition to stricter loan underwriting criteria.
Loan pay-offs were $48.8 million during fourth quarter 2008, compared to
$81.9 million during third quarter 2008 and $76.5 million during fourth
quarter 2007.
SBA loan originations were $8.0 million during fourth quarter 2008
compared to $6.9 million during third quarter 2008 and $29.0 million
during fourth quarter 2007. There were no sales of SBA loans during
fourth quarter 2008, compared to $5.8 million of SBA loan sales during
third quarter 2008 and $24.9 million during fourth quarter 2007.
Total deposits were $1.94 billion at December 31, 2008, a slight
decrease from $1.95 billion at September 30, 2008 and a 6% increase from
$1.83 billion at December 31, 2007. During fourth quarter 2008, core
deposits increased $23 million and brokered deposits increased $68
million, but were offset by a $99 million decrease in retail jumbo CDs.
The retail deposit marketplace continues to be very competitive and rate
sensitive as some financial institutions are aggressively pricing CDs in
an attempt to improve liquidity. Core deposit growth was adversely
affected by net funds transferred to South Korea by deposit customers to
take advantage of the weakening Korean Won and higher deposit rates paid
by South Korean banks.
FHLB advances were $350.0 million at both December 31, 2008 and
September 30, 2008 and $297.0 million at December 31, 2007. Advances are
primarily long term advances with an expected average remaining term to
maturity of 3.4 years. The average interest rate at December 31, 2008
was 3.70%
Provision and Allowance for Loan Losses
The Company recorded a provision for loan losses of $28.0 million in
fourth quarter 2008, compared to $3.7 million in the same period of the
prior year and $6.2 million in third quarter 2008. The provision
responds to the fourth quarter deterioration in credit quality.
Total delinquencies, representing loans 30 days or more past due,
increased to $51.2 million from $43.8 million at September 30, 2008 and
$34.7 million at December 31, 2007.
Total watch list loans increased to $136.7 million at December 31, 2008
from $90.3 million at September 30, 2008, and $30.8 million at December
31, 2007. Special mention loans increased to $71.2 million at December
31, 2008, from $38.5 million at September 30, 2008, and $9.4 million at
December 31, 2007. Substandard loans increased to $55.6 million at
December 31, 2008, from $44.6 million at September 30, 2008 and $20.2
million at December 31, 2007.
Non-performing loans at December 31, 2008 were $37.6 million, or 1.79%
of total loans, compared to $30.5 million, or 1.45% of total loans, at
September 30, 2008, and $16.6 million, or 0.83% of total loans, at
December 31, 2007.
Net loan charge-offs during fourth quarter 2008 were $12.4 million, or
2.37% of average loans on an annualized basis, compared to $3.0 million,
or 0.61% of average loans on an annualized basis, during fourth quarter
2007, and $6.3 million, or 1.19% of average loans on an annualized
basis, during third quarter 2008. Fourth quarter 2008 charge-offs
included the following with respect to three large loan relationships:
-- A partial charge-off of $3.9 million on a $7 million commercial line of
credit relationship that is secured by land. The borrower filed chapter
11 bankruptcy during the fourth quarter of 2008.
-- A partial charge-off of $1.7 million on a $3.0 million commercial line
of credit. The loan was placed in non-accrual status earlier in 2008 and
the Bank agreed to a workout plan. The amount charged-off was based on
the forbearance and workout terms.
-- The sale of a $2.6 million non-performing commercial real estate loan
for $1 million and the charge-off of the remaining $1.6 million. The
loan was in the process of non-judicial foreclosure.
Excluding these loans, fourth quarter charge-offs primarily consisted of
$5.1 million of loans to retail businesses, averaging approximately $101
thousand per loan. Fourth quarter 2008 gross charge-offs were
substantially provided for in the allowance for loan losses at September
30, 2008. On a full year basis, 2008 net charge-offs were $25.4 million,
compared to $6.6 million in 2007.
The allowance for loan losses at December 31, 2008 was $43.4 million, or
2.07% of gross loans receivable, compared to $27.8 million, or 1.33% of
gross loans receivable, at September 30, 2008, and $20.0 million, or
1.00% of gross loans receivable, at December 31, 2007. The allowance for
loan losses to non-performing loans was 116%, 91% and 121% at December
31, 2008, September 30, 2008, and December 31, 2007, respectively. The
allowance for loan losses reflects an increase in specific allowances
for impaired loans, as well as general allowances, based on quantitative
and qualitative factors.
