Q1 2010 Summary:
-- Net loss of $0.10 per common share
-- Allowance for loan losses increased to 2.98% from 2.69%
-- Improving deposit mix driven by growth in core deposits
-- Efficiency ratio improved to 40.96% from 47.03% in Q4 2009
-- Total non-performing assets increased $16 million
-- All capital ratios increased over Q4 2009 levels
LOS ANGELES--(BUSINESS WIRE)--
Nara Bancorp, Inc. (the "Company") (NASDAQ:NARA), the holding company of
Nara Bank (the "Bank"), reported a net loss available to common
stockholders of ($3.6) million, or ($0.10) per diluted share, for first
quarter 2010, compared to a net loss available to common stockholders of
($4.2) million, or ($0.16) per diluted share, for first quarter 2009,
and a net loss available to common stockholders of ($1.5) million, or
($0.04) per diluted share, for fourth quarter 2009.
Alvin Kang, President and Chief Executive Officer, said, "We have not
seen a noticeable improvement in economic conditions in our markets, so
our primary focus remains on balance sheet management. We continue to
see an increase in non-performing assets, and we have responded by
aggressively charging-off loans and further increasing our allowance for
loan losses. Our liquidity, capital and reserves remain at high levels.
We continue to successfully increase our base of core deposits, which
has enabled us to reduce our balances of higher-cost certificates of
deposit. This is having a positive impact on our cost of funds, which
should improve our earnings power later in the year."
Financial Highlights
2010 2009 2009
First Quarter First Quarter Fourth Quarter
(Dollars in thousands)
Net loss $ (2,532 ) $ (3,180 ) $ (476 )
Net loss available to common $ (3,603 ) $ (4,248 ) $ (1,546 )
stockholders
Diluted loss per share $ (0.10 ) $ (0.16 ) $ (0.04 )
Net interest income $ 25,243 $ 20,421 $ 26,414
Net interest margin 3.31 % 3.19 % 3.34 %
Non-interest income $ 9,384 $ 4,383 $ 5,424
Non-interest expense $ 14,184 $ 15,248 $ 14,975
Net loans receivable $ 2,098,269 $ 2,057,875 $ 2,162,009
Deposits $ 2,281,792 $ 2,098,312 $ 2,434,190
Non-performing loans * $ 63,232 $ 41,337 $ 51,674
ALLL to gross loans * 2.98 % 2.42 % 2.69 %
ALLL to non-performing loans * 101 % 122 % 115 %
Provision for loan losses $ 25,407 $ 15,670 $ 17,853
Efficiency ratio 40.96 % 61.47 % 47.03 %
* Excludes the guaranteed portion of delinquent SBA loans totaling $14.8
million, $20.2 million and $12.5 million at first quarter 2010, first quarter
2009 and fourth quarter 2009, respectively.
Operating Results for First Quarter
2010
Net Interest Income and Net Interest Margin. First quarter
2010 net interest income before provision for loan losses was $25.2
million, an increase of 24% from first quarter 2009. The increase in net
interest income was due to a 19% increase in average interest earning
assets and an improved net interest margin.
First quarter 2010 net interest margin (net interest income divided by
average interest-earning assets) increased 12 basis points to 3.31% from
3.19% for first quarter 2009. With no change in the prime rate since
December of 2008, the yield on loans remained relatively stable while
interest-bearing deposits gradually re-priced downward during 2009.
However, the yield on securities available-for-sale declined 101 basis
points as certain higher yielding securities were sold as part of
rebalancing the duration and mix of the investment portfolio.
Additionally, higher levels of cash held at the Federal Reserve Bank to
cover anticipated CD maturity outflows, affected the overall decline in
the yield on interest-earning assets to 5.07% for first quarter 2010,
from 5.64% for the same quarter 2009.
The weighted average yield on the loan portfolio for first quarter 2010
increased 5 basis points to 6.06% from 6.01% for the same period last
year. At March 31, 2010, fixed rate loans were 51% of the loan
portfolio, compared to 49% at March 31, 2009. The weighted average yield
on the variable rate and fixed rate loan portfolios (excluding loan
discount accretion) at March 31, 2010 was 4.57% and 7.23%, respectively,
compared to 4.52% and 7.63% at March 31, 2009.
The weighted average yield on securities available-for-sale ("AFS") for
first quarter 2010 decreased 101 basis points to 3.07% from 4.08% for
the same period 2009. The decrease was primarily attributable to $768
million in new investment securities purchased during 2009, which had
lower yields than the weighed average yield of the portfolio at March
31, 2009. The weighted average yield on AFS investment securities
purchased during 2009 was 3.80%. The decrease was also affected by an
increase in premium amortization of FNMA and FHLMC mortgage related
securities due to the increase in the prepayments of approximately $28.6
million as a result of FNMA and FHLMC accelerated purchases of seriously
delinquent loans, under revised guidelines announced on February 10,
2010.
