Quarterly Highlights:
-- Return to profitability for the quarter
-- Increase in delinquencies and non-performing assets
-- Decline in net charge-offs and total watch list loans
-- Loan growth of $52 million
-- Liquidity and capital levels remain strong
LOS ANGELES--(BUSINESS WIRE)--
Nara Bancorp, Inc. (the "Company") (NASDAQ: NARA), the holding company
of Nara Bank (the "Bank") reported net income available to common
stockholders of $2.9 million, or $0.11 per diluted share, for third
quarter 2009, compared to net income available to common stockholders of
$5.0 million, or $0.19 per diluted share, for third quarter 2008, and a
net loss available to common stockholders of $7.1 million, or ($0.27)
per diluted share, for second quarter 2009.
Min Kim, President and Chief Executive Officer, said, "As expected, our
net interest margin expanded, and combined with net loan growth during
the quarter, we had a meaningful increase in net interest income as
compared with the second quarter of 2009. On the credit quality front,
we continue to aggressively work through our problem loans. Although
delinquencies and non-performing assets increased, we experienced lower
net charge-offs and a lower loan loss provision for the quarter."
"Our deposits continue to grow, but at a slower rate in the third
quarter compared with the first half of the year. This was a direct
result of our strategy to reduce pricing on deposits. We will continue
to redeploy funds from deposit growth into higher yielding assets as the
opportunities arise. In the meantime, our substantial liquidity provides
us significant flexibility," said Ms. Kim.
Financial Highlights
2009 2008 2009
Third Quarter Third Quarter Second Quarter
(Dollars in thousands)
Net income (loss) $ 3,941 $ 4,982 $ (6,008 )
Net income (loss) available to $ 2,872 $ 4,982 $ (7,077 )
common stockholders
Diluted earnings (loss) per share $ 0.11 $ 0.19 $ (0.27 )
Net interest income $ 24,233 $ 24,753 $ 21,260
Net interest margin 3.14 % 4.02 % 2.94 %
Non-interest income $ 4,894 $ 4,011 $ 3,785
Non-interest expense $ 14,668 $ 13,991 $ 16,822
Net loans receivable $ 2,099,223 $ 2,084,062 $ 2,049,738
Deposits $ 2,487,070 $ 1,946,843 $ 2,439,795
Non-performing loans * $ 35,510 $ 30,501 $ 30,850
ALLL to gross loans * 2.49 % 1.33 % 2.42 %
ALLL to non-performing loans * 149 % 91 % 163 %
Provision for loan losses $ 8,500 $ 6,180 $ 19,000
Efficiency ratio 50.36 % 48.64 % 67.17 %
* Excludes the guaranteed portion of delinquent SBA loans totaling $20.9
million, $14.5 million and $19.8 million at third quarter 2009, third quarter
2008 and second quarter 2009, respectively.
Operating Results for Third Quarter
2009
Net Interest Income and Net Interest Margin. Third quarter
2009 net interest income before provision for loan losses was $24.2
million, a decrease of 2% from third quarter 2008. The decline in net
interest income was due to the decline in the net interest margin,
caused in part by an increase in liquid assets with lower yields
resulting from the increase in deposits during the first half of 2009,
substantially offset by an increase in average interest earning assets.
Third quarter 2009 net interest margin (net interest income divided by
average interest-earning assets) decreased 88 basis points to 3.14% from
4.02% for third quarter 2008. During the twelve months ended September
30, 2009, market interest rates declined as the targeted federal funds
rate declined 175 basis points, and the Bank's interest-earning assets
re-priced downward faster than its interest-bearing liabilities.
Concurrently, average interest earning assets increased 26% year over
year.
Total deposits grew 28% year over year, primarily from the growth in the
first half of the year. Third quarter deposit growth was 2%, resulting
in a loan to deposit ratio of 86% at September 30, 2009, compared to
108% at September 30, 2008.
Total loans grew 2% year over year, primarily due to net loan growth of
$52 million during third quarter 2009. Cash and investments grew 144%
year over year, as funds from deposit growth were invested in
securities, federal funds and cash at the Federal Reserve, substantially
increasing on-balance sheet liquidity, but adversely affecting net
interest margin. As loan demand continues to improve, the Bank expects
to convert liquid assets and short term investments into higher yielding
loans.
The weighted average yield on the loan portfolio for third quarter 2009
decreased 87 basis points to 6.28% from 7.15% 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 reductions in interest rates by the Federal Reserve
throughout 2008. The prime rate decreased 175 basis points, consistent
with the federal funds rate cuts. This was partially mitigated by the
fixed rate loans in the portfolio. At September 30, 2009, fixed rate
loans were 51% of the loan portfolio. The weighted average yield on the
variable rate and fixed rate loan portfolios (excluding loan discount
accretion) at September 30, 2009 was 4.79% and 7.52%, respectively,
compared to 6.04% and 7.65% at September 30, 2008.
The weighted average yield on securities available-for-sale for third
quarter 2009 decreased 25 basis points to 4.37% from 4.62% for the same
period last year. The decrease was primarily due to downward repricing
of variable rate agency CMO investment securities tied to one month
LIBOR, as such rates declined over the past 12 months, and the
rebalancing our investment portfolio to shorter duration securities to
mitigate against interest rate risk. The variable rate agency CMO
portfolio was $67.5 million at September 30, 2009, yielding 2.72%,
compared to $112.9 million at September 30, 2008, yielding 4.12%.