The Company provided specific allowances for certain impaired loans
during the fourth quarter of 2008. The most significant was a $1.9
million specific allowance for a lending relationship totaling $11.3
million that is partially secured by first and second trust deeds on two
golf courses located in Northern California. This specific allowance was
made due to information received from the borrower regarding his
stressed financial condition. Excluding specific allowances for impaired
loans, the allowance coverage on non-impaired loans was 1.41%, compared
to 0.77% at September 30, 2008 and 0.91% at December 31, 2007.
Capital
During November 2008, the Company received an investment of $67 million
as a result of its participation in the U.S. Department of Treasury's
TARP Capital Purchase Program (CPP). The Company issued 67,000 shares of
cumulative perpetual preferred stock, with a dividend rate of 5% per
share, to the U.S. Treasury, together with warrants to purchase 1.04
million shares of the Company's common stock.
At December 31, 2008, the Company continued to exceed the regulatory
capital requirements to be classified as a "well-capitalized
institution." With the additional $67 million of TARP CPP preferred
stock proceeds, all ratios improved at year-end 2008. The Leverage Ratio
was 12.72% at December 31, 2008, compared to 10.42% at September 30,
2008 and 10.77% at December 31, 2007. The Tier 1 Risk-based Ratio was
14.32% at December 31, 2008, compared to 11.84% at September 30, 2008
and December 31, 2007. The Total Risk-based Ratio was 15.58% at December
31, 2008, compared to 13.08% at September 30, 2008 and 12.78% at
December 31, 2007. Tangible common equity per share was $8.33 at
December 31, 2008.
Outlook
For the full year 2009, Nara Bancorp expects the following:
-- Credit costs to remain elevated
-- Net interest margin to remain compressed due to historically low
interest rates affecting loan yields and intense competition for
deposits
-- Modest loan growth as management seeks to match loan production to core
deposit gathering
Commenting on the outlook for 2009, Ms. Kim said, "We anticipate that
the operating environment will continue to be very challenging in 2009,
even with the additional economic stimulus being proposed. Our primary
focus will be on growing core deposits and maintaining strong liquidity;
taking an aggressive posture in resolving problem assets and providing
for credit losses; and maintaining strong capital levels. We will also
be redeploying resources into more profitable areas of the Company by
closing all but two of our loan production offices while expanding our
East Coast franchise with the opening of three new branches in 2009. We
fully expect our emphasis on maintaining a strong balance sheet and
investing in our branch network will position us to generate profitable
growth when economic conditions become more favorable."
Conference Call and Webcast
A conference call with simultaneous webcast to discuss the Company's
fourth quarter 2008 financial results will be held today, January 30,
2009 at 9:30 a.m. Pacific / 12:30 p.m. Eastern. Interested participants
and investors may access the conference call by dialing 800-218-0713
(domestic) or 303-262-2130 (international). There will also be a live
webcast of the call available at the Investor Relations section of Nara
Bank's web site at www.narabank.com.
After the live webcast, a replay will remain available in the Investor
Relations section of Nara Bancorp's web site. A replay of the call will
be available at 800-405-2236 (domestic) or 303-590-3000 (international)
through February 6, 2009; the passcode is 11125463.
About Nara Bancorp, Inc.
Nara Bancorp, Inc. is the parent company of Nara Bank, which was founded
in 1989. Nara Bank is a full-service community bank headquartered in Los
Angeles, with 21 branches and 6 loan production offices in the United
States. Nara Bank operates full-service branches in California, New York
and New Jersey, with loan production offices in California, Nevada,
Texas, Georgia, New Jersey, and Virginia. Nara Bank was founded
specifically to serve the needs of Korean-Americans, one of the
fastest-growing Asian ethnic communities over the past decade.
Presently, Nara Bank serves a diverse group of customers mirroring its
communities. Nara Bank specializes in core business banking products for
small and medium-sized companies, with emphasis in commercial real
estate and business lending, SBA lending and international trade
financing. Nara Bank is a member of the FDIC and is an Equal Opportunity
Lender. For more information on Nara Bank, visit our website at www.narabank.com.
