EX-99.1 2 a5133575ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Nara Bancorp Reports 46% Increase in Net Income for First Quarter 2006 LOS ANGELES--(BUSINESS WIRE)--April 26, 2006--Nara Bancorp, Inc. (the "Company") (NASDAQ: NARA), the holding company of Nara Bank (the "Bank") reported net income of $7.9 million for the first quarter of 2006, an increase of 46% over $5.4 million for the first quarter of 2005. The Company also reported earnings of $0.30 per diluted share for first quarter 2006, a 36% increase compared to $0.22 per diluted share for the first quarter of 2005. "We are very pleased with Nara Bancorp's first quarter performance," said Min Kim, Chief Operating Officer and Acting President of Nara Bancorp. "We were able to stay highly focused on our efforts to attract new customer relationships to the Bank, which resulted in double-digit annualized increases in both loans and deposits. We were also able to effectively manage our deposit costs despite a competitive environment, which resulted in a modest expansion of our net interest margin from the first quarter of 2005." First Quarter Financial Highlights (2006 vs. 2005): -- Net income increased 46% to $7.9 million -- Diluted EPS increased 36% to $0.30 per share -- Net interest income increased 29% to $22.4 million -- Annualized net interest margin increased 34 basis points to 5.13% -- Net loans receivable increased 15% over prior year to $1.51 billion -- Deposits increased 22% over prior year to $1.65 billion Operating Results for First Quarter 2006 Net Interest Income and Net Interest Margin. First quarter net interest income before provision for loan losses increased 29% to $22.4 million from $17.3 million for first quarter 2005. The improvement was attributable to a 20% increase in the net average interest-earning assets and a 22 basis point increase in the annualized net interest spread (yield on average interest earning assets less average cost of funds). The resulting annualized net interest margin (net interest income divided by average interest-earning assets) increased 34 basis points to 5.13% in the first quarter of 2006 from 4.79% in the same period of the prior year. The weighted average annualized yield on the loan portfolio for first quarter 2006 increased 161 basis points to 8.64% from 7.03% for the same period last year. The increase was the result of the Company's substantially prime rate-based loan portfolio repricing upward with each discount rate increase by the Federal Reserve. The weighted average annualized cost of deposits for first quarter 2006 increased 123 basis points to 2.94% from 1.71% for the same period last year. The most significant increase was seen in annualized time deposit costs, which increased 169 basis points to 4.22% from 2.53% last year. Sequentially, first quarter 2006 net interest income before provision for loan losses increased $606,000, or 3%, over the fourth quarter 2005. The annualized net interest margin for first quarter 2006 was 5.13%, the same as fourth quarter 2005, an increase of six basis points from the adjusted net interest margin of 5.07% (the net interest margin excluding an upward adjustment in the fourth quarter 2005 from the recognition of unamortized discounts, totaling $245,000 related to certain purchased loans that paid off during the fourth quarter). Non-interest Income. First quarter non-interest income increased $1.1 million, or 26%, to $5.3 million from $4.2 million for the same period last year. The increase was primarily due to an increase in SBA loan sale gains of $968,000. The net gains on sale of SBA loans increased primarily due to higher sales volumes of $24 million during first quarter 2006 compared to $14 million during first quarter 2005. Non-interest Expense. First quarter non-interest expense increased $2.5 million, or 23%, to $13.2 million from $10.7 million for the same period last year. The increase was driven by higher compensation costs due to staff and management additions, as well as higher accrued bonuses; higher occupancy costs due to opening or commencement of leasing of new branches, and marketing costs relating to the new