-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K99OwELhNmMhhxhBJ0RD7KYNy5oa0W1dN13daXMDCdNVwEs+vHarI9wByKtjXybU YTH8U073k3gdlnIxyFPiEw== 0001157523-07-010114.txt : 20071024 0001157523-07-010114.hdr.sgml : 20071024 20071023173944 ACCESSION NUMBER: 0001157523-07-010114 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20071023 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071024 DATE AS OF CHANGE: 20071023 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NARA BANCORP INC CENTRAL INDEX KEY: 0001128361 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 954170121 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50245 FILM NUMBER: 071186382 BUSINESS ADDRESS: STREET 1: 3731 WILSHIRE BLVD STREET 2: SUITE 1000 CITY: LOS ANGELES STATE: CA ZIP: 90010 BUSINESS PHONE: 2136391700 MAIL ADDRESS: STREET 1: 3731 WILSHIRE BLVD STREET 2: SUITE 1000 CITY: LOS ANGELES STATE: CA ZIP: 90010 8-K 1 a5525856.txt NARA BANCORP, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 23, 2007 Nara Bancorp, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-50245 95-4170121 - -------------------------------------------------------------------------------- of incorporation) File Number) Identification No.) 3731 Wilshire Boulevard, Suite 1000, Los Angeles, CA 90010 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (213) 639-1700 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On October 23, 2007, Nara Bancorp, Inc. issued a press release announcing results for the quarter ended September 30, 2007. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K. The foregoing information and the attached exhibit are intended to be furnished only and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit No. Description - ----------- ----------- Exhibit 99.1 Press release issued by Nara Bancorp, Inc. dated October 23, 2007. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Nara Bancorp, Inc. Date: October 23, 2007 By: /s/ Alvin D. Kang -------------------------------------------- Name: Alvin D. Kang Title: Chief Financial Officer 3 EX-99.1 2 a5525856ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Nara Bancorp Reports $0.33 Earnings Per Diluted Share for Third Quarter 2007 LOS ANGELES--(BUSINESS WIRE)--Oct. 23, 2007--Nara Bancorp, Inc. (the "Company") (NASDAQ: NARA), the holding company of Nara Bank (the "Bank"), reported net income of $8.8 million, or $0.33 per diluted share, for third quarter 2007, compared to $8.7 million, or $0.33 per diluted share, for third quarter 2006. The settlement of the previously announced arbitration matter reduced net income by $394 thousand, net of $274 thousand in income taxes. On a pro forma basis, third quarter net income would have been $9.2 million, or $0.35 per diluted share, excluding the settlement charges. Min Kim, President and Chief Executive Officer, said, "We delivered a solid quarter despite a highly competitive deposit pricing environment that negatively impacted our net interest margin. We continued to generate strong loan production in both our commercial real estate and C&I portfolios, as well as our SBA lending business. Importantly, asset quality remained healthy as non-performing assets to total assets remained stable compared to the prior quarter. We also made progress on an important strategic initiative during the quarter with our acquisition of a branch in New Jersey. This acquisition, which is subject to regulatory approval, will provide branching rights in the state of New Jersey that will facilitate the further expansion of our East Coast franchise," said Ms. Kim. Third Quarter Financial Highlights (2007 vs. 2006): -- Net interest income increased 3% to $25.1 million -- Net interest margin of 4.67% compared to 5.25% -- Non-interest income increased 36% to $5.9 million -- Non-interest expense increased 12% to $14.6 million -- Net loans receivable increased 18% to $1.94 billion -- Deposits increased 10% to $1.81 billion -- Non-performing assets to total assets of 0.26% compared to 0.23% Operating Results for Third Quarter 2007 Net Interest Income and Net Interest Margin. Third quarter 2007 net interest income before provision for loan losses increased 3% to $25.1 million from $24.4 million for third quarter 