The weighted average cost of deposits for first quarter 2010 decreased
73 basis points to 1.68% from 2.41% for the same period last year. The
cost of time deposits decreased 57 basis points to 2.24% from 2.81% for
the same period last year.
The weighted average cost of FHLB advances for first quarter 2010 also
decreased 6 basis points to 3.45% for first quarter 2010, compared to
3.51% for first quarter 2009.
Following are the weighted average rate data on a spot rate basis at
March 31, 2010 and 2009:
March 31,
2010 2009
Weighted average loan portfolio yield (excluding discounts) 5.94 % 5.95 %
Weighted average securities available-for-sale portfolio yield 2.95 % 4.25 %
Weighted average cost of deposits 1.42 % 2.42 %
Weighted average cost of total interest-bearing deposits 1.70 % 2.83 %
Weighted average cost of FHLB advances 3.42 % 3.70 %
Net interest margin 3.34 % 2.87 %
Sequentially, first quarter 2010 net interest income before provision
for loan losses decreased $1.2 million, or 4%, from fourth quarter 2009.
The decrease was attributable to a decrease in average interest-earning
assets as well as net interest margin compression. Average
interest-earning assets decreased $111.5 million, or 3.5%, to $3.05
billion at March 31, 2010, compared to $3.16 billion at December 31,
2009. The net interest margin decreased by 3 basis points to 3.31% for
first quarter 2010 from 3.34% for fourth quarter 2009. The decrease in
net interest margin was primarily due to the effect of the FNMA and
FHLMC Buyout program and the decrease in the yield on investment
securities as previously mentioned.
Non-accrual loan interest reversed was $788 thousand, $394 thousand, and
$581 thousand for first quarter 2010, first quarter 2009, and fourth
quarter 2009, respectively. Excluding this effect, the net interest
margin for first quarter 2010, first quarter 2009, and fourth quarter
2009 was 3.42%, 3.26%, and 3.42%, respectively.
Prepayment penalty income for first quarter 2010, first quarter 2009 and
fourth quarter 2009 was $173 thousand, $147 thousand and $166 thousand,
respectively. Excluding the effects of both non-accrual loan interest
reversed and prepayment penalty income, the net interest margin for
first quarter 2010, first quarter 2009 and fourth quarter 2009 was
3.39%, 3.23% and 3.40%, respectively.
Non-interest Income. First quarter 2010 non-interest
income was $9.4 million, an increase of $5.0 million, or 114%, compared
to first quarter 2009. The increase was primarily due to net gains on
sales of securities of $6.3 million during first quarter 2010, compared
to $785 thousand during first quarter 2009. A total of $201.8 million in
available-for-sale GSE investment securities were sold to rebalance the
duration and mix of the investment securities portfolio and to hold
higher levels of cash to fund CD maturities. A total of $42.9 million in
investment securities were sold during first quarter 2009.
Sequentially, non-interest income increased 73% from fourth quarter
2009. The increase was primarily due to net gains on sale of securities
during first quarter 2010, offset by lower net gains from the sale of
loans compared to fourth quarter 2009, as a result of new accounting
literature adopted January 1, 2010, which requires the Company to defer
gain on sales of SBA loans until the 90 days recourse provision expires.
Non-interest Expense. First quarter 2010 non-interest
expense was $14.2 million, a decrease of 7% from $15.2 million for the
same period last year. The decrease was primarily due to decreases in
salaries and benefits expense and credit related expense, offset by an
increase in FDIC insurance premiums. Salaries and benefits expense
decreased $850 thousand, or 13%, to $5.6 million for first quarter 2010,
compared to $6.4 million for the same quarter of 2009. The decrease is
primarily due to decreases in stock compensation expense and in the
number of full-time equivalent employees, which decreased to 338 at
March 31, 2010 from 367 at March 31, 2009. The stock compensation
expense decreased $530 thousand, or 92%, to $48 thousand for first
quarter 2010, compared to $578 thousand for the same period last year.
The decrease was primarily due to the vesting and cancellation of
certain stock options and grants.
Credit related expense decreased $925 thousand, or 62%, to $563 thousand
for first quarter 2010, compared to $1.5 million for the same period
last year. The decrease was primarily due to decreases in OREO related
expenses and provision for uncollectible SBA receivables. The OREO
related expenses decreased $358 thousand, or 71%, to $145 thousand for
first quarter 2010, compared to $503 thousand for same period last year.