branches. Included in compensation expense for first quarter 2006 was stock option expense of $288,000 pursuant to the adoption of SFAS 123R, "Share-Based Payment." Sequentially, non-interest expense in first quarter 2006 decreased $245,000, or 2%, to $13.2 million from $13.5 million in fourth quarter 2005. This decrease was primarily due to decreases in advertising and marketing expense and professional fees. Advertising and marketing expense were higher during the fourth quarter 2005 due to new branch and holiday promotions. Professional fees were higher during the fourth quarter 2005 primarily due to costs related to legal and consultant fees in connection with the Company's MOU compliance. Income Taxes. The effective tax rate was 41% for first quarters of 2006 and 2005. Balance Sheet Summary At March 31, 2006 total assets were $1.91 billion compared to $1.78 billion at December 31, 2005 and $1.59 billion at March 31, 2005, increases of 31% (annualized) and 20%, respectively. Gross loans receivable, excluding loans held for sale of $15.4 million, were $1.52 billion at March 31, 2006, an increase of 15% from the $1.33 billion at March 31, 2005, and an increase of 22% (annualized) from the $1.45 billion at December 31, 2005. The growth in the loan portfolio was primarily driven by the real estate portfolio, which increased at an annualized rate of 33%. Total deposits were $1.65 billion at March 31, 2006, an increase of 22% from $1.36 billion at March 31, 2005, and an increase of 33% (annualized) from $1.53 billion at December 31, 2005. One money market account deposit relationship added during the first quarter of 2006 totaling $36.0 million is considered short-term in nature, and may be withdrawn at any time. Such funds are invested in Federal funds sold. Core deposits increased on a sequential quarter basis to 56% of total deposits at March 31, 2006 from 53% at December 31, 2005, as non-jumbo time deposits increased 37% sequentially and money market and savings accounts increased 18% and 17%, respectively, a result of a bank-wide deposit campaign during the first quarter of 2006. Asset Quality Non-performing assets at March 31, 2006 were $5.4 million or 0.28% of total assets, compared to $6.2 million, or 0.35% of total assets at December 31, 2005 and $4.2 million or 0.26% of total assets at March 31, 2005. Non-performing loans at March 31, 2006 were $4.6 million or 0.30% of total loans, compared to $5.5 million, or 0.38% of total loans at December 31, 2005 and $3.8 million or 0.29% of total loans at March 31, 2005. The decrease in non-performing loans during the first quarter 2006 was primarily attributable to the pay-off of four non-accrual loans. Net loan charge-offs were $300,000 for first quarter 2006, or 0.08% of average loans on an annualized basis, compared to $307,000, or 0.08% of average loans on annualized basis for fourth quarter 2005 and $562,000, or 0.18% of average loan on an annualized basis for first quarter 2005. The allowance for loan losses at March 31, 2006 was $18.4 million, or 1.21% of gross loans receivables, compared to $17.6 million, or 1.22% of gross loans receivable at December 31, 2005 and $15.7 million, or 1.19% of gross loans receivable at March 31, 2005. Performance Ratios The annualized return on average equity (ROE) for first quarter 2006 was 20.72%, compared to 21.83% for fourth quarter 2005, and 21.05% for first quarter 2005. The 2006 first quarter ROE declined from the 2005 first quarter primarily due to the increase in equity resulting from the $20 million of capital raised in September 2005. The annualized return on average assets (ROA) for first quarter 2006 was 1.72%, compared to 1.77% for the fourth quarter 2005 and 1.41% for first quarter 2005. The efficiency ratio for first quarter 2006 was 47.79%, compared to 48.63% for fourth quarter 2005 and 49.74% for first quarter 2005. The improved efficiency ratio was attributable to generating greater net interest income as a result of asset growth and net interest margin expansion that more than offset increased operating costs. Capital At March 31, 2006, we continued to exceed the regulatory capital requirements