2006. The improvement was attributable to a $20.8 million, or 4%, increase in net average interest-earning assets (average interest-earning assets minus average interest-bearing liabilities), which offset the 52 basis point decline in the net interest spread (yield on average interest-earning assets minus cost of average interest-earning liabilities). The resulting third quarter net interest margin (net interest income divided by average interest-earning assets) decreased 58 basis points to 4.67% from 5.25%. The weighted average yield on the loan portfolio for third quarter 2007 decreased 41 basis points to 8.87% from 9.28% for the same period last year. The decline was the result of an increase in the percentage of fixed-rate loans in the loan portfolio that have lower yields, as borrowers migrated to fixed-rate loans offered at lower interest rates than the interest rates offered for adjustable rate loans during 2006 and 2007. The 50 basis point rate cut by the Federal Reserve Bank on September 18, 2007 had a nominal impact on the quarter, but will have a negative effect in future quarters, as the Company's adjustable rate loans are expected to reprice downward at a faster rate than its deposit liabilities. The weighted average yield on the adjustable rate and fixed rate loan portfolios at September 30, 2007 were 8.79% and 7.72%, respectively, compared to 9.38% and 7.63% at September 30, 2006. At September 30, 2007, 48% of the loan portfolio consisted of fixed-rate loans, compared to 35% at September 30, 2006. The weighted average cost of deposits for third quarter 2007 increased 39 basis points to 3.94% from 3.55% for the same period last year. The increase in the cost of deposits was partially affected by the decrease in the average balance of non-interest bearing demand deposits. At September 30, 2007, non-interest bearing demand deposits accounted for 20.4% of total deposits, compared to 23.4% of total deposits at September 30, 2006. The cost of the interest-bearing demand deposits, primarily money market accounts, increased 70 basis points to 4.33% for third quarter 2007 from 3.63% for third quarter of 2006. The increase was due to a money market account deposit campaign initiated during fourth quarter 2006, which carried over into 2007. The cost of time deposits increased 23 basis points to 5.29% for third quarter 2007 from 5.06% for third quarter 2006, accounting for a substantial portion of the increase in deposit interest costs. The weighted average cost of other borrowings for third quarter 2007 decreased 159 basis points to 5.22% from 6.81% for third quarter 2006. The reduction in the weighted average cost of borrowings is primarily attributable to lower rates on FHLB advances and trust preferred securities. The average cost for FHLB advances was 4.47% for third quarter 2007, compared to 4.74% for third quarter 2006, and the average cost of trust preferred securities was 8.81% for third quarter 2007, compared to 9.34% for third quarter 2006. Sequentially, third quarter 2007 net interest income before provision for loan losses increased $925 thousand, or 4%, from second quarter 2007. Net average interest-earning assets decreased by $9.6 million, or 2%, and the net interest spread increased by 2 basis points, resulting in a decline of 5 basis points in the net interest margin to 4.67% from 4.72%. Compared to second quarter 2007, the cost of total deposits increased 12 basis points to 3.94% from 3.82%. The cost of time deposits was 5.29%, 4 basis points higher than second quarter 2007. However, at September 30, 2007, the spot rate for time deposits was 5.20%, compared to 5.29% at June 30, 2007, a decline of 9 basis points. Prepayment penalty income for third quarter 2007, second quarter 2007 and third quarter 2006 was $654 thousand, $524 thousand, and $618 thousand, respectively. Excluding the effect of prepayment penalty income, the net interest margin for third quarter 2007, second quarter 2007, and third quarter 2006 was 4.55%, 4.61%, and 5.11%, respectively. Non-interest Income. Third quarter 2007 non-interest income was higher by $1.5 million, or 36%, compared to third quarter 2006. This increase was primarily due to an increase in net gains on sales of