During first quarter 2009, the Company provided $330 thousand as an
allowance for doubtful SBA receivables. There was no such expense during
first quarter 2010. FDIC insurance premiums increased $617 thousand, or
82%, to $1.4 million for first quarter 2010, compared to $750 thousand
for the same quarter of 2009. The increase is due to an increase in the
assessment rate beginning in 2010.
Sequentially, non-interest expense for first quarter 2010 decreased by
5% from $15.0 million in fourth quarter 2009, primarily due to decreases
in salaries and benefits expense and credit related expenses, offset by
increases in advertising expense and FDIC insurance assessment.
Income Taxes. The effective income tax benefit rate was
49% for first quarter 2010 compared to 48% for first quarter 2009 and
52% for fourth quarter 2009. The higher effective tax benefit rate for
fourth quarter 2009 was due to the effect of higher tax credits
recognized.
Balance Sheet Summary
Gross loans receivable were $2.16 billion at March 31, 2010, a decrease
of $59 million from $2.22 billion at December 31, 2009. New loan
production was $48.6 million during first quarter 2010, compared to
$149.2 million during fourth quarter 2009, and $62.8 million during
first quarter 2009. The lower production during first quarter 2009 was
attributable to slower loan demand, our tightened underwriting criteria,
and our focus in commercial business lending rather than commercial real
estate lending. Loan pay-offs, pay-downs, amortization and other changes
totaled $107.0 million during first quarter 2010, compared to $78.3
million during fourth quarter 2009 and $71.9 million during first
quarter 2009. Included in pay-downs for first quarter 2010 were 6
problem loans in amount of $25 million that were transferred to loans
held for sale.
Total deposits were $2.28 billion at March 31, 2010, a decrease of 6%
from $2.43 billion at December 31, 2009. The decrease in total deposits
was primarily due to a decrease in retail jumbo CDs. Retail jumbo CDs
decreased $257.8 million, or 35%, to $474.6 million at March 31, 2010
from $732.5 million at December 31, 2009. The majority of these jumbo
CDs were deposits raised during the campaign held during the first and
second quarters of 2009 to strengthen liquidity. Approximately 51% of
these matured retail jumbo CDs were retained and either repriced to
lower rate CDs or moved to other interest-bearing accounts. The weighted
average cost of such deposits decreased 159 basis points to 1.50% at
March 31, 2010.
Credit Quality
The Company recorded a provision for loan losses of $25.4 million in
first quarter 2010, compared to $15.7 million for the same period of the
prior year and $17.9 million in fourth quarter 2009. The increase in the
provision for loan losses from fourth quarter 2009 was primarily due to
the impact of higher net charge-offs, increases in impaired loans
requiring specific reserves or charge-offs, and increases in Special
Mention and Classified loans, subject to general allowances.
Total Watchlist loans, defined as Special Mention and Classified loans,
were $215.3 million at March 31, 2010, an increase from $199.9 million
at December 31, 2009. The increase was primarily in Substandard loans
which increased to $169.1 million at March 31, 2010, from $153.5 million
at December 31, 2009, primarily due to commercial real estate loans
("CRE") to the hospitality industry.
Total delinquent loans, 30 or more days delinquent, were $75.6 million
at March 31, 2010, compared to $69.5 million at December 31, 2009. Loans
past due 30 - 59 days decreased to $8.4 million at March 31, 2010, from
$14.9 million at December 31, 2009. Loans past due 60-89 days increased
to $4.0 million at March 31, 2010, from $2.9 million at December 31,
2009. Non-performing loans (loans past due 90 days or more and
non-accrual) at March 31, 2010, were $63.2 million, or 2.94% of total
loans, compared to $51.7 million, or 2.34% of total loans, at December
31, 2009. CRE and commercial and industrial loans ("C & I") loans
contributed 70% and 30%, respectively, of new inflows to non-performing
loans for the first quarter 2010.
Non-performing assets, comprised of non-accrual loans, accruing
restructured loans and other real estate owned, at March 31, 2010 were
$134.1 million, or 6.23% of gross loans plus other real estate owned,
compared to $118.1 million, or 5.34%, at December 31, 2009. Other real
estate owned increased to $5.9 million at March 31, 2010, compared to
$2.0 million at December 31, 2009, as five new properties totaling $4.6
million were transferred in as other real estate owned, which was offset
by sales of $700 thousand. Accruing troubled debt restructured loans
included in non-performing assets, increased $685 thousand to $65.0
million at March 31, 2010, from $64.3 million at December 31, 2009.
Net loan charge-offs during first quarter 2010 were $20.8 million, or
3.79% of average loans on an annualized basis, compared to $8.6 million,
or 1.63% during first quarter 2009, and $11.4 million, or 2.08% of
average loans, during fourth quarter 2009. CRE and C&I loans represented
62% and 37%, respectively, of charge-offs during first quarter 2010.