The weighted average cost of deposits for third quarter 2009 decreased
50 basis points to 2.20% from 2.70% for the same period last year. The
cost of time deposits decreased 64 basis points to 2.71% from 3.35% for
the same period last year.
The weighted average cost of FHLB advances for third quarter 2009 also
decreased 6 basis points to 3.76% for third quarter 2009, compared to
3.82% for third quarter 2008, due to refinancing of $10 million of
advances during the quarter at a lower three-year rate.
Following are the weighted average rate data on a spot rate basis at
September 30, 2009 and 2008:
September 30,
2009 2008
Weighted average loan portfolio yield (excluding discounts) 6.19 % 6.87 %
Weighted average securities available-for-sale portfolio yield 4.35 % 4.89 %
Weighted average cost of deposits 2.06 % 2.69 %
Weighted average cost of total interest-bearing deposits 2.38 % 3.29 %
Weighted average cost of FHLB advances 3.67 % 3.78 %
Sequentially, third quarter 2009 net interest income before provision
for loan losses increased $3.0 million, or 14%, from second quarter
2009. The increase was attributable to an increase in average
interest-earning assets and improved net interest margin. Average
interest-earning assets increased $193 million, or 7%, during third
quarter 2009. The net interest margin increased 20 basis points to 3.14%
for third quarter 2009 from 2.94% for second quarter 2009. The yield on
interest-earning assets increased nine basis points reflecting the shift
from federal funds and cash to loans, and the cost of interest-bearing
liabilities decreased 17 basis points, reflecting the deposit lag effect
as CDs mature, as well as the downward adjustments made by the Bank to
rates offered to deposit customers.
Non-accrual loan interest reversed was $328 thousand, $273 thousand, and
$169 thousand for third quarter 2009, third quarter 2008, and second
quarter 2009, respectively. Excluding this effect, the net interest
margin for third quarter 2009, third quarter 2008, and second quarter
2009 was 3.18%, 4.07%, and 2.96%, respectively.
Prepayment penalty income for third quarter 2009, third quarter 2008 and
second quarter 2009 was $173 thousand, $434 thousand and $145 thousand,
respectively. Excluding the effects of both non-accrual loan interest
income and prepayment penalty income, the net interest margin for third
quarter 2009, third quarter 2008 and second quarter 2009 was 3.16%,
4.00% and 2.94%, respectively.
Non-interest Income. Third quarter 2009 non-interest
income was $4.9 million, an increase of $883 thousand, or 22% compared
to third quarter 2008. The increase is primarily due to net gains on
sales of securities available-for-sale of $1.7 million during the
quarter. There were no gains on sales of securities available-for-sale
for the same quarter 2008. A total of $85.2 million in
available-for-sale GSE investment securities were sold as part of the
rebalancing of duration and mix of our investment securities portfolio.
Sequentially, non-interest income increased 29% from second quarter
2009. The increase was primarily due to higher net gains on sale of
securities available-for-sale during third quarter 2009, offset by a
loss recognized from the sale of loans during third quarter 2009. Net
gains on sales of securities available-for-sale were $1.7 million for
third quarter 2009, compared to $220 thousand for second quarter 2009.
Net losses on sales of non-performing loans were $126 thousand during
third quarter 2009, compared to net gains of $542 thousand for second
quarter 2009. Non-performing loans of $8.7 million were sold during
third quarter 2009, compared to $1.7 million during second quarter 2009.
Non-interest Expense. Third quarter 2009 non-interest
expense was $14.7 million, an increase of 5% from $14.0 million for the
same period last year. The increase was primarily due to an increase in
FDIC insurance premiums and credit related expenses. FDIC insurance
premiums increased $554 thousand, or 129%, to $984 thousand for third
quarter 2009, compared to $430 thousand for the same quarter of 2008.
The increase is due to an increase in the assessment rate imposed by the
FDIC starting with second quarter 2009. Credit related expenses, which
includes loan collection and OREO expenses, increased 217% to $1.1
million for third quarter 2009, compared to $363 thousand for the same
quarter of 2008.
Salaries and employee benefits expense decreased $814 thousand, or 12%,
over the same quarter of the prior year, primarily due to decreases in
bonus expense and in the number of full-time equivalent employees, which
decreased to 348 at September 30, 2009 from 378 at September 30, 2008.
Sequentially, non-interest expense for third quarter 2009 decreased by
13% from $16.8 million in second quarter 2009, primarily due to the
Company's share of a special industry-wide FDIC assessment of $1.47
million expensed during second quarter 2009, partially offset by an
increase in credit related expenses of $164 thousand in third quarter
2009.
Income Taxes. The effective income tax rate was 34% for
third quarter 2009 compared to 42% for third quarter 2008 and a tax
benefit of 44% for second quarter 2009. The lower effective tax for
third quarter 2009 and higher benefit rates for the second quarter of
2009 were due to the effect of higher tax credits recognized in those
periods.
Balance Sheet Summary
Gross loans receivable were $2.13 billion at September 30, 2009, an
increase from $2.08 billion at June 30, 2009. New loan production,
including $47.1 million in purchased loans, was $131.9 million during
third quarter 2009, compared to $80.5 million during second quarter 2009
and $105.7 million during third quarter 2008. Loan pay-offs, pay- downs,
amortization and other changes totaled $60.0 million during third
quarter 2009, compared to $88.4 million during second quarter 2009 and
$129.1 million during third quarter 2008.