SBA and other loans. Net gains on sales of SBA loans increased $737 thousand, or 80%, to $1.7 million for third quarter 2007 from $922 thousand for third quarter 2006. The increase was primarily due to a 151% increase in loans originated and a 180% increase in SBA loans sold. The Bank also sold $12.0 million of commercial real estate loans during third quarter 2007 to help manage portfolio concentration and liquidity, which resulted in gains of $518 thousand. Sequentially, non-interest income decreased 4%, primarily due to the decrease in net gains on sales of SBA and other loans. Net gains on sales of SBA and other loans decreased 13% to $2.2 million during third quarter 2007, compared to $2.5 million in second quarter 2007. Although SBA sales volume increased, the premium received on sales decreased, due primarily to market expectations of faster prepayments. Non-interest Expense. Third quarter non-interest expense was $14.6 million, higher by $1.6 million, or 12%, compared to third quarter 2006. Salaries and employee benefits expense increased 15% over the same quarter of the prior year, primarily due to increased salaries and bonuses. Occupancy expense increased 8%, primarily due to increased lease expense for lease renewals and the relocation of the corporate headquarters during October 2006. Furniture and equipment expense increased 24%, primarily due to higher amortization and depreciation expenses related to furniture and equipment purchased for the new corporate headquarters, and IT-related equipment purchased to support and enhance the Company's technology. Professional fees decreased by $274 thousand, or 34%, over the same quarter of the prior year primarily due to non-recurring executive search fees in 2006. Data processing and communication expense decreased $231 thousand, or 22%, over the same quarter of the prior year primarily due to purging of closed accounts and closing of unused telephone lines. Other expense increased by $783 thousand, or 42%, over the same quarter of the prior year. Included in other expense was the settlement from the arbitration matter mentioned in previous quarters in the amount of $668 thousand. Excluding such settlement, other expense increased 6% from third quarter 2006. Sequentially, non-interest expense in third quarter 2007 increased 4% to $14.6 million from $14.1 million in second quarter 2007. Salaries and employee benefits increased $575 thousand, or 9%, primarily due to an increase in accrued bonuses. Professional fees decreased $508 thousand, or 48%, primarily due to the higher legal fees incurred during the second quarter 2007 related to the arbitration matter which was settled during third quarter 2007. Income Taxes. The effective tax rate was 41.0% for third quarter 2007 compared to 41.2% for second quarter 2007 and 40.5% for third quarter 2006. During third quarter 2006, certain tax contingencies were resolved resulting in a reduction in deferred tax liabilities and tax expense of approximately $180,000. Balance Sheet Summary At September 30, 2007 total assets were $2.34 billion, compared to $2.22 billion at June 30, 2007, an increase of 23% (annualized). Gross loans receivable were $1.96 billion at September 30, 2007, an increase of 17% (annualized) from the $1.88 billion at June 30, 2007. New loan production was $245 million during third quarter 2007, compared to $282 million during second quarter 2007, and $195 million during third quarter 2006. Loan pay-offs during third quarter 2007, second quarter 2007, and third quarter 2006 were $85 million, $106 million, and $112 million, respectively. SBA loan originations were $58.5 million during third quarter 2007 compared to $57.3 million during second quarter 2007, and $23.3 million during third quarter 2006. Sales of SBA loans during third quarter 2007 were $43.1 million, compared to $33.4 million during second quarter 2007, and $15.4 million during third quarter 2006. Total deposits were $1.81 billion at September 30, 2007, an increase of 4% (annualized) from $1.80 billion at June 30, 2007. Money market deposits increased $6 million, or 10% (annualized). Retail CDs declined by $25 million or 12% (annualized), while State Treasurer and brokered deposits increased