Nara Bancorp, Inc. stock is listed on NASDAQ under the symbol "NARA."
Forward-Looking Statements
This press release contains forward-looking statements including
statements about future operations and projected full-year financial
results that are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied by
such forward looking statements, including, but not limited to economic,
competitive, governmental and technological factors affecting the
Company's operations, markets, products, services, and pricing. Readers
should carefully review the risk factors and the information that could
materially affect the Company's financial results and business,
described in documents the Company files from time to time with the
Securities and Exchange Commission, including its quarterly reports on
Form 10-Q and Annual Reports on Form 10-K, and particularly the
discussion of business considerations and certain factors that may
affect results of operations and stock price set forth therein. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. The
Company undertakes no obligation to revise or publicly release the
results of any revision to these forward-looking statements.
Nara Bancorp, Inc.
Consolidated Statements of Financial Condition
Unaudited (Dollars in Thousands)
Nara Bancorp, Inc.
Assets 12/31/2008 9/30/2008 % change 12/31/2007 % change
Cash and due $ 30,057 $ 41,281 -27 % $ 40,147 -25 %
from banks
Federal funds 19,000 32,500 -42 % 9,000 111 %
sold
Securities
available for 406,586 313,393 30 % 258,773 57 %
sale, at fair
value
Federal Home
Loan Bank and 22,255 21,836 2 % 17,694 26 %
Federal Reserve
Bank stock
Loans held for
sale, at the 9,821 4,705 109 % 12,304 -20 %
lower of cost or
market
Loans receivable 2,098,443 2,097,333 0 % 2,008,729 4 %
Allowance for (43,419 ) (27,806 ) 56 % (20,035 ) 117 %
loan losses
Net loans 2,055,024 2,069,527 -1 % 1,988,694 3 %
receivable
Accrued interest 8,168 8,153 0 % 9,348 -13 %
receivable
Premises and 11,987 11,836 1 % 11,254 7 %
equipment, net
Bank owned life 23,349 23,291 0 % 22,908 2 %
insurance
Goodwill 2,509 2,509 0 % 2,159 16 %
Other intangible 1,627 1,795 -9 % 2,242 -27 %
assets, net
Other assets 78,510 66,826 17 % 48,887 61 %
Total assets $ 2,668,893 $ 2,597,652 3 % $ 2,423,410 10 %
Liabilities
Deposits $ 1,938,603 $ 1,946,843 0 % $ 1,833,346 6 %
Borrowings from
Federal Home 350,000 350,000 0 % 297,000 18 %
Loan Bank
Subordinated 39,268 39,268 0 % 39,268 0 %
debentures
Accrued interest 8,549 8,599 -1 % 10,481 -18 %
payable
Other 42,520 22,429 90 % 21,135 101 %
liabilities
Total 2,378,940 2,367,139 0 % 2,201,230 8 %
liabilities
Stockholders'
Equity
TARP preferred
stock, $1,000
par value;
authorized
10,000,000
shares; issued
and outstanding
67,000, 0 and 0 $ 67,000 $ - 100 % $ - 100 %
shares at
December
31,2008,
September
30,2008 and
December
31,2007,
respectively
Preferred stock (4,664 ) - 100 % - 100 %
discount
Common stock,
$0.001 par
value;
authorized,
40,000,000
shares; issued
and outstanding,
26,246,560,
26,201,672, and 26 26 0 % 26 0 %
26,193,672
shares at
December 31,
2008, September
30, 2008 and
December 31,
2007,
respectively
Common stock 4,766 $ - 100 % $ - 100 %
warrant
Capital surplus 82,077 81,426 1 % 79,974 3 %
Retained 141,890 152,939 -7 % 142,491 0 %
earnings
Accumulated
other (1,142 ) (3,878 ) -71 % (311 ) 267 %
comprehensive
loss, net
Total
stockholders' 289,953 230,513 26 % 222,180 31 %
equity
Total
liabilities and $ 2,668,893 $ 2,597,652 3 % $ 2,423,410 10 %
stockholders'
equity
Nara Bancorp, Inc.