Total deposits were $2.49 billion at September 30, 2009, an increase of
2% from $2.44 billion at June 30, 2009. During third quarter 2009,
retail deposits increased $113 million, which was offset by a $66
million decrease in brokered deposits. Retail money market accounts
increased $63 million and retail CDs increased $35 million, accounting
for 87% of the increase in retail deposits. Brokered deposits decreased
to $21 million at September 30, 2009 from $304 million at December 31,
2008.
Credit Quality
The Company recorded a provision for loan losses of $8.5 million in
third quarter 2009, compared to $6.2 million for the same period of the
prior year and $19.0 million in second quarter 2009. The decrease in the
provision for loan losses from second quarter 2009 was primarily due to
the impact of lower net charge offs and lower special mention and
classified loans, partially offset by an increase in non-performing
loans.
Total watch list loans, defined as special mention and classified
assets, were $144.2 million at September 30, 2009, a decline from $170.2
million at June 30, 2009. Special mention loans decreased to $30.8
million at September 30, 2009, from $53.3 million at June 30, 2009, due
to net loan upgrades to the pass category. Substandard loans also
decreased to $110.7 million at September 30, 2009, from $112.6 million
at June 30, 2009, as certain problem loans were resolved.
Total delinquent loans, 30 or more days delinquent, increased to $67.9
million at September 30, 2009, from $42.8 million at June 30, 2009.
Loans past due 30 - 59 days increased significantly to $24.5 million at
September 30, 2009, from $5.4 million at June 30, 2009. The increase in
early stage delinquencies was primarily attributable to five loan
relationships aggregating $18.3 million. The relationships consisted of
$10.9 million in loans to a borrower with several car wash businesses,
$6.0 million in loans to three motel operators, and a $1.4 million loan
to a dry cleaner. These borrowers are experiencing a fall-off in
revenues due to the economy.
Non-performing loans on non-accrual status at September 30, 2009, were
$35.5 million, or 1.67% of total loans, compared to $30.9 million, or
1.48% of total loans, at June 30, 2009. Inflows to non-performing loans
during third quarter 2009 included four loan relationships aggregating
$8.6 million, primarily secured by commercial real estate.
Non-performing assets at September 30, 2009 were $84.9 million, or 3.98%
of gross loans plus other real estate owned, compared to $71.7 million,
or 3.44%, at June 30, 2009. In addition to the net increase in
non-performing loans, other real estate owned increased $888 thousand to
$4.7 million at September 30, 2009, from $3.8 million at June 30, 2009.
This increase was primarily due to the foreclosure of one commercial
real estate loan secured by a retail building in Georgia. Accruing
troubled debt restructured loans included in non-performing assets,
increased $7.7 million to $44.7 million at September 30, 2009, from
$37.0 million at June 30, 2009. This increase was primarily due to five
commercial real estate loans, aggregating $10.8 million that were
restructured during the quarter. The underlying collateral for these
loans related to hospitality, retail and a multi-family residential
property, and a church.
Net loan charge-offs during third quarter 2009 were $5.9 million, or
1.1% of average loans on an annualized basis, compared to $6.3 million,
or 1.2% during third quarter 2008, and $19.2 million, or 3.7% of average
loans, during second quarter 2009. Third quarter 2009 charge offs
included one commercial real estate loan of $1.2 million, and a
commercial loan of $737 thousand. Excluding these two loans, the
remaining charge-offs were comprised of 55 loans averaging $71 thousand.
The allowance for loan losses at September 30, 2009, was $53.0 million,
or 2.49% of gross loans receivable (net of the guaranteed portion of
delinquent SBA loans), compared to $50.3 million, or 2.42%, at June 30,
2009. The ratio of the allowance for loan losses to non-performing loans
was 149% at September 30, 2009, compared to 163% at June 30, 2009.
Impaired loans at September 30, 2009, were $88.4 million, an increase
from $81.7 million at June 30, 2009. New impaired loans during the
quarter included ten significant loan relationships of approximately
$1.0 million or more, and aggregating $23.7 million that were
restructured. Specific reserves for impaired loans were $16.0 million,
or 18.1% of the aggregate impaired loan amount at September 30, 2009,
compared to $13.3 million, or 16.3%, at June 30, 2009. Excluding
specific reserves for impaired loans, the allowance coverage on the
remaining loan portfolio was 1.81% at September 30, 2009, compared to
1.85% at June 30, 2009.
Capital
At September 30, 2009, the Company continued to exceed the regulatory
capital requirements to be classified as a "well-capitalized"
institution. The Leverage Ratio was 9.95% at September 30, 2009,
compared to 10.50% at June 30, 2009. The Tier 1 Risk-based Ratio was
13.51% at September 30, 2009, compared to 13.37% at June 30, 2009. The
Total Risk-based Ratio was 14.77% at September 30, 2009, compared to
14.63% at June 30, 2009.
At September 30, 2009, common equity represented 6.92% of total assets,
compared to 8.87% at September 30, 2008. Tangible common equity (TCE)
represented 6.81% of tangible assets at September 30, 2009, compared to
8.72% at September 30, 2008. The decrease in both ratios is primarily
attributable to the increase in assets between the periods indicated.
Tangible common equity to tangible assets is a non-GAAP financial
measure that represents common equity less goodwill and other intangible
assets, net divided by total assets less goodwill and other intangible
assets, net. Management reviews tangible common equity to tangible
assets in evaluating the Company's capital levels and has included this
ratio in response to market participant interest in tangible common
equity as a measure of capital. See the accompanying financial
information for a reconciliation of the ratio of tangible common equity
to tangible assets with stockholders' equity and total assets.