by $56 million, or 124% (annualized). Total CDs increased $32 million, or 13% (annualized) since June 30, 2007. FHLB advances were $240.0 million at September 30, 2007, compared to $120.0 million at June 30, 2007. The increase in FHLB advances reflects the continuation of the Company's strategy to augment deposits with borrowings as a source of match-funding fixed-rate loan originations. The weighted average cost of FHLB advances was 4.47% during third quarter 2007, compared to 4.31% during second quarter of 2007, and 4.74% during third quarter of 2006. Asset Quality The Company recorded a provision for loan losses of $1.6 million in third quarter 2007, compared to $1.4 million in the second quarter of 2007 and $1.2 million in the same period of the prior year. The increase in provision for loan losses primarily reflects the growth in the loan portfolio and a year over year increase in the level of net charge-offs. Non-performing assets at September 30, 2007 were $6.1 million, or 0.26% of total assets, compared to $6.0 million, or 0.27% of total assets, at June 30, 2007, and $4.6 million, or 0.23% of total assets, at September 30, 2006. Since 2002, non-performing assets have averaged 0.28% of total assets on an annual basis. The Company also noted that it has no exposure to sub-prime residential real estate mortgages in either its loan or securities portfolios. Non-performing loans at September 30, 2007 were $5.5 million, or 0.28% of total loans, compared to $5.8 million, or 0.31% of total loans, at June 30, 2007, and $4.0 million, or 0.24% of total loans at September 30, 2006. Included in non-performing loans at September 30, 2007 were two loans placed on non-accrual during first quarter 2007. One loan for $1.3 million was put on an interest-only workout for six months during the second quarter 2007 and has been paying as agreed, and the other loan for $1.6 million is currently in process of a similar workout arrangement with guarantors of the loan. No loss is anticipated on either loan. Total delinquencies were $10.0 million at September 30, 2007, up slightly from $9.4 million at June 30, 2007, but down significantly from $12.0 million at March 31, 2007 and $13.0 million at September 30, 2006. Net loan charge-offs during third quarter 2007 were $1.2 million, or 0.25% of average loans on an annualized basis, compared to $1.0 million during second quarter 2007, or 0.22% of average loans on an annualized basis, and $0.43 million during third quarter 2006, or 0.11% of average loans on an annualized basis. Annual charge-offs have averaged 18 basis points since 2002. The allowance for loan losses at September 30, 2007 was $19.4 million, or 0.99% of gross loans receivable, compared to $19.1 million, or 1.02% of gross loans receivable, at June 30, 2007, and $18.9 million, or 1.14% of gross loans receivable at September 30, 2006. The allowance to non-performing loans was 354%, 332% and 475% at September 30, 2007, June 30, 2007, and September 30, 2006, respectively. Performance Ratios The annualized return on average equity (ROE) for third quarter 2007 was 16.85%, compared to 17.53% for second quarter 2007 and 20.36% for third quarter 2006. The annualized return on average assets (ROA) for third quarter 2007 was 1.56%, compared to 1.63% for second quarter 2007 and 1.77% for third quarter 2006. The efficiency ratio for third quarter 2007 was 47.01%, compared to 46.38% for second quarter 2007 and 45.26% for third quarter 2006. The increase in the efficiency ratio over second quarter 2007 was due to the decrease in loan sale gains and the increase in salaries and employee benefits expense and an increase in other expense, as a result of the $668 thousand arbitration settlement during the third quarter of 2007. Capital At September 30, 2007, the Company continued to exceed the regulatory capital requirements to be classified as a "Well-Capitalized." The Leverage Ratio was 10.98% compared to 11.10% June 30, 2007 and 10.91% at September 30, 2006. The Total Risk-based Capital Ratio was 12.60%, compared to 12.83% at June 30, 2007 and 13.17% at September 30, 2006. Earnings Outlook Based on the year-to-date results and the outlook for the fourth quarter of 2007, the Company now