First quarter 2010 charge-offs included five relationships totaling $7.7
million consisting of CRE loans. Excluding these five relationships, the
average charge-off during the quarter was $153 thousand.
The allowance for loan losses at March 31, 2010 was $64.0 million, or
2.98% of gross loans receivable (net of the guaranteed portion of
delinquent SBA loans), compared to $59.4 million, or 2.69%, at December
31, 2009. The ratio of the allowance for loan losses to non-performing
loans was 101% at March 31, 2010, compared to 115% at December 31, 2009.
Impaired loans (defined as loans where it is probable that all principal
and interest payments due will not be collectible according to
contractual terms) at March 31, 2010, were $146.5 million, an increase
from $120.5 million at December 31, 2009. CRE and C&I loans represented
73% and 27%, respectively, of new impaired loans during first quarter
2010. Specific reserves for impaired loans were $26.1 million, or 17.8%
of the aggregate impaired loan amount at March 31, 2010, compared to
$19.8 million, or 16.43% of the aggregate impaired loan amount at
December 31, 2009. Excluding specific reserves for impaired loans, the
allowance coverage on the remaining loan portfolio was 1.89% at March
31, 2010, compared to 1.90% at December 31, 2009.
Capital
At March 31, 2010, the Company continued to be in excess of the
regulatory capital requirements to be classified as a "well-capitalized"
institution. The Leverage Ratio was 12.49% at March 31, 2010, compared
to 12.36% at December 31, 2009. The Tier 1 Risk-based Ratio was 17.10%
at March 31, 2010, compared to 16.73% at December 31, 2009. The Total
Risk-based Ratio was 18.37% at March 31, 2010, compared to 17.99% at
December 31, 2009.
At March 31, 2010, common equity represented 9.68% of total assets,
compared to 9.37% at December 31, 2009. Tangible common equity (TCE)
represented 9.58% of tangible assets at March 31, 2010, compared to
9.27% of tangible assets at December 31, 2009.
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.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss the Company's
first quarter 2010 financial results will be held tomorrow, April 27,
2010 at 9:30 am Pacific / 12:30 pm Eastern. Interested participants and
investors may access the conference call by dialing 800-762-8795
(domestic) or 480-629-9774 (international), conference ID# 4283463.
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 May 4, 2010, conference ID# 4283463.
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 20 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 3/31/2010 12/31/2009 % 3/31/2009 %
change change
Cash and due from $ 260,030 $ 105,592 146 % $ 44,705 482 %
banks
Federal funds sold 20,000 20,000 0 % 150,000 -87 %
Securities available
for sale, at fair 498,801 782,690 -36 % 430,219 16 %
value
Federal Home Loan
Bank and Federal 24,334 24,334 0 % 22,255 9 %
Reserve Bank stock
Loans held for sale,
at the lower of cost 28,679 4,756 503 % 10,965 162 %
or market
Loans receivable 2,162,264 2,221,433 -3 % 2,108,379 3 %
Allowance for loan (63,995 ) (59,424 ) 8 % (50,504 ) 27 %
losses
Net loans receivable 2,098,269 2,162,009 -3 % 2,057,875 2 %
Accrued interest 9,723 11,261 -14 % 8,276 17 %
receivable
Premises and 10,950 10,865 1 % 11,749 -7 %
equipment, net
Bank owned life 23,645 23,571 0 % 23,402 1 %
insurance
Goodwill 2,509 2,509 0 % 2,509 0 %
Other intangible 915 1,042 -12 % 1,474 -38 %
assets, net
Other assets 101,165 79,328 28 % 62,108 63 %
Total assets $ 3,079,020 $ 3,227,957 -5 % $ 2,825,537 9 %
Liabilities
Deposits $ 2,281,792 $ 2,434,190 -6 % $ 2,098,312 9 %
Borrowings from
Federal Home Loan 350,000 350,000 0 % 350,000 0 %
Bank
Other borrowings 43,318 39,268 10 % 39,268 10 %
Accrued interest 10,070 12,674 -21 % 9,273 9 %
payable
Other liabilities 30,019 23,850 26 % 38,999 -23 %
Total liabilities 2,715,199 2,859,982 -5 % 2,535,852 7 %
Stockholders' Equity
Preferred stock,
$0.001 par value;
authorized 10,000,000
undesignated shares;
issued and
outstanding 67,000
shares of Fixed Rate
Cumulative Perpetual 67,000 67,000 0 % 67,000 0 %
Preferred Stock,
Series A with a
liquidation
preference of
$67,428,000 at March
31, 2010, December
31, 2009 and March
31, 2009
Preferred stock (3,503 ) (3,737 ) -6 % (4,434 ) -21 %
discount
Common stock, $0.001
par value;
authorized,
40,000,000 shares;
issued and
outstanding, 38 38 0 % 26 46 %
37,835,407,37,824,007
and 26,256,960 shares
at March 31, 2010,
December 31, 2009 and
March 31, 2009,
respectively
Capital surplus 169,848 169,806 0 % 87,435 94 %
Retained earnings 128,288 131,891 -3 % 137,643 -7 %
Accumulated other
comprehensive income 2,150 2,977 -28 % 2,015 -7 %
(loss), net
Total stockholders' 363,821 367,975 -1 % 289,685 26 %
equity
Total liabilities and $ 3,079,020 $ 3,227,957 -5 % $ 2,825,537 9 %
stockholders' equity
Nara Bancorp, Inc.