Consolidated Statements of Income
Unaudited (Dollars in Thousands, Except for Per Share Data)
Three Months Ended, Twelve Months Ended December 31,
12/31/2008 12/31/2007 % 9/30/2008 % 2008 2007 %
change change change
Interest income:
Interest and fees $ 35,308 $ 42,878 -18 % $ 37,801 -7 % $ 151,172 $ 164,163 -8 %
on loans
Interest on 3,819 3,096 23 % 3,358 14 % 14,416 9,867 46 %
securities
Interest on
federal funds sold (36 ) 365 -110 % 531 -107 % 1,340 1,743 -23 %
and other
investments
Total interest 39,091 46,339 -16 % 41,690 -6 % 166,928 175,773 -5 %
income
Interest expense:
Interest on 12,347 17,432 -29 % 12,948 -5 % 54,080 68,247 -21 %
deposits
Interest on other 4,042 3,782 7 % 3,989 1 % 16,627 10,321 61 %
borrowings
Total interest 16,389 21,214 -23 % 16,937 -3 % 70,707 78,568 -10 %
expense
Net interest
income before 22,702 25,125 -10 % 24,753 -8 % 96,221 97,205 -1 %
provision for loan
losses
Provision for loan 28,000 3,650 667 % 6,180 353 % 48,825 7,530 548 %
losses
Net interest
(expense) income (5,298 ) 21,475 -125 % 18,573 -129 % 47,396 89,675 -47 %
after provision
for loan losses
Non-interest
income:
Service fees on 1,940 1,877 3 % 1,895 2 % 7,379 7,023 5 %
deposit accounts
Net gains on sales
of SBA and other 87 1,688 -95 % 268 -68 % 1,781 7,576 -76 %
loans
Net gains on sales
of securities - 27 -100 % - 0 % 860 27 3085 %
available-for-sale
Net losses on (1,003 ) - 100 % - 100 % (1,003 ) - 100 %
sales of OREO
Other income and 1,034 2,376 -56 % 1,848 -44 % 4,976 7,947 -37 %
fees
Total non-interest 2,058 5,968 -66 % 4,011 -49 % 13,993 22,573 -38 %
income
Non-interest
expense:
Salaries and 6,840 7,694 -11 % 6,955 -2 % 28,887 28,429 2 %
employee benefits
Occupancy 2,469 2,167 14 % 2,353 5 % 9,132 8,506 7 %
Furniture and 691 716 -3 % 722 -4 % 2,829 2,724 4 %
equipment
Advertising and 360 391 -8 % 466 -23 % 2,029 1,993 2 %
marketing
Data processing 794 860 -8 % 754 5 % 3,275 3,482 -6 %
and communications
Professional fees 380 379 0 % 448 -15 % 1,961 2,815 -30 %
Other 2,213 1,649 34 % 2,293 -3 % 8,896 8,501 5 %
Total non-interest 13,747 13,856 -1 % 13,991 -2 % 57,009 56,450 1 %
expense
(Loss ) income
before income (16,987 ) 13,587 -225 % 8,593 -298 % 4,380 55,798 -92 %
taxes
Income taxes (7,134 ) 5,248 -236 % 3,611 -298 % 1,625 22,599 -93 %
Net (loss) income (9,853 ) 8,339 -218 % 4,982 -298 % 2,755 33,199 -92 %
Preferred stock
dividends and
accretion of (474 ) - 100 % - 100 % (474 ) - 100 %
preferred stock
discount
Net (loss) income
available to $ (10,327 ) $ 8,339 -224 % $ 4,982 -307 % $ 2,281 $ 33,199 -93 %
common
stockholders
(Loss) Earnings
Per Share:
Basic $ (0.39 ) $ 0.32 $ 0.19 $ 0.09 $ 1.27
Diluted $ (0.39 ) $ 0.32 $ 0.19 $ 0.09 $ 1.25
Average Shares
Outstanding
Basic 26,213,085 26,193,672 26,199,455 26,200,344 26,168,176
Diluted 26,358,768 26,467,109 26,443,893 26,419,533 26,503,633
Nara Bancorp, Inc.