expects fully diluted earnings per share to range between $1.25 and $1.27. Commenting on the outlook, Ms. Kim said, "We expect that our fourth quarter results will be negatively impacted by three trends: 1) we expect to see further compression in our net interest margin as a result of the Fed rate cut; 2) the premiums received on SBA loan sales are declining due to investor expectation of faster prepayment speeds; and 3) deposit growth will continue to be challenging. On the positive side, we expect that these trends will be offset by continued strong loan production and solid asset quality." Conference Call and Webcast A conference call with simultaneous webcast to discuss the Company's third quarter 2007 financial results will be held tomorrow, October 24 2007 at 9:30 a.m. Pacific / 12:30 p.m. Eastern. Interested participants and investors may access the conference call by dialing 866-510-0704 (domestic) or 617-597-5362 (international), passcode 27862857. 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 888-286-8010 (domestic) or 617-801-6888 (international) through October 31, 2007; the passcode is 36743061. 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 19 branches and 8 loan production offices in the United States. Nara Bank operates full-service branches in California and New York, with loan production offices in California, Washington, 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 % 9/30/2007 6/30/2007 change --------------------------------- Cash and due from banks $ 27,936 $ 34,434 -19% Federal funds sold 2,000 10,000 -80% Securities available for sale, at fair value 237,626 194,925 22% Securities held to maturity, at amortized cost (fair value: December 31, 2006 - $1,002; September 30, 2006 - $1,005) - - - Federal Home Loan Bank and Federal Reserve Bank stock 14,055 10,772 30% Loans held for sale, at the lower of cost or market 20,626 17,154 20% Loans receivable 1,958,693 1,878,970 4% Allowance for loan losses (19,431) (19,101) 2% ---------------------------------- Net loans receivable 1,939,262 1,859,869 4% ---------------------------------- Accrued interest receivable 10,257 9,074 13% Premises and equipment, net 11,476 11,585 -1% Cash surrender value of life insurance 22,695 15,660 45% Goodwill 2,347 2,347 0% Other intangible assets, net 2,406 2,570 -6% Other assets 53,813 47,583 13% ---------------------------------- Total assets $2,344,499 $2,215,973 6% ================================== Liabilities Deposits $1,814,463 $1,798,460 1% Borrowings from the Federal Home Loan Bank 240,000 120,000 100% Subordinated debentures 39,268 39,268 0% Accrued interest payable 11,445 10,586 8% Other liabilities 26,696 45,332 -41% ---------------------------------- Total liabilities 2,131,872 2,013,646 6% ---------------------------------- Stockholders' Equity Common stock, $0.001 par value; authorized, 40,000,000 shares; issued and outstanding, 26,193,672, 26,181,672, 26,107,672 and 26,100,672 shares at September 30, 2007, June 30 2007, December 31, 2006 and September 30, 2006, respectively $ 26 $ 26 0% Capital surplus 79,596 79,108 1% Retained earnings 134,874 126,811 6% Accumulated other comprehensive income (loss), net (1,869) (3,618) -48% --------------------------------- Total stockholders' equity 212,627 202,327 5% --------------------------------- Total liabilities and stockholders' equity $2,344,499 $2,215,973 6% ================================= Assets % % 12/31/2006 change 9/30/2006 change ---------------------- --------------------- Cash and due from banks $ 36,300 -23% $ 33,799 -17% Federal funds sold 44,500 -96% 2,500 -20% Securities available for sale, at fair value 162,851 46% 200,461 19% Securities held to maturity, at amortized cost (fair value: December 31, 2006 - $1,002; September 30, 2006 - $1,005) 1,000 -100% 1,000 -100% Federal Home Loan Bank and Federal Reserve Bank stock 9,758 44% 9,655 46% Loans held for sale, at the lower of cost or market 15,162 36% 9,103 127% Loans receivable 1,714,865 14% 1,660,321 18% Allowance for loan losses (19,112) 2% (18,909) 3% -------------------------------------------- Net loans receivable 1,695,753 14% 1,641,412 18% -------------------------------------------- Accrued interest receivable 8,974 