Outlook
Commenting on the outlook for the remainder of 2009, Ms. Kim said, "As
we move into the fourth quarter, we will continue to focus on taking an
aggressive posture in resolving problem assets, growing core deposits,
and maintaining strong liquidity and capital. We believe this focus
positions us well for increasing profitability as economic conditions
improve."
Conference Call and Webcast
A conference call with simultaneous webcast to discuss the Company's
third quarter 2009 financial results will be held tomorrow, October 16,
2009 at 9:30 am Pacific / 12:30 pm Eastern. Interested participants and
investors may access the conference call by dialing 877-941-6009
(domestic) or 480-629-9771 (international), conference ID# 4171948.
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 800-406-7325 (domestic) or 303-590-3030 (international)
through October 23, 2009, conference ID# 4171948.
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 1 loan production office in the United
States. Nara Bank operates full-service branches in California, New York
and New Jersey, and a loan production office in Texas. Nara Bank was
founded specifically to serve the needs of Korean-Americans. 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 an 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.
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. These risks and uncertainties include
but are 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 discussions 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 9/30/2009 6/30/2009 % 12/31/2008 % 9/30/2008 %
change change change
Cash and due from $ 182,150 $ 239,454 -24 % $ 30,057 506 % $ 41,281 341 %
banks
Federal funds sold 20,000 40,000 -50 % 19,000 5 % 32,500 -38 %
Securities available
for sale, at fair 744,044 745,792 0 % 406,586 83 % 313,393 137 %
value
Federal Home Loan Bank
and Federal Reserve 24,325 24,325 0 % 22,255 9 % 21,836 11 %
Bank stock
Loans held for sale,
at the lower of cost 14,137 13,664 3 % 9,821 44 % 4,705 200 %
or market
Loans receivable 2,152,190 2,100,077 2 % 2,119,354 2 % 2,111,868 2 %
Allowance for loan (52,967 ) (50,339 ) 5 % (43,419 ) 22 % (27,806 ) 90 %
losses
Net loans receivable 2,099,223 2,049,738 2 % 2,075,935 1 % 2,084,062 1 %
Accrued interest 11,062 10,187 9 % 8,168 35 % 8,153 36 %
receivable
Premises and 11,222 11,580 -3 % 11,987 -6 % 11,836 -5 %
equipment, net
Bank owned life 23,518 23,462 0 % 23,349 1 % 23,291 1 %
insurance
Goodwill 2,509 2,509 0 % 2,509 0 % 2,509 0 %
Other intangible 1,186 1,330 -11 % 1,627 -27 % 1,795 -34 %
assets, net
Other assets 79,314 98,768 -20 % 60,760 31 % 52,291 52 %
Total assets $ 3,212,690 $ 3,260,809 -1 % $ 2,672,054 20 % $ 2,597,652 24 %
Liabilities
Deposits $ 2,487,070 $ 2,439,795 2 % $ 1,938,603 28 % $ 1,946,843 28 %
Borrowings from 350,000 350,000 0 % 350,000 0 % 350,000 0 %
Federal Home Loan Bank
Subordinated 39,268 39,268 0 % 39,268 0 % 39,268 0 %
debentures
Accrued interest 12,550 10,921 15 % 8,549 47 % 8,599 46 %
payable
Other liabilities 33,787 139,406 -76 % 45,681 -26 % 22,429 51 %
Total liabilities 2,922,675 2,979,390 -2 % 2,382,101 23 % 2,367,139 23 %
Stockholders' Equity
Preferred stock,
$0.001 par value;
authorized 10,000,000
undesignated shares;
issued and outstanding
67,000, 67,000, 67,000
and 0 shares of Fixed
Rate Cumulative
Perpetual Preferred 67,000 67,000 0 % 67,000 0 % - 100 %
Stock, Series A with a
liquidation preference
of $67,000,000 at
September 30, 2009,
June 30, 2009,
December 31, 2008 and
September 30, 2008,
respectively
Preferred stock (3,970 ) (4,202 ) -6 % (4,664 ) -15 % - 100 %
discount
Common stock, $0.001
par value; authorized,
40,000,000 shares;
issued and
outstanding,
26,316,576,26,256,960,
26,246,560, and 26 26 0 % 26 0 % 26 0 %
26,201,560 shares at
September 30, 2009,
June 30, 2009,
December 31, 2008 and
September 30, 2008,
respectively
Common stock warrant 4,766 4,766 0 % 4,766 0 % - 100 %
Capital surplus 83,453 83,064 0 % 82,077 2 % 81,426 2 %
Retained earnings 133,437 130,565 2 % 141,890 -6 % 152,939 -13 %
Accumulated other
comprehensive income 5,303 200 2552 % (1,142 ) 564 % (3,878 ) 237 %
(loss), net
Total stockholders' 290,015 281,419 3 % 289,953 0 % 230,513 26 %
equity
Total liabilities and $ 3,212,690 $ 3,260,809 -1 % $ 2,672,054 20 % $ 2,597,652 24 %
stockholders' equity
Nara Bancorp, Inc.