to be classified as a "well-capitalized institution." The Leverage Ratio was 10.45% compared to 10.22% at December 31, 2005 and 8.75% at March 31, 2005. The Tier 1 Risk-based Ratio was 11.67% compared to 11.77% at December 31, 2005 and 9.52% at March 31, 2005. The Total Risk-based Ratio was 12.79% compared to 12.90% at December 31, 2005 and 10.97% at March 31, 2005. Outlook For the full year 2006, Nara Bancorp continues to expect fully diluted earnings per share to range between $1.20 and $1.25. Commenting on the outlook, Ms. Kim said, "Our loan pipeline remains healthy and our deposit campaigns are helping us to effectively manage our funding costs. While we expect our net interest margin to be flat to slightly lower over the remainder of 2006, as rates stop rising, we believe the impact will be offset by increased net interest income from loan growth, increased SBA loan sale gains, and lower expenses in the second half of the year related to our regulatory compliance efforts. Overall, we expect to continue generating steady growth as we move through 2006." Conference Call and Webcast A conference call with simultaneous web cast to discuss the Company's first quarter 2006 financial results will be held tomorrow, April 27, 2006 at 9:30 a.m. Pacific / 12:30 p.m. Eastern. Interested participants and investors may access the conference call by dialing 866-700-6293 (domestic) or 617-213-8835 (international). There will also be a live web cast of the call available at the Investor Relations section of Nara Bank's web site at www.narabank.com. Web participants are encouraged to go to the web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. After the live web cast, 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 888-286-8010 (domestic) or 617-801-6888 (international) through May 4, 2006; the pass code is 57526806. 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 18 branches and 8 loan production offices in the United States and one liaison office in Seoul, Korea. Nara Bank operates full-service branches in California and New York, with loan production offices in California, Washington, Colorado, Texas, Georgia, Illinois, 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) Assets 3/31/2006 12/31/2005 % change 3/31/2005 % change ------------------------------------------------------ Cash and due from banks $38,306 $32,924 16% $28,308 35% Federal funds sold 75,500 33,100 128% 20,500 268% Term federal funds sold 7,000 7,000 0% 12,000 -42% Securities available for sale, at fair value 185,653 174,709 6% 134,283 38% Securities held to maturity, at amortized cost (fair value: March 31, 2006 - $1,015; December 31, 2005 - $1,023; March 31, 2005 - $2,070) 1,000 1,001 0% 2,001 -50% Federal Home Loan Bank and Federal Reserve Bank stock 8,341 8,266 1% 6,997 19% Loans held for sale, at the lower of cost or market 15,422 17,083 -10% 7,084 118% Loans receivable 1,524,377 1,445,740 5% 1,325,859 15% Allowance for loan losses (18,398) (17,618) 4% (15,715) 17% ------------------------------------------------------ Net loans 1,505,979 1,428,122 5% 1,310,144 15% ------------------------------------------------------ Accrued interest receivable 7,694 7,620 1% 6,157 25% Premises and equipment, net 8,575 8,148 5% 6,846 25% Cash surrender value of life insurance 14,775 14,640 1% 14,322 3% Goodwill 2,347 2,347 0% 2,347 0% Other intangible assets, net 3,416 3,589 -5% 4,118 -17% Other assets 37,302 37,273 0% 35,360 5% ------------------------------------------------------ Total assets $1,911,310 $1,775,822 8% $1,590,467 20% ====================================================== Liabilities Deposits $1,650,623 $1,526,486 8% $1,357,263 22% Borrowings from Federal Home Loan Bank 31,000 31,000 0% 63,500 -51% Subordinated debentures 39,268 39,268 0% 39,268 0% Accrued interest payable 11,655 8,755 33% 4,345 168% Other liabilities 24,307 23,559 3% 22,008 10% ------------------------------------------------------ Total liabilities 1,756,853 1,629,068 8% 1,486,384 18% ------------------------------------------------------ Stockholders' Equity Common stock, $0.001 par value; authorized, 40,000,000 shares; issued