Supplemental Data
Unaudited (Dollars in Thousands, Except for Per Share Data)
(Annualized) (Annualized)
At or for the Three Months Ended, At or for the Twelve Months
Ended,
Profitability 12/31/2008 12/31/2007 9/30/2008 12/31/2008 12/31/2007
measures:
ROA -1 .54% 1 .40% 0 .77% 0 .11% 1 .50%
ROE -15 .06% 15 .24% 8 .56% 1 .15% 16 .21%
Net interest 3 .71% 4 .43% 4 .02% 3 .96% 4 .60%
margin
Efficiency ratio 55 .52% 44 .56% 48 .64% 51 .73% 47 .13%
Three Months Ended Three Months Ended Three Months Ended
12/31/2008 12/31/2007 9/30/2008
Interest Annualized Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost Balance Expense Yield/Cost
(Dollars in thousands) (Dollars in thousands) (Dollars in thousands)
INTEREST EARNING
ASSETS:
Gross loans,
includes loans $ 2,092,641 $ 35,308 6.75 % $ 2,007,151 $ 42,878 8.55 % $ 2,113,925 $ 37,801 7.15 %
held for sale
Securities
available for 328,601 3,819 4.65 % 235,654 3,096 5.26 % 290,641 3,358 4.62 %
sale
FRB and FHLB
stock and other 22,705 (46 ) -0.81 % 17,528 250 5.71 % 23,052 369 6.40 %
investments
Federal funds 5,528 10 0.72 % 10,436 115 4.41 % 32,626 162 1.99 %
sold
Total interest $ 2,449,475 $ 39,091 6.38 % $ 2,270,769 $ 46,339 8.16 % $ 2,460,244 $ 41,690 6.78 %
earning assets
INTEREST BEARING
LIABILITIES:
Deposits:
Demand, $ 319,318 $ 2,413 3.02 % $ 264,916 $ 2,731 4.12 % $ 291,134 $ 2,121 2.91 %
interest-bearing
Savings 115,245 1,043 3.62 % 143,720 1,406 3.91 % 140,295 1,229 3.50 %
Time deposits:
$100,000 or more 661,172 4,844 2.93 % 766,725 9,790 5.11 % 764,899 6,288 3.29 %
Other 465,236 4,047 3.48 % 274,955 3,505 5.10 % 381,056 3,310 3.47 %
Total time 1,126,408 8,891 3.16 % 1,041,680 13,295 5.11 % 1,145,955 9,598 3.35 %
deposits
Total interest 1,560,971 12,347 3.16 % 1,450,316 17,432 4.81 % 1,577,384 12,948 3.28 %
bearing deposits
FHLB advances 371,038 3,385 3.65 % 272,923 2,947 4.32 % 350,700 3,349 3.82 %
Other borrowings 39,268 657 6.69 % 37,584 835 8.89 % 37,709 640 6.79 %
Total interest
bearing 1,971,277 $ 16,389 3.33 % 1,760,823 $ 21,214 4.82 % 1,965,793 $ 16,937 3.45 %
liabilities
Non-interest
bearing demand 240,142 362,976 342,200
deposits
Total funding
liabilities / $ 2,211,419 2.96 % $ 2,123,799 4.00 % $ 2,307,993 2.94 %
cost of funds
Net interest
income / net $ 22,702 3.05 % $ 25,125 3.34 % $ 24,753 3.33 %
interest spread
Net interest 3.71 % 4.43 % 4.02 %
margin
Net interest
margin,
excluding effect 3.75 % 4.46 % 4.07 %
of non-accrual
loan income
(expense)
Net interest
margin,
excluding effect
of non-accrual 3.68 % 4.36 % 4.00 %
loan income
(expense) and
prepayment fee
income
Non-accrual loan
income $ (283 ) $ (182 ) $ (273 )
(reversed)
recognized
Prepayment fee 433 560 434
income received
Net $ 150 $ 378 $ 161
Cost of
deposits:
Non-interest
bearing demand $ 240,142 $ - $ 362,976 $ - $ 342,200 $ -
deposits
Interest bearing 1,560,971 12,347 3.16 % 1,450,316 17,432 4.81 % 1,577,384 12,948 3.28 %
deposits
Total deposits $ 1,801,113 $ 12,347 2.74 % $ 1,813,292 $ 17,432 3.85 % $ 1,919,584 $ 12,948 2.70 %
Twelve Months Ended Twelve Months Ended
12/31/2008 12/31/2007
Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost
(Dollars in thousands) (Dollars in thousands)
INTEREST EARNING
ASSETS:
Gross loans,
includes loans $ 2,089,803 $ 151,172 7.23 % $ 1,879,457 $ 164,163 8.73 %
held for sale
Securities
available for 298,886 14,416 4.82 % 199,293 9,867 4.95 %
sale
FRB and FHLB
stock and other 23,498 1,010 4.30 % 12,460 690 5.54 %
investments
Federal funds 16,816 330 1.96 % 20,514 1,053 5.13 %
sold
Total interest $ 2,429,003 $ 166,928 6.87 % $ 2,111,724 $ 175,773 8.32 %
earning assets
INTEREST BEARING
LIABILITIES:
Deposits:
Demand, $ 280,055 $ 8,264 2.95 % $ 241,152 $ 9,895 4.10 %
interest-bearing
Savings 133,791 4,920 3.68 % 143,762 5,373 3.74 %
Time deposits:
$100,000 or more 742,767 27,033 3.64 % 761,104 40,207 5.28 %
Other 370,900 13,863 3.74 % 254,613 12,772 5.02 %
Total time 1,113,667 40,896 3.67 % 1,015,717 52,979 5.22 %
deposits
Total interest 1,527,513 54,080 3.54 % 1,400,631 68,247 4.87 %
bearing deposits
FHLB advances 372,142 13,932 3.74 % 161,410 6,988 4.33 %
Other borrowings 37,683 2,695 7.15 % 37,564 3,333 8.87 %
Total interest
bearing 1,937,338 $ 70,707 3.65 % 1,599,605 $ 78,568 4.91 %
liabilities
Non-interest
bearing demand 328,116 371,599
deposits
Total funding
liabilities / $ 2,265,454 3.12 % $ 1,971,204 3.99 %
cost of funds
Net interest
income / net $ 96,221 3.22 % $ 97,205 3.41 %
interest spread
Net interest 3.96 % 4.60 %
margin
Net interest
margin,
excluding effect 3.99 % 4.64 %
of non-accrual
loan income
(expense)
Net interest
margin,
excluding effect
of non-accrual 3.92 % 4.55 %
loan income
(expense) and
prepayment fee
income
Non-accrual loan
income $ (689 ) $ (697 )
(reversed)
recognized
Prepayment fee 1,668 1,880
income received
Net $ 979 $ 1,183
Cost of
deposits:
Non-interest
bearing demand $ 328,116 $ - $ 371,599 $ -
deposits
Interest bearing 1,527,513 54,080 3.54 % 1,400,631 68,247 4.87 %
deposits
Total deposits $ 1,855,629 $ 54,080 2.91 % $ 1,772,230 $ 68,247 3.85 %
For the Three Months Ended For the Twelve Months Ended
12/31/2008 12/31/2007 % 9/30/2008 % 12/31/2008 12/31/2007 %
change change change
AVERAGE BALANCES
Gross loans,
includes loans held 2,092,641 $ 2,007,151 4 % $ 2,113,925 -1 % 2,089,803 1,879,457 11 %
for sale
Investments 356,834 263,618 35 % 346,319 3 % 339,200 232,267 46 %
Interest-earning 2,449,475 2,270,769 8 % 2,460,244 0 % 2,429,003 2,111,724 15 %
assets
Total assets 2,559,289 2,380,680 8 % 2,573,286 -1 % 2,539,355 2,216,514 15 %
Interest-bearing 1,560,971 1,450,316 8 % 1,577,384 -1 % 1,527,513 1,400,631 9 %
deposits
Interest-bearing 1,971,277 1,760,823 12 % 1,965,793 0 % 1,937,338 1,599,605 21 %
liabilities
Non-interest-bearing 240,142 362,976 -34 % 342,200 -30 % 328,116 371,599 -12 %
demand deposits
Stockholders' Equity 261,635 218,847 20 % 232,918 12 % 238,798 204,863 17 %
Net interest earning 478,198 509,946 -6 % 494,451 -3 % 491,665 512,119 -4 %
assets
LOAN PORTFOLIO 12/31/2008 9/30/2008 % 12/31/2007 %
COMPOSITION: change change
Commercial loans $ 598,556 $ 600,933 0 % $ 605,553 -1 %