Consolidated Statements of Income (Loss)
Unaudited (Dollars in Thousands, Except for Per Share Data)
Three Months Ended,
3/31/2010 3/31/2009 % 12/31/2009 %
change change
Interest income:
Interest and fees $ 33,348 $ 31,672 5 % $ 34,041 -2 %
on loans
Interest on 5,088 4,320 18 % 7,649 -33 %
securities
Interest on
federal funds sold 225 49 359 % 180 25 %
and other
investments
Total interest 38,661 36,041 7 % 41,870 -8 %
income
Interest expense:
Interest on 9,947 11,825 -16 % 11,808 -16 %
deposits
Interest on other 3,471 3,795 -9 % 3,648 -5 %
borrowings
Total interest 13,418 15,620 -14 % 15,456 -13 %
expense
Net interest
income before 25,243 20,421 24 % 26,414 -4 %
provision for loan
losses
Provision for loan 25,407 15,670 62 % 17,853 42 %
losses
Net interest
income after (164 ) 4,751 -103 % 8,561 -102 %
provision for loan
losses
Non-interest
income:
Service fees on 1,619 1,769 -8 % 1,616 0 %
deposit accounts
Net gains on sales 43 450 -90 % 556 -92 %
of loans
Net gains on sales
of securities 6,296 785 702 % 1,700 270 %
available-for-sale
Net valuation
losses on interest (231 ) (116 ) -99 % (94 ) -146 %
rate swaps
Net gains (losses) 15 (130 ) 112 % (8 ) -288 %
on sales of OREO
Other income and 1,642 1,625 1 % 1,654 -1 %
fees
Total non-interest 9,384 4,383 114 % 5,424 73 %
income
Non-interest
expense:
Salaries and 5,593 6,443 -13 % 6,302 -11 %
employee benefits
Occupancy 2,427 2,426 0 % 2,482 -2 %
Furniture and 778 695 12 % 764 2 %
equipment
Advertising and 459 457 0 % 323 42 %
marketing
Data processing 933 901 4 % 955 -2 %
and communications
Professional fees 702 678 4 % 698 1 %
FDIC assessment 1,367 750 82 % 1,057 29 %
Other 1,925 2,898 -34 % 2,394 -20 %
Total non-interest 14,184 15,248 -7 % 14,975 -5 %
expense
Income (loss)
before income (4,964 ) (6,114 ) -19 % (990 ) 401 %
taxes
Income tax
provision (2,432 ) (2,934 ) -17 % (514 ) 373 %
(benefit)
Net income (loss) $ (2,532 ) $ (3,180 ) -20 % $ (476 ) 432 %
Dividends and
discount accretion $ (1,071 ) $ (1,068 ) 0 % $ (1,070 ) 0 %
on preferred stock
Net income (loss)
available to $ (3,603 ) $ (4,248 ) -15 % $ (1,546 ) 133 %
common
stockholders
Earnings (Loss)
Per Common Share:
Basic $ (0.10 ) $ (0.16 ) $ (0.04 )
Diluted $ (0.10 ) $ (0.16 ) $ (0.04 )
Average Shares
Outstanding:
Basic 37,828,587 26,250,258 34,571,292
Diluted 37,828,587 26,250,258 34,571,292
Nara Bancorp, Inc.