Consolidated Statements of Income (Loss)
Unaudited (Dollars in Thousands, Except for Per Share Data)
Three Months Ended, Nine Months Ended,
9/30/2009 9/30/2008 % 6/30/2009 % 9/30/2009 9/30/2008 %
change change change
Interest income:
Interest and fees $ 33,242 $ 37,801 -12 % $ 32,461 2 % $ 97,375 $ 115,864 -16 %
on loans
Interest on 8,063 3,358 140 % 5,710 41 % 18,093 10,597 71 %
securities
Interest on
federal funds sold 401 531 -24 % 239 68 % 707 1,376 -49 %
and other
investments
Total interest 41,706 41,690 0 % 38,410 9 % 116,175 127,837 -9 %
income
Interest expense:
Interest on 13,638 12,948 5 % 13,365 2 % 38,828 41,733 -7 %
deposits
Interest on other 3,835 3,989 -4 % 3,785 1 % 11,415 12,585 -9 %
borrowings
Total interest 17,473 16,937 3 % 17,150 2 % 50,243 54,318 -8 %
expense
Net interest
income before 24,233 24,753 -2 % 21,260 14 % 65,932 73,519 -10 %
provision for loan
losses
Provision for loan 8,500 6,180 38 % 19,000 -55 % 43,170 20,825 107 %
losses
Net interest
income after 15,733 18,573 -15 % 2,260 596 % 22,762 52,694 -57 %
provision for loan
losses
Non-interest
income:
Service fees on 1,701 1,895 -10 % 1,698 0 % 5,168 5,439 -5 %
deposit accounts
Net gains (losses) (126 ) 268 -147 % 542 -123 % 866 1,694 -49 %
on sales of loans
Net gains on sales
of securities 1,722 - 100 % 220 683 % 2,727 860 217 %
available-for-sale
Net valuation
gains (losses) on (85 ) 76 -212 % (151 ) -44 % (352 ) 251 -240 %
interest rate
swaps
Net losses on 2 - 100 % (184 ) -101 % (312 ) - -100 %
sales of OREO
Other than
temporary - - 0 % - 0 % - (1,713 ) 100 %
impairment on
securities
Other income and 1,680 1,772 -5 % 1,660 1 % 4,947 5,404 -8 %
fees
Total non-interest 4,894 4,011 22 % 3,785 29 % 13,044 11,935 9 %
income
Non-interest
expense:
Salaries and 6,141 6,955 -12 % 6,551 -6 % 19,135 22,047 -13 %
employee benefits
Occupancy 2,526 2,353 7 % 2,484 2 % 7,436 6,663 12 %
Furniture and 731 722 1 % 736 -1 % 2,162 2,138 1 %
equipment
Advertising and 386 466 -17 % 505 -24 % 1,348 1,669 -19 %
marketing
Data processing 896 754 19 % 990 -9 % 2,787 2,481 12 %
and communications
Professional fees 520 448 16 % 428 21 % 1,626 1,581 3 %
FDIC assessment 984 430 129 % 2,446 -60 % 4,180 1,031 305 %
Other 2,484 1,863 33 % 2,682 -7 % 8,064 5,652 43 %
Total non-interest 14,668 13,991 5 % 16,822 -13 % 46,738 43,262 8 %
expense
Income (loss)
before income 5,959 8,593 -31 % (10,777 ) -155 % (10,932 ) 21,367 -151 %
taxes
Income tax
provision 2,018 3,611 -44 % (4,769 ) -142 % (5,685 ) 8,759 -165 %
(benefit)
Net income (loss) $ 3,941 $ 4,982 -21 % $ (6,008 ) -166 % (5,247 ) 12,608 -142 %
Dividends and
discount accretion $ (1,069 ) $ - 100 % $ (1,069 ) 0 % (3,206 ) - 100 %
on preferred stock
Net income (loss)
available to $ 2,872 $ 4,982 -42 % $ (7,077 ) -141 % $ (8,453 ) $ 12,608 -167 %
common
stockholders
Earnings (Loss)
Per Common Share:
Basic $ 0.11 $ 0.19 $ (0.27 ) $ (0.32 ) $ 0.48
Diluted $ 0.11 $ 0.19 $ (0.27 ) $ (0.32 ) $ 0.48
Average Shares
Outstanding:
Basic 26,290,656 26,199,455 26,256,960 26,266,144 26,196,066
Diluted 26,360,505 26,443,893 26,256,960 26,266,144 26,431,197
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 Nine Months
Ended,
Profitability 9/30/2009 9/30/2008 6/30/2009 9/30/2009 9/30/2008
measures:
ROA 1 0.49 % 0.77 % -0.80 % -0.24 % 0.66 %
ROE 1 5.54 % 8.56 % -8.26 % -2.42 % 7.27 %
Net interest 3.14 % 4.02 % 2.94 % 3.08 % 4.05 %
margin *
Efficiency 50.36 % 48.64 % 67.17 % 59.18 % 50.63 %
ratio
1 based on net income before effect of dividends and discount accretion on
preferred stock
Three Months Ended Three Months Ended Three Months Ended
9/30/2009 9/30/2008 6/30/2009
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 $ 2,117,910 $ 33,242 6.28 % $ 2,113,917 $ 37,801 7.15 % $ 2,092,809 $ 32,461 6.20 %
held for sale
Securities
available for 737,471 8,063 4.37 % 290,641 3,358 4.62 % 530,322 5,710 4.31 %