Real estate loans 1,472,872 1,470,348 0 % 1,369,826 8 %
Consumer and other 28,520 27,574 3 % 34,809 -18 %
loans
Loans outstanding 2,099,948 2,098,855 0 % 2,010,188 4 %
Unamortized deferred
loan fees - net of (1,505 ) (1,522 ) -1 % (1,459 ) 3 %
costs
Loans, net of
deferred loan fees 2,098,443 2,097,333 0 % 2,008,729 4 %
and costs
Allowance for loan (43,419 ) (27,806 ) 56 % (20,035 ) 117 %
losses
Loan receivable, net $ 2,055,024 $ 2,069,527 -1 % $ 1,988,694 3 %
DEPOSIT COMPOSITION 12/31/2008 9/30/2008 % 12/31/2007 %
Change Change
Non-interest-bearing $ 303,656 $ 352,252 -14 % $ 364,518 -17 %
demand deposits
Money market and 306,478 318,701 -4 % 260,224 18 %
other
Saving deposits 113,186 128,490 -12 % 143,020 -21 %
Time deposits of 626,850 737,273 -15 % 778,199 -19 %
$100,000 or more
Other time deposits 588,433 410,127 43 % 287,385 105 %
Total deposit $ 1,938,603 $ 1,946,843 0 % $ 1,833,346 6 %
balances
DEPOSIT COMPOSITION (%) 12/31/2008 9/30/2008 12/31/2007
Non-interest-bearing demand deposits 15 .7% 18 .1% 19 .9%
Money market and other 15 .8% 16 .3% 14 .2%
Saving deposits 5 .8% 6 .6% 7 .8%
Time deposits of $100,000 or more 32 .3% 37 .9% 42 .4%
Other time deposits 30 .4% 21 .1% 15 .7%
Total deposit balances 100 .0% 100 .0% 100 .0%
CAPITAL RATIOS 12/31/2008 9/30/2008 12/31/2007
Total stockholders' equity $ 289,953 $ 230,513 $ 222,180
Tier 1 risk-based capital ratio 14.32 % 11.84 % 11.84 %
Total risk-based capital ratio 15.58 % 13.08 % 12.78 %
Tier 1 leverage ratio 12.72 % 10.42 % 10.77 %
Book value per share * $ 8.49 $ 8.80 $ 8.48
Tangible common equity per share * $ 8.33 $ 8.63 $ 8.31
Tangible equity to tangible assets * 8.21 % 8.71 % 9.00 %
* excludes TARP preferred stock and stock warrants of $67.1 million
For the Three Months Ended For the Twelve Months Ended
ALLOWANCE FOR LOAN 12/31/2008 9/30/2008 % 12/31/2007 % 12/31/2008 12/31/2007 %
LOSSES: Change Change Change
Balance at
Beginning of $ 27,806 $ 27,899 0 % $ 19,431 43 % $ 20,035 $ 19,112 5 %
Period
Provision for Loan 28,000 6,180 353 % 3,650 667 % 48,825 7,530 548 %
Losses
Recoveries 124 23 439 % 168 -26 % 252 841 -70 %
Charge Offs (12,511 ) (6,296 ) 99 % (3,214 ) 289 % (25,693 ) (7,448 ) 245 %
Balance at End of $ 43,419 $ 27,806 56 % $ 20,035 117 % $ 43,419 $ 20,035 117 %
Period
Net
charge-off/Average 2.37 % 1.19 % 0.61 % 1.22 % 0.35 %
gross loans
(annualized)
NON-PERFORMING ASSETS 12/31/2008 9/30/2008 12/31/2007
Delinquent Loans 90 days or more on $ 37,580 $ 30,501 $ 16,592
Non-Accrual Status
Delinquent Loans 90 days or more on Accrual - - -
Status
Total Non-Performing Loans 37,580 30,501 16,592
Other real estate owned 2,969 2,623 -
Restructured Loans 3,256 3,699 765
Total Non-Performing Assets $ 43,805 $ 36,823 $ 17,357
Non-Performing Assets/ Total Assets 1.64 % 1.42 % 0.72 %
Non-Performing Loans/Gross Loans 1.79 % 1.45 % 0.83 %
Allowance for loan losses/ Gross Loans 2.07 % 1.33 % 1.00 %
Allowance for loan losses/ Non-Performing 116 % 91 % 121 %
Loans
Source: Nara Bancorp, Inc.
Contact: Investors and Financial Media:
Financial Relations Board
Tony Rossi, 213-486-6545