14% 8,425 22% Premises and equipment, net 11,941 -4% 11,575 -1% Cash surrender value of life insurance 15,113 50% 15,000 51% Goodwill 2,347 0% 2,347 0% Other intangible assets, net 2,899 -17% 3,071 -22% Other assets 40,387 33% 40,457 33% -------------------------------------------- Total assets $ 2,046,985 15% $1,978,805 18% ============================================ Liabilities Deposits $ 1,712,235 6% $1,649,317 10% Borrowings from the Federal Home Loan Bank 76,000 216% 81,000 196% Subordinated debentures 39,268 0% 39,268 0% Accrued interest payable 8,258 39% 9,933 15% Other liabilities 24,597 9% 22,665 18% -------------------------------------------- Total liabilities 1,860,358 15% 1,802,183 18% -------------------------------------------- Stockholders' Equity Common stock, $0.001 par value; authorized, 40,000,000 shares; issued and outstanding, 26,193,672, 26,181,672, 26,107,672 and 26,100,672 shares at September 30, 2007, June 30 2007, December 31, 2006 and September 30, 2006, respectively $ 26 0% $ 26 0% Capital surplus 77,939 2% 77,320 3% Retained earnings 111,978 20% 103,338 31% Accumulated other comprehensive income (loss), net (3,316) -44% (4,062) -54% -------------------------------------------- Total stockholders' equity 186,627 14% 176,622 20% -------------------------------------------- Total liabilities and stockholders' equity $ 2,046,985 15% $1,978,805 18% ============================================ Nara Bancorp, Inc. Consolidated Statements of Income Unaudited (Dollars in Thousands, Except for Per Share Data) Three Months Ended, --------------------------------------------------- % % 9/30/2007 6/30/2007 change 9/30/2006 change --------------------------------------------------- Interest income: Interest and fees on loans $ 42,752 $ 40,289 6% $ 37,818 13% Interest on securities 2,613 2,105 24% 2,340 12% Interest on federal funds sold and other investments 201 682 -71% 470 -57% --------------------------------------------------- Total interest income 45,566 43,076 6% 40,628 12% --------------------------------------------------- Interest expense: Interest on deposits 17,613 16,903 4% 14,799 19% Interest on other borrowings 2,818 1,963 44% 1,403 101% --------------------------------------------------- Total interest expense 20,431 18,866 8% 16,202 26% --------------------------------------------------- Net interest income before provision for loan losses 25,135 24,210 4% 24,426 3% Provision for loan losses 1,550 1,350 15% 1,170 32% --------------------------------------------------- Net interest income after provision for loan losses 23,585 22,860 3% 23,256 1% --------------------------------------------------- Non-interest income: Service fees on deposit accounts 1,841 1,685 9% 1,471 25% Net gains on sales of SBA and other loans 2,177 2,491 -13% 922 136% Other income and fees 1,872 1,935 -3% 1,951 -4% --------------------------------------------------- Total non- interest income 5,890 6,111 -4% 4,344 36% --------------------------------------------------- Non-interest expense: Salaries and employee benefits 7,298 6,723 9% 6,346 15% Occupancy 2,155 2,109 2% 1,993 8% Furniture and equipment 699 684 2% 562 24% Advertising and marketing 456 484 -6% 421 8% Data processing and communications 798 870 -8% 1,029 -22% Professional fees 541 1,049 -48% 815 -34% Other 2,638 2,144 23% 1,855 42% --------------------------------------------------- Total non- interest expense 14,585 14,063 4% 13,021 12% --------------------------------------------------- Income before income taxes 14,890 14,908 0% 14,579 2% Income taxes 6,108 6,138 0% 5,910 3% --------------------------------------------------- Net Income $ 8,782 $ 8,770 0% $ 8,669 1% =================================================== Earnings Per Share: Basic $ 0.34 $ 0.34 $ 0.33 Diluted $ 0.33 $ 0.33 $ 0.33 Average Shares Outstanding Basic 26,189,368 26,165,254 25,949,931 Diluted 26,497,773 26,502,862 26,407,185 Nine Months Ended September 30, ------------------------------- % 2007 2006 change ------------------------------- Interest income: Interest and fees on loans $ 121,285 $ 105,399 15% Interest on securities 6,771 6,284 8% Interest on federal funds sold and other investments 1,378 2,723 -49% ------------------------------- Total interest income 129,434 114,406 13% ------------------------------- Interest expense: Interest on deposits 50,815 40,312 26% Interest on other borrowings 6,539 3,696 77% ------------------------------- Total interest expense 57,354 44,008 30% ------------------------------- Net interest income before provision for loan losses 72,080 70,398 2% Provision for loan losses 3,880 2,392 62% ------------------------------- Net interest income after provision for loan losses 68,200 68,006 0% ------------------------------- Non-interest income: Service fees on deposit accounts 5,146 4,528 14% Net gains on sales of SBA and other loans 5,888 3,735 58% Other income and fees 5,571 5,559 0% ------------------------------- Total non-interest income 16,605 13,822 20% ------------------------------- Non-interest expense: Salaries and employee benefits 20,735 20,240 2% Occupancy 6,339 5,727 11% Furniture and equipment 2,008 1,630 23% Advertising and marketing 1,602 1,697 -6% Data processing and communications 2,622 3,000 -13% Professional fees 2,436 2,275 7% Other 6,852 5,711 20% ------------------------------- Total non-interest expense 42,594 40,280 6% ------------------------------- Income before income taxes 42,211 41,548 2% Income taxes 17,351 17,099 1% ------------------------------- Net Income $ 24,860 $ 24,449 2% =============================== Earnings Per Share: Basic $ 0.95 $ 0.95 Diluted $ 0.94 $ 0.93 Average Shares Outstanding Basic 26,159,584 25,679,893 Diluted 26,514,819 26,247,283 Nara Bancorp, Inc. Supplemental Data Unaudited (Dollars in Thousands, Except for Per Share Data) (Annualized) (Annualized) At or for the Three At or for the Nine Months Ended, Months Ended, --------------------------------------------------- Profitability measures: 9/30/2007 6/30/2007 9/30/2006 9/30/2007 9/30/2006 ------------------------------ -------------------- ROA 1.56% 1.63% 1.77% 1.53% 1.70% ROE 16.85% 17.53% 20.36% 16.56% 20.26% Net interest margin, including loan prepayment fee income 4.67% 4.72% 5.25% 4.67% 5.16% Net interest margin, excluding loan prepayment fee income 4.55% 4.61% 5.11% 4.58% 5.07% Efficiency ratio 47.01% 46.38% 45.26% 48.03% 47.83% Yield on loan portfolio 8.87% 8.84% 9.28% 8.81% 9.01% Cost of total deposits 3.94% 3.82% 3.55% 3.85% 3.27% Primary interest spread 4.93% 5.02% 5.73% 4.96% 5.74% Yield on interest- earning assets 8.47% 8.39% 8.73% 8.39% 8.38% Cost of interest- bearing liabilities 5.00% 4.94% 4.74% 4.95% 4.37% Net interest spread 3.47% 3.45% 3.99% 3.44% 4.01% Cost of funds 4.08% 3.94% 3.70% 3.98% 3.42% Net interest spread (including effect of non- interest bearing demand deposits) 4.39% 4.45% 5.03% 4.41% 4.96% Cost of interest- bearing deposits 4.96% 4.89% 4.61% 4.90% 4.23% Cost of jumbo deposits 5.35% 5.33% 5.18% 5.32% 4.72% Cost of time deposits 5.29% 5.25% 5.06% 5.25% 4.65% Cost of FHLB advances 4.47% 4.31% 4.74% 4.35% 4.51% Cost of other borrowings 5.22% 5.46% 6.81% 5.40% 6.75% For the Three Months Ended --------------------------------------------------- % % 9/30/2007 6/30/2007 change 9/30/2006 change --------------------------------------------------- AVERAGE BALANCES Gross loans, includes loans held for sale $1,928,293 $1,823,323 6% $1,629,345 18% Interest-earning assets 2,152,115 2,053,087 5% 1,862,304 16% Total assets 2,258,958 2,156,121 5% 1,959,562 15% Interest-bearing deposits 1,419,778 1,383,014 3% 1,284,143 11% Interest-bearing liabilities 1,635,547 1,526,908 7% 1,366,506 20% Non-interest- bearing demand deposits 368,321 387,143 -5% 383,587 -4% Net interest earning assets 516,568 526,179 -2% 495,798 4% Stockholders' equity 208,496 200,162 4% 170,273 22% For the Nine Months Ended ------------------------------- % 9/30/2007 9/30/2006 change ------------------------------- AVERAGE BALANCES Gross loans, includes loans held for sale 1,836,424 1,560,465 18% Interest-earning assets 2,058,125 1,820,573 13% Total assets 2,161,190 1,914,598 13% Interest-bearing deposits 1,383,889 1,270,224 9% Interest-bearing liabilities 1,545,279 1,343,223 15% Non-interest-bearing demand deposits 374,504 372,133 1% Net interest earning assets 512,846 477,350 7% Stockholders' equity 200,150 160,878 24% LOAN PORTFOLIO COMPOSITION: % 9/30/2007 