sale
FRB and FHLB
stock and other 202,131 277 0.55 % 23,052 369 6.40 % 266,179 212 0.32 %
investments
Federal funds 30,870 124 1.61 % 32,626 162 1.99 % 5,934 27 1.82 %
sold
Total interest $ 3,088,382 $ 41,706 5.40 % $ 2,460,236 $ 41,690 6.78 % $ 2,895,244 $ 38,410 5.31 %
earning assets*
INTEREST BEARING
LIABILITIES:
Deposits:
Demand, $ 549,991 $ 2,569 1.87 % $ 291,134 $ 2,121 2.91 % $ 416,561 $ 2,417 2.32 %
interest-bearing
Savings 134,998 1,040 3.08 % 140,295 1,229 3.50 % 117,948 1,008 3.42 %
Time deposits:
$100,000 or more 811,007 4,799 2.37 % 783,151 6,441 3.29 % 679,064 4,109 2.42 %
Other 670,465 5,230 3.12 % 362,804 3,157 3.48 % 763,999 5,831 3.05 %
Total time 1,481,472 10,029 2.71 % 1,145,955 9,598 3.35 % 1,443,063 9,940 2.76 %
deposits
Total interest 2,166,461 13,638 2.52 % 1,577,384 12,948 3.28 % 1,977,572 13,365 2.70 %
bearing deposits
FHLB advances 356,848 3,355 3.76 % 350,668 3,349 3.82 % 350,000 3,262 3.73 %
Other borrowings 37,769 480 5.08 % 37,741 640 6.78 % 37,764 523 5.54 %
Total interest
bearing 2,561,078 $ 17,473 2.73 % 1,965,793 $ 16,937 3.45 % 2,365,336 $ 17,150 2.90 %
liabilities
Non-interest
bearing demand 308,327 342,200 297,089
deposits
Total funding
liabilities / $ 2,869,405 2.44 % $ 2,307,993 2.94 % $ 2,662,425 2.58 %
cost of funds
Net interest
income / net $ 24,233 2.67 % $ 24,753 3.33 % $ 21,260 2.41 %
interest spread*
Net interest 3.14 % 4.02 % 2.94 %
margin*
Net interest
margin*,
excluding effect 3.18 % 4.07 % 2.96 %
of non-accrual
loan income
(expense)
Net interest
margin*,
excluding effect
of non-accrual 3.16 % 4.00 % 2.94 %
loan income
(expense) and
prepayment fee
income
Non-accrual loan
income $ (328 ) $ (273 ) $ (169 )
(reversed)
recognized
Prepayment fee 173 434 145
income received
Net $ (155 ) $ 161 $ (24 )
Cost of
deposits:
Non-interest
bearing demand $ 308,327 $ - $ 342,200 $ - $ 297,089 $ -
deposits
Interest bearing 2,166,461 13,638 2.52 % 1,577,384 12,948 3.28 % 1,977,572 13,365 2.70 %
deposits
Total deposits $ 2,474,788 $ 13,638 2.20 % $ 1,919,584 $ 12,948 2.70 % $ 2,274,661 $ 13,365 2.35 %
Nine Months Ended Nine Months Ended
9/30/2009 9/30/2008
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 $ 2,106,172 $ 97,375 6.16 % $ 2,088,851 $ 115,864 7.40 %
held for sale
Securities
available for 565,059 18,093 4.27 % 288,909 10,597 4.89 %
sale
FRB and FHLB
stock and other 173,315 555 0.43 % 23,765 1,056 5.92 %
investments
Federal funds 13,128 152 1.54 % 20,605 320 2.07 %
sold
Total interest $ 2,857,674 $ 116,175 5.42 % $ 2,422,130 $ 127,837 7.04 %
earning assets*
INTEREST BEARING
LIABILITIES:
Deposits:
Demand, $ 437,224 $ 7,251 2.21 % $ 266,872 $ 5,851 2.92 %
interest-bearing
Savings 121,480 3,056 3.35 % 140,018 3,877 3.69 %
Time deposits:
$100,000 or more 690,649 12,452 2.40 % 822,548 22,389 3.63 %
Other 690,686 16,069 3.10 % 286,841 9,616 4.47 %
Total time 1,381,335 28,521 2.75 % 1,109,389 32,005 3.85 %
deposits
Total interest 1,940,039 38,828 2.67 % 1,516,279 41,733 3.67 %
bearing deposits
FHLB advances 358,434 9,853 3.67 % 372,294 10,543 3.78 %
Other borrowings 37,920 1,562 5.49 % 37,882 2,042 7.19 %
Total interest
bearing 2,336,393 $ 50,243 2.87 % 1,926,455 $ 54,318 3.76 %
liabilities
Non-interest
bearing demand 298,418 339,169
deposits
Total funding
liabilities / $ 2,634,811 2.54 % $ 2,265,624 3.20 %
cost of funds
Net interest
income / net $ 65,932 2.55 % $ 73,519 3.28 %
interest spread*
Net interest 3.08 % 4.05 %
margin*
Net interest
margin*,
excluding effect 3.12 % 4.07 %
of non-accrual
loan income
(expense)
Net interest
margin*,
excluding effect
of non-accrual 3.10 % 4.00 %
loan income
(expense) and
prepayment fee
income
Non-accrual loan
income $ (888 ) $ (406 )
(reversed)
recognized
Prepayment fee 465 1,235
income received
Net $ (423 ) $ 829
Cost of
deposits:
Non-interest
bearing demand $ 298,418 $ - $ 339,169 $ -