Supplemental Data
Unaudited (Dollars in Thousands, Except for Per Share Data)
(Annualized)
At or for the Three Months Ended,
Profitability measures: 3/31/2010 3/31/2009 12/31/2009
ROA 1 -0.32 % -0.47 % -0.06 %
ROE 1 -2.72 % -4.36 % -0.54 %
Net interest margin * 3.31 % 3.19 % 3.34 %
Efficiency ratio 40.96 % 61.47 % 47.03 %
1 based on net income before effect of dividends and discount accretion
on preferred stock
Three Months Ended Three Months Ended Three Months Ended
3/31/2010 3/31/2009 12/31/2009
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 $ 2,200,488 $ 33,348 6.06 % $ 2,107,685 $ 31,672 6.01 % $ 2,193,810 $ 34,041 6.21 %
held for sale
Securities
available for 662,023 5,088 3.07 % 423,907 4,320 4.08 % 781,422 7,649 3.92 %
sale
FRB and FHLB
stock and other 166,191 183 0.44 % 22,880 48 0.84 % 165,193 124 0.30 %
investments
Federal funds 20,000 42 0.84 % 2,267 1 0.18 % 19,783 56 1.13 %
sold
Total interest $ 3,048,702 $ 38,661 5.07 % $ 2,556,739 $ 36,041 5.64 % $ 3,160,208 $ 41,870 5.30 %
earning assets*
INTEREST BEARING
LIABILITIES:
Deposits:
Demand, $ 504,666 $ 1,288 1.02 % $ 342,843 $ 2,265 2.64 % $ 558,389 $ 1,696 1.21 %
interest-bearing
Savings 134,441 805 2.40 % 111,233 1,008 3.62 % 138,924 892 2.57 %
Time deposits:
$100,000 or more 903,466 4,961 2.20 % 579,333 3,544 2.45 % 903,963 5,378 2.38 %
Other 500,067 2,893 2.31 % 637,226 5,008 3.14 % 541,183 3,842 2.84 %
Total time 1,403,533 7,854 2.24 % 1,216,559 8,552 2.81 % 1,445,146 9,220 2.55 %
deposits
Total interest 2,042,640 9,947 1.95 % 1,670,635 11,825 2.83 % 2,142,459 11,808 2.20 %
bearing deposits
FHLB advances 350,000 3,017 3.45 % 368,584 3,237 3.51 % 350,870 3,187 3.63 %
Other borrowings 39,767 454 4.57 % 39,734 558 5.62 % 37,774 461 4.88 %
Total interest
bearing 2,432,407 $ 13,418 2.21 % 2,078,953 $ 15,620 3.01 % 2,531,103 $ 15,456 2.44 %
liabilities
Non-interest
bearing demand 331,875 291,324 305,831
deposits
Total funding
liabilities / $ 2,764,282 1.94 % $ 2,370,277 2.64 % $ 2,836,934 2.18 %
cost of funds
Net interest
income / net $ 25,243 2.87 % $ 20,421 2.63 % $ 26,414 2.86 %
interest spread*
Net interest 3.31 % 3.19 % 3.34 %
margin*
Net interest
margin*,
excluding effect 3.42 % 3.26 % 3.42 %
of non-accrual
loan expense
Net interest
margin*,
excluding effect
of non-accrual 3.39 % 3.23 % 3.40 %
loan expense and
prepayment fee
income
Non-accrual loan $ (788 ) $ (394 ) $ (581 )
income reversed
Prepayment fee 173 147 166
income received
Net $ (615 ) $ (247 ) $ (415 )
Cost of
deposits:
Non-interest
bearing demand $ 331,875 $ - $ 291,324 $ - $ 305,831 $ -
deposits
Interest bearing 2,042,640 9,947 1.95 % 1,670,635 11,825 2.83 % 2,142,459 11,808 2.20 %
deposits
Total deposits $ 2,374,515 $ 9,947 1.68 % $ 1,961,959 $ 11,825 2.41 % $ 2,448,290 $ 11,808 1.93 %
For the Three Months Ended
3/31/2010 3/31/2009 % change 12/31/2009 %
change
AVERAGE BALANCES
Gross loans*,
includes loans held $ 2,200,488 $ 2,107,685 4 % $ 2,193,810 0 %
for sale
Investments 848,214 449,054 89 % 966,398 -12 %
Interest-earning 3,048,702 2,556,739 19 % 3,160,208 -4 %
assets*
Total assets 3,176,343 2,696,951 18 % 3,235,147 -2 %
Interest-bearing 2,042,640 1,670,635 22 % 2,142,459 -5 %
deposits
Interest-bearing 2,432,407 2,078,953 17 % 2,531,103 -4 %
liabilities
Non-interest-bearing 331,875 291,324 14 % 305,831 9 %
demand deposits
Stockholders' Equity 372,363 291,908 28 % 351,779 6 %
Net interest earning 616,295 477,786 29 % 629,105 -2 %
assets*
LOAN PORTFOLIO 3/31/2010 12/31/2009 % change 3/31/2009 %
COMPOSITION: * change
Commercial loans $ 514,975 $ 539,147 -4 % $ 573,615 -10 %
Real estate loans 1,617,967 1,654,104 -2 % 1,491,480 8 %
Consumer and other 16,766 18,035 -7 % 24,633 -32 %
loans
Loans outstanding* 2,149,708 2,211,286 -3 % 2,089,728 3 %
Unamortized deferred
loan fees - net of (2,215 ) (2,343 ) -5 % (1,500 ) 48 %
costs
Loans*, net of
deferred loan fees 2,147,493 2,208,943 -3 % 2,088,228 3 %
and costs
Allowance for loan (63,995 ) (59,424 ) 8 % (50,504 ) 27 %
losses
Loan receivable*, $ 2,083,498 $ 2,149,519 -3 % $ 2,037,724 2 %
net
* The loan portfolio
composition tables
and net interest
margin excludes the
guaranteed portion
of delinquent SBA $ 14,771 $ 12,490 $ 20,151
loans for the
amounts indicated at
each period as these
are 100% guaranteed
by the SBA.