and outstanding, 25,557,948, 25,444,442 and 23,366,660 shares at March 31, 2006, December 31, 2005 and March 31, 2005, respectively $25 $25 0% $23 9% Capital surplus 70,900 69,451 2% 45,072 57% Retained earnings 88,192 81,016 9% 61,611 43% Accumulated other comprehensive income (loss), net (4,660) (3,738) 25% (2,623) 78% ------------------------------------------------------ Total stockholders' equity 154,457 146,754 5% 104,083 48% ------------------------------------------------------ Total liabilities and stockholders' equity $1,911,310 $1,775,822 8% $1,590,467 20% ====================================================== Nara Bancorp, Inc. Consolidated Statements of Income Unaudited (Dollars in Thousands, Except for Per Share Data) Three Months Ended, ----------------------------------------------------- 3/31/2006 12/31/2005 % change 3/31/2005 % change ----------------------------------------------------- Interest income: Interest and fees on loans $32,400 $30,895 5% $22,455 44% Interest on securities 1,884 1,871 1% 1,400 35% Interest on federal funds sold and other investments 792 651 22% 239 231% ----------------------------------------------------- Total interest income 35,076 33,417 5% 24,094 46% ----------------------------------------------------- Interest expense: Interest on deposits 11,589 10,537 10% 5,458 112% Interest on other borrowings 1,122 1,121 0% 1,304 -14% ----------------------------------------------------- Total interest expense 12,711 11,658 9% 6,762 88% ----------------------------------------------------- Net interest income before provision for loan losses 22,365 21,759 3% 17,332 29% Provision for loan losses 1,080 857 26% 1,650 -35% ----------------------------------------------------- Net interest income after provision for loan losses 21,285 20,902 2% 15,682 36% ----------------------------------------------------- Non-interest income: Service fees on deposit accounts 1,537 1,569 -2% 1,578 -3% Net gains on sales of SBA loans 1,717 2,297 -25% 749 129% Net gains on sales of securities available-for- sale - - 0% 15 -100% Other income and fees 2,019 2,043 -1% 1,837 10% ----------------------------------------------------- Total non- interest income 5,273 5,909 -11% 4,179 26% ----------------------------------------------------- Non-interest expense: Salaries and employee benefits 6,811 6,361 7% 5,263 29% Occupancy 1,816 1,907 -5% 1,596 14% Furniture and equipment 520 589 -12% 510 2% Advertising and marketing 551 789 -30% 390 41% Data processing and communications 953 920 4% 796 20% Professional fees 678 1,159 -42% 756 -10% Other 1,880 1,729 9% 1,389 35% ----------------------------------------------------- Total non- interest expense 13,209 13,454 -2% 10,700 23% ----------------------------------------------------- Income before income taxes 13,349 13,357 0% 9,161 46% Income taxes 5,470 5,446 0% 3,756 46% ----------------------------------------------------- Net Income $7,879 $7,911 0% $5,405 46% ===================================================== Earnings Per Share: Basic $0.31 $0.31 $0.23 Diluted $0.30 $0.30 $0.22 Average Shares Outstanding Basic 25,473,400 25,406,294 23,353,801 Diluted 26,140,846 26,180,117 24,669,721 Nara Bancorp, Inc. Supplemental Data Unaudited (Dollars in Thousands, Except for Per Share Data) (Annualized) At or for the three months ended, ----------------------------------- Profitability measures: 3/31/2006 12/31/2005 3/31/2005 ---------------------------------- ROA 1.72% 1.77% 1.41% ROE 20.72% 21.83% 21.05% Net interest margin 5.13% 5.13% 4.79% Efficiency ratio 47.79% 48.63% 49.74% Yield on loan portfolio 8.64% 8.49% 7.03% Yield on interest- earning assets 8.04% 7.88% 6.65% Cost of interest- bearing deposits 3.80% 3.57% 2.32% Cost of total deposits 2.94% 2.74% 1.71% Cost of interest- bearing liabilities 3.95% 3.74% 2.53% Cost of funds 3.09% 2.90% 1.92% Net interest spread (yield on average interest- earning assets - average cost of funds) 4.95% 4.98% 4.73% For the three months ended ------------------------------------------------------- 3/31/2006 12/31/2005 % change 3/31/2005 % change ------------------------------------------------------- AVERAGE