deposits
Interest bearing 1,940,039 38,828 2.67 % 1,516,279 41,733 3.67 %
deposits
Total deposits $ 2,238,457 $ 38,828 2.31 % $ 1,855,448 $ 41,733 3.00 %
For the Three Months Ended For the Nine Months Ended
9/30/2009 9/30/2008 % change 6/30/2009 % 9/30/2009 9/30/2008 %
change change
AVERAGE BALANCES
Gross loans*,
includes loans held $ 2,117,910 $ 2,113,917 0 % $ 2,092,809 1 % 2,106,172 2,088,851 1 %
for sale
Investments 970,472 346,319 180 % 802,435 21 % 751,502 333,279 125 %
Interest-earning 3,088,382 2,460,236 26 % 2,895,244 7 % 2,857,674 2,422,130 18 %
assets*
Total assets 3,208,774 2,573,286 25 % 3,007,256 7 % 2,972,856 2,532,671 17 %
Interest-bearing 2,166,461 1,577,384 37 % 1,977,572 10 % 1,940,039 1,516,279 28 %
deposits
Interest-bearing 2,561,078 1,965,793 30 % 2,365,336 8 % 2,336,393 1,926,455 21 %
liabilities
Non-interest-bearing 308,327 342,200 -10 % 297,089 4 % 298,418 339,169 -12 %
demand deposits
Stockholders' Equity 284,676 232,918 22 % 290,959 -2 % 288,928 231,133 25 %
Net interest earning 527,304 494,443 7 % 529,908 0 % 521,281 495,675 5 %
assets*
LOAN PORTFOLIO 9/30/2009 6/30/2009 % change 12/31/2008 % 9/30/2008 % change
COMPOSITION: * change
Commercial loans $ 546,328 $ 556,793 -2 % $ 598,556 -9 % $ 600,933 -9 %
Real estate loans 1,566,551 1,502,048 4 % 1,472,872 6 % 1,470,348 7 %
Consumer and other 20,142 23,069 -13 % 28,520 -29 % 27,574 -27 %
loans
Loans outstanding* 2,133,021 2,081,910 2 % 2,099,948 2 % 2,098,855 2 %
Unamortized deferred
loan fees - net of (1,688 ) (1,598 ) 6 % (1,505 ) 12 % (1,522 ) 11 %
costs
Loans*, net of
deferred loan fees 2,131,333 2,080,312 2 % 2,098,443 2 % 2,097,333 2 %
and costs
Allowance for loan (52,967 ) (50,339 ) 5 % (43,419 ) 22 % (27,806 ) 90 %
losses
Loan receivable*, $ 2,078,366 $ 2,029,973 2 % $ 2,055,024 1 % $ 2,069,527 0 %
net
* The loan portfolio
composition tables
excludes the
guaranteed portion
of delinquent SBA $ 20,857 $ 19,765 $ 20,911 $ 14,535
loans for the
amounts indicated at
each period as these
are 100% guaranteed
by the SBA.
DEPOSIT COMPOSITION 9/30/2009 6/30/2009 % Change 12/31/2008 % 9/30/2008 % Change
Change
Non-interest-bearing $ 328,844 $ 318,874 3 % $ 303,656 8 % $ 352,252 -7 %
demand deposits
Money market and 577,185 517,020 12 % 306,478 88 % 318,701 81 %
other
Saving deposits 143,476 129,120 11 % 113,186 27 % 128,490 12 %
Time deposits of 855,261 763,088 12 % 626,850 36 % 737,273 16 %
$100,000 or more
Other time deposits 582,304 711,693 -18 % 588,433 -1 % 410,127 42 %
Total deposit $ 2,487,070 $ 2,439,795 2 % $ 1,938,603 28 % $ 1,946,843 28 %
balances
DEPOSIT COMPOSITION 9/30/2009 6/30/2009 12/31/2008 9/30/2008
(%)
Non-interest-bearing 13.2 % 13.1 % 15.7 % 18.1 %
demand deposits
Money market and 23.2 % 21.2 % 15.8 % 16.4 %
other
Saving deposits 5.8 % 5.3 % 5.8 % 6.6 %
Time deposits of 34.4 % 31.3 % 32.3 % 37.8 %
$100,000 or more
Other time deposits 23.4 % 29.1 % 30.4 % 21.1 %
Total deposit 100.0 % 100.0 % 100.0 % 100.0 %
balances
CAPITAL RATIOS 9/30/2009 6/30/2009 12/31/2008 9/30/2008
Total stockholders' $ 290,015 $ 281,419 $ 289,953 $ 230,513
equity
Tier 1 risk-based 13.51 % 13.37 % 14.32 % 11.84 %
capital ratio
Total risk-based 14.77 % 14.63 % 15.58 % 13.08 %
capital ratio
Tier 1 leverage 9.95 % 10.50 % 12.61 % 10.42 %
ratio
Book value per share $ 11.02 $ 10.72 $ 11.05 $ 8.80
Tangible common $ 8.30 $ 8.00 $ 8.33 $ 8.63
equity per share2
Tangible common
equity to tangible 6.81 % 6.45 % 8.20 % 8.72 %
assets2
2 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and other
intangible assets, net divided by total assets less goodwill and other intangible assets, net. Management reviews tangible common
equity to tangible assets in evaluating the Company's capital levels and has included this ratio in response to market participant
interest in tangible common equity as a measure of capital.