REAL ESTATE LOANS BY 3/31/2010 12/31/2009 % change 3/31/2009 %
PROPERTY TYPE: change
Retail buildings $ 381,892 $ 380,958 0 % $ 381,222 0 %
Hotels/motels 311,801 324,058 -4 % 301,389 3 %
Gas stations/ car 265,375 266,986 -1 % 258,681 3 %
washes
Mixed-use facilities 153,297 157,136 -2 % 156,071 -2 %
Warehouses 109,778 111,543 -2 % 116,877 -6 %
Multifamily 70,744 75,587 -6 % 33,202 113 %
Other 325,080 337,836 -4 % 244,038 33 %
Total $ 1,617,967 $ 1,654,104 -2 % $ 1,491,480 8 %
DEPOSIT COMPOSITION 3/31/2010 12/31/2009 % Change 3/31/2009 %
Change
Non-interest-bearing $ 360,801 $ 330,489 9 % $ 297,540 21 %
demand deposits
Money market and 547,468 524,188 4 % 364,297 50 %
other
Saving deposits 136,821 136,804 0 % 113,614 20 %
Time deposits of 714,952 932,699 -23 % 590,342 21 %
$100,000 or more
Other time deposits 521,750 510,010 2 % 732,519 -29 %
Total deposit $ 2,281,792 $ 2,434,190 -6 % $ 2,098,312 9 %
balances
DEPOSIT COMPOSITION 3/31/2010 12/31/2009 3/31/2009
(%)
Non-interest-bearing 15.8 % 13.6 % 14.2 %
demand deposits
Money market and 24.0 % 21.5 % 17.4 %
other
Saving deposits 6.0 % 5.6 % 5.4 %
Time deposits of 31.3 % 38.3 % 28.1 %
$100,000 or more
Other time deposits 22.9 % 21.0 % 34.9 %
Total deposit 100.0 % 100.0 % 100.0 %
balances
CAPITAL RATIOS 3/31/2010 12/31/2009 3/31/2009
Total stockholders' $ 363,821 $ 367,975 $ 289,685
equity
Tier 1 risk-based 17.10 % 16.73 % 14.03 %
capital ratio
Total risk-based 18.37 % 17.99 % 15.30 %
capital ratio
Tier 1 leverage 12.49 % 12.36 % 11.95 %
ratio
Book value per $ 7.87 $ 7.99 $ 8.47
common share
Tangible common $ 7.78 $ 7.90 $ 8.32
equity per share2
Tangible common
equity to tangible 9.58 % 9.27 % 7.74 %
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.