BALANCES Gross loans, includes loans held for sale $1,500,177 $1,454,930 3% $1,277,808 17% Interest- earning assets 1,744,924 1,696,845 3% 1,448,668 20% Total assets 1,836,238 1,790,975 3% 1,533,157 20% Interest- bearing deposits 1,218,324 1,179,585 3% 941,839 29% Interest- bearing liabilities 1,286,621 1,247,753 3% 1,069,365 20% Non-interest- bearing demand deposits 360,460 359,103 0% 335,753 7% Stockholders' Equity 152,105 144,963 5% 102,687 48% LOAN PORTFOLIO COMPOSITION: 3/31/2006 12/31/2005 % change 3/31/2005 % change ------------------------------------------------------- Commercial loans $495,080 $483,231 2% $465,762 6% Real estate loans 973,903 900,699 8% 796,962 22% Consumer and other loans 58,214 64,633 -10% 66,180 -12% ------------------------------------------------------- Loans outstanding 1,527,197 1,448,563 5% 1,328,904 15% Unamortized deferred loan fees - net of costs (2,820) (2,823) 0% (3,045) -7% ------------------------------------------------------- Loans, net of deferred loan fees and costs 1,524,377 1,445,740 5% 1,325,859 15% Allowance for loan losses (18,398) (17,618) 4% (15,715) 17% ------------------------------------------------------- Loan receivable, net $1,505,979 $1,428,122 5% $1,310,144 15% ======================================================= For the period ended ------------------------------------------------------ ALLOWANCE FOR LOAN LOSSES: 3/31/2006 12/31/2005 % Change 3/31/2005 % Change ------------------------------------------------------ Balance at Beginning of Period $17,618 $14,627 20% $14,627 20% Provision for Loan Losses 1,080 5,427 -80% 1,650 -35% Recoveries 351 630 -44% 294 19% Charge Offs (651) (3,066) -79% (856) -24% ------------------------------------------------------ Balance at End of Period $18,398 $17,618 4% $15,715 17% ====================================================== Net charge- off/Average gross loans (annualized) 0.08% 0.18% 0.18% NON-PERFORMING ASSETS 3/31/2006 12/31/2005 3/31/2005 ---------------------------------- Delinquent Loans 90 days or more on Non-Accrual Status $4,589 $5,489 $3,838 Delinquent Loans 90 days or more on Accrual Status - - - ---------------------------------- Total Non- Performing Loans 4,589 5,489 3,838 Other real estate owned - - - Restructured Loans 807 741 322 ---------------------------------- Total Non- Performing Assets $5,396 $6,230 $4,160 ================================== Non-Performing Assets/ Total Assets 0.28% 0.35% 0.26% Non-Performing Loans/Gross Loans 0.30% 0.38% 0.29% Allowance for loan losses/ Gross Loans 1.21% 1.22% 1.19% Allowance for loan losses/ Non-Performing Loans 401% 321% 409% DEPOSIT COMPOSITION 3/31/2006 12/31/2005 % Change 3/31/2005 % Change ------------------------------------------------------ Non-interest- bearing demand deposits $375,672 $371,943 1% $363,614 3% Money market and other 218,235 185,550 18% 270,703 -19% Saving deposits 141,327 120,948 17% 111,674 27% Time deposits of $100,000 or more 732,348 714,636 2% 527,768 39% Other time deposits 183,041 133,409 37% 83,504 119% ------------------------------------------------------ Total deposit balances $1,650,623 $1,526,486 8% $1,357,263 22% ====================================================== DEPOSIT COMPOSITION (%) 3/31/2006 12/31/2005 3/31/2005 --------------------------------- Non-interest- bearing demand deposits 22.7% 24.4% 26.8% Money market and other 13.2% 12.2% 19.9% Saving deposits 8.6% 7.9% 8.2% Time deposits of $100,000 or more 44.4% 46.8% 38.9% Other time deposits 11.1% 8.7% 6.2% ----------- ----------- ---------- Total deposit balances 100.0% 100.0% 100.0% =========== =========== ========== CAPITAL RATIOS 3/31/2006 12/31/2005 3/31/2005 ---------------------------------- Total stockholders' equity $154,457 $146,754 $104,083 Tier 1 risk- based capital ratio 11.67% 11.77% 9.52% Total risk- based capital ratio 12.79% 12.90% 10.97% Tier 1 leverage ratio 10.45% 10.22% 8.75% Book value per share $6.04 $5.77 $4.45 Tangible book value per share $5.82 $5.53 $4.18 Tangible equity to tangible assets 7.80% 7.96% 6.16% CONTACT: Investors and Financial Media: Financial Relations Board Tony Rossi, 310-854-8317