Reonciliation of GAAP financial measures to non-GAAP financial measures:
9/30/2009 6/30/2009 12/31/2008 9/30/2008
Total stockholders' $ 290,015 $ 281,419 $ 289,953 $ 230,513
equity
Less: Preferred
stock, net of (63,030 ) (62,798 ) (62,336 ) -
discount
Common stock warrant (4,766 ) (4,766 ) (4,766 ) -
Goodwill and other
intangible assets, (3,695 ) (3,839 ) (4,136 ) (4,304 )
net
Tangible common $ 218,524 $ 210,016 $ 218,715 $ 226,209
equity
Total assets $ 3,212,690 $ 3,260,809 $ 2,672,054 $ 2,597,652
Less: Goodwill and
other intangible (3,695 ) (3,839 ) (4,136 ) (4,304 )
assets, net
Tangible assets $ 3,208,995 $ 3,256,970 $ 2,667,918 $ 2,593,348
Common shares 26,316,576 26,256,960 26,246,560 26,201,560
outstanding
Tangible common
equity to tangible 6.81 % 6.45 % 8.20 % 8.72 %
assets
Tangible common $ 8.30 $ 8.00 $ 8.33 $ 8.63
equity per share
For the Three Months Ended For the Nine Months Ended
ALLOWANCE FOR LOAN 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008 9/30/2009 9/30/2008
LOSSES:
Balance at
beginning of $ 50,339 $ 50,504 $ 43,419 $ 27,806 $ 27,899 $ 43,419 $ 20,035
period
Provision for loan 8,500 19,000 15,670 28,000 6,180 43,170 20,825
losses
Recoveries 179 251 83 124 23 513 128
Charge offs (6,051 ) (19,416 ) (8,668 ) (12,511 ) (6,296 ) (34,135 ) (13,182 )
Balance at end of $ 52,967 $ 50,339 $ 50,504 $ 43,419 $ 27,806 $ 52,967 $ 27,806
period
Net
charge-off/average 1.11 % 3.66 % 1.63 % 2.37 % 1.19 % 2.13 % 0.83 %
gross loans*
(annualized)
For the Three Months Ended, For the Nine Months Ended
NET CHARGED OFF 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008 9/30/2009 9/30/2008
LOANS BY TYPE
Real estate loans $ 2,572 $ 12,410 $ 2,121 $ 2,613 $ 2,128 $ 17,103 $ 4,764
Commercial loans 3,282 6,608 5,204 9,685 4,053 15,094 7,968
Consumer loans 18 147 1,260 89 92 1,425 322
Total net $ 5,872 $ 19,165 $ 8,585 $ 12,387 $ 6,273 $ 33,622 $ 13,054
charge-offs
NON-PERFORMING 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
ASSETS
Delinquent loans
90 days or more on $ 35,510 $ 30,850 $ 41,330 $ 37,580 $ 30,501
non-accrual
status*
Delinquent loans
90 days or more on - - 7 - -
accrual status
Total
non-performing 35,510 30,850 41,337 37,580 30,501
loans*
Other real estate 4,693 3,805 4,822 2,969 2,623
owned
Restructured loans 44,707 37,026 31,131 3,256 3,699
Total
non-performing $ 84,910 $ 71,681 $ 77,290 $ 43,805 $ 36,823
assets*
Non-performing
assets*/ total 2.64 % 2.20 % 2.74 % 1.64 % 1.42 %
assets
Non-performing
assets*/ gross 3.98 % 3.44 % 3.69 % 2.08 % 1.75 %
loans* & OREO
Non-performing
loans*/gross 1.67 % 1.48 % 1.98 % 1.79 % 1.45 %
loans*
Allowance for loan
losses/ gross 2.49 % 2.42 % 2.42 % 2.07 % 1.33 %
loans*
Allowance for loan
losses/ 149 % 163 % 122 % 116 % 91 %
non-performing
loans*
DELINQUENT LOANS 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
BY DAYS PAST DUE
30 - 59 days $ 24,507 $ 5,364 $ 8,272 $ 10,967 $ 10,486
60 - 89 days 7,931 6,593 838 2,668 2,792
90 days or more - - 7 - -
and accruing
Non-accrual 35,510 30,850 41,330 37,580 30,501
Total delinquent $ 67,948 $ 42,807 $ 50,447 $ 51,215 $ 43,779
loans*
DELINQUENT LOANS 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
BY TYPE3
Real estate loans $ 54,129 $ 28,242 $ 31,823 $ 28,409 $ 18,681
Commercial loans 13,241 14,041 18,076 21,030 24,151
Consumer loans 578 524 548 1,776 947
Total delinquent $ 67,948 $ 42,807 $ 50,447 $ 51,215 $ 43,779
loans*
3Delinquent over
30 days, including
non-accrual loans
NON-ACCRUAL LOANS 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
BY TYPE
Real estate loans $ 25,696 $ 20,515 $ 26,153 $ 21,759 $ 11,410
Commercial loans 9,521 10,072 14,876 14,379 18,885
Consumer loans 293 263 301 1,442 206
Total non-accrual $ 35,510 $ 30,850 $ 41,330 $ 37,580 $ 30,501
loans*
WATCH LIST LOANS 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
Special mention $ 30,762 $ 53,277 $ 68,388 $ 71,169 $ 38,461
Substandard 110,669 112,641 98,412 55,622 44,580
Doubtful 2,767 4,237 7,288 9,883 7,306
Loss - - 8 - -
Total watch list $ 144,198 $ 170,155 $ 174,096 $ 136,674 $ 90,347
loans
Source: Nara Bancorp, Inc.
Contact: Investors and Financial Media:
Financial Relations Board
George Zagoudis, 312-640-6663