Reconciliation of GAAP financial measures to non-GAAP financial measures:
3/31/2010 12/31/2009 3/31/2009
Total stockholders' equity $ 363,821 $ 367,975 $ 289,685
Less: Preferred stock, net of (63,497 ) (63,263 ) (62,566 )
discount
Common stock warrant (2,383 ) (2,383 ) (4,766 )
Goodwill and other intangible (3,424 ) (3,551 ) (3,983 )
assets, net
Tangible common equity $ 294,517 $ 298,778 $ 218,370
Total assets $ 3,079,020 $ 3,227,957 $ 2,825,537
Less: Goodwill and other (3,424 ) (3,551 ) (3,983 )
intangible assets, net
Tangible assets $ 3,075,596 $ 3,224,406 $ 2,821,554
Common shares outstanding 37,835,407 37,824,007 26,256,960
Tangible common equity to 9.58 % 9.27 % 7.74 %
tangible assets
Tangible common equity per share $ 7.78 $ 7.90 $ 8.32
For the Three Months Ended
ALLOWANCE FOR LOAN 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
LOSSES:
Balance at
beginning of $ 59,424 $ 52,967 $ 50,339 $ 50,504 $ 43,419
period
Provision for loan 25,407 17,853 8,500 19,000 15,670
losses
Recoveries 221 155 179 251 83
Charge offs (21,057 ) (11,551 ) (6,051 ) (19,416 ) (8,668 )
Balance at end of $ 63,995 $ 59,424 $ 52,967 $ 50,339 $ 50,504
period
Net
charge-off/average 3.79 % 2.08 % 1.11 % 3.66 % 1.63 %
gross loans*
(annualized)
For the Three Months Ended,
NET CHARGED OFF 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
LOANS BY TYPE
Real estate loans $ 12,823 $ 7,065 $ 2,572 $ 12,410 $ 2,121
Commercial loans 7,201 4,236 3,282 6,608 5,204
Consumer loans 812 95 18 147 1,260
Total net $ 20,836 $ 11,396 $ 5,872 $ 19,165 $ 8,585
charge-offs
NON-PERFORMING 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
ASSETS
Delinquent loans
90 days or more on $ 62,775 $ 51,674 $ 35,510 $ 30,850 $ 41,330
non-accrual
status*
Delinquent loans
90 days or more on 457 - - - 7
accrual status
Total
non-performing 63,232 51,674 35,510 30,850 41,337
loans*
Other real estate 5,856 2,044 4,693 3,805 4,822
owned
Restructured loans 65,026 64,341 44,707 37,026 31,131
Total
non-performing $ 134,114 $ 118,059 $ 84,910 $ 71,681 $ 77,290
assets*
Non-performing
assets*/ total 4.36 % 3.66 % 2.64 % 2.20 % 2.74 %
assets
Non-performing
assets*/ gross 6.23 % 5.34 % 3.98 % 3.44 % 3.69 %
loans* & OREO
Non-performing
loans*/gross 2.94 % 2.34 % 1.67 % 1.48 % 1.98 %
loans*
Allowance for loan
losses/ gross 2.98 % 2.69 % 2.49 % 2.42 % 2.42 %
loans*
Allowance for loan
losses/ 101 % 115 % 149 % 163 % 122 %
non-performing
loans*
BREAKDOWN OF
RESTRUCTURED LOANS 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
BY TYPE:
Retail buildings $ 8,976 $ 9,620 $ 4,811 $ 1,387 $ 847
Hotels/motels 19,177 16,647 4,400 5,325 5,325
Gas stations/ car 10,941 20,006 19,547 18,931 18,231
washes
Mixed-use 3,355 2,907 373 374 -
facilities
Warehouses 1,522 - 4,455 4,455 -
Multifamily - 1,371 1,371 - -
Other3 21,055 13,790 9,750 6,554 6,728
Total $ 65,026 $ 64,341 $ 44,707 $ 37,026 $ 31,131
3Includes
commercial
business and other
loans
DELINQUENT LOANS BY DAYS 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
PAST DUE
30 - 59 days $ 8,370 $ 14,926 $ 24,507 $ 5,364 $ 8,272
60 - 89 days 3,978 2,877 7,931 6,593 838
90 days or more and 457 - - - 7
accruing
Non-accrual 62,775 51,674 35,510 30,850 41,330
Total delinquent loans* $ 75,580 $ 69,477 $ 67,948 $ 42,807 $ 50,447
DELINQUENT LOANS BY 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
TYPE4
Real estate loans $ 57,634 $ 52,660 $ 54,129 $ 28,242 $ 31,823
Commercial loans 17,107 15,303 13,241 14,041 18,076
Consumer loans 839 1,514 578 524 548
Total delinquent loans* $ 75,580 $ 69,477 $ 67,948 $ 42,807 $ 50,447
4Delinquent over 30
days, including
non-accrual loans
NON-ACCRUAL LOANS BY 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
TYPE
Real estate loans $ 49,393 $ 40,354 $ 25,696 $ 20,515 $ 26,153
Commercial loans 13,103 10,275 9,521 10,072 14,876
Consumer loans 279 1,045 293 263 301
Total non-accrual loans* $ 62,775 $ 51,674 $ 35,510 $ 30,850 $ 41,330
WATCH LIST LOANS 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009
Special mention $ 43,647 $ 42,671 $ 30,762 $ 53,277 $ 68,388
Substandard 169,149 153,535 110,669 112,641 98,412
Doubtful 2,519 3,655 2,767 4,237 7,288
Loss - - - - 8
Total watch list loans $ 215,315 $ 199,861 $ 144,198 $ 170,155 $ 174,096
* The loan portfolio composition tables and net interest margin excludes the
guaranteed portion of delinquent SBA loans for the amounts indicated at each
period as these are 100% guaranteed by the SBA.
Source: Nara Bancorp, Inc.
Contact: Investors and Financial Media:
Financial Profiles, Inc
Tony Rossi, 310-478-2700 x13
trossi@finprofiles.com