6/30/2007 change ---------------------------------- Commercial loans $ 658,298 $ 624,873 5% Real estate loans 1,269,092 1,217,296 4% Consumer and other loans 33,207 38,792 -14% ---------------------------------- Loans outstanding 1,960,597 1,880,961 4% Unamortized deferred loan fees - net of costs (1,904) (1,991) -4% ---------------------------------- Loans, net of deferred loan fees and costs 1,958,693 1,878,970 4% Allowance for loan losses (19,431) (19,101) 2% ---------------------------------- Loan receivable, net $1,939,262 $1,859,869 4% ================================== LOAN PORTFOLIO COMPOSITION: % % 12/31/2006 change 9/30/2006 change ---------------------------------------- Commercial loans $ 565,759 16% $ 520,253 27% Real estate loans 1,102,072 15% 1,089,705 16% Consumer and other loans 49,201 -33% 53,132 -38% ---------------------------------------- Loans outstanding 1,717,032 14% 1,663,090 18% Unamortized deferred loan fees - net of costs (2,167) -12% (2,769) -31% ---------------------------------------- Loans, net of deferred loan fees and costs 1,714,865 14% 1,660,321 18% Allowance for loan losses (19,112) 2% (18,909) 3% ---------------------------------------- Loan receivable, net $ 1,695,753 14% $1,641,412 18% ======================================== For the Three Months Ended ----------------------------------------------------- ALLOWANCE FOR % % LOAN LOSSES: 9/30/2007 6/30/2007 Change 9/30/2006 Change ----------- ----------- --------- ------------------- Balance at Beginning of Period $ 19,101 $ 18,752 2% $ 18,168 5% Provision for Loan Losses 1,550 1,350 15% 1,170 32% Recoveries 87 396 -78% 218 -60% Charge Offs (1,307) (1,397) -6% (647) 102% ----------- ----------- --------- ------------------- Balance at End of Period $ 19,431 $ 19,101 2% $ 18,909 3% =========== =========== ========= =================== Net charge- off/Average gross loans (annualized) 0.25% 0.22% 0.11% For the Nine Months Ended ------------------------------ ALLOWANCE FOR LOAN LOSSES: % 9/30/2007 9/30/2006 Change ------------------------------ Balance at Beginning of Period $ 19,112 $ 17,618 8% Provision for Loan Losses 3,880 2,392 62% Recoveries 674 1,293 -48% Charge Offs (4,235) (2,394) 77% ------------------------------ Balance at End of Period $ 19,431 $ 18,909 3% ============================== Net charge-off/Average gross loans (annualized) 0.26% 0.09% NON-PERFORMING ASSETS 9/30/2007 6/30/2007 12/31/2006 9/30/2006 ----------- ----------- ------------ ----------- Delinquent Loans 90 days or more on Non-Accrual Status $ 5,491 $ 5,757 $ 3,271 $ 3,983 Delinquent Loans 90 days or more on Accrual Status - - - - ----------- ----------- ------------ ----------- Total Non- Performing Loans 5,491 5,757 3,271 3,983 Other real estate owned - - - - Restructured Loans 621 222 298 606 ----------- ----------- ------------ ----------- Total Non- Performing Assets $ 6,112 $ 5,979 $ 3,569 $ 4,589 =========== =========== ============ =========== Non-Performing Assets/ Total Assets 0.26% 0.27% 0.17% 0.23% Non-Performing Loans/Gross Loans 0.28% 0.31% 0.19% 0.24% Allowance for loan losses/ Gross Loans 0.99% 1.02% 1.11% 1.14% Allowance for loan losses/ Non-Performing Loans 354% 332% 584% 475% DEPOSIT COMPOSITION % 9/30/2007 6/30/2007 Change ----------- ----------- --------- Non-interest-bearing demand deposits $ 370,100 $ 396,074 -7% Money market and other 266,039 259,241 3% Saving deposits 147,987 144,381 2% Time deposits of $100,000 or more 869,879 829,940 5% Other time deposits 160,458 168,824 -5% ----------- ----------- --------- Total deposit balances $1,814,463 $1,798,460 1% =========== =========== ========= DEPOSIT COMPOSITION % % 12/31/2006 Change 9/30/2006 Change -------------------- -------------------- Non-interest-bearing demand deposits $ 407,519 -9% $ 386,263 -4% Money market and other 184,199 44% 202,157 32% Saving deposits 141,611 5% 138,567 7% Time deposits of $100,000 or more 768,727 13% 726,900 20% Other time deposits 210,179 -24% 195,430 -18% -------------------- -------------------- Total deposit balances $ 1,712,235 6% $1,649,317 10% ==================== ==================== DEPOSIT COMPOSITION (%) 9/30/2007 6/30/2007 12/31/2006 9/30/2006 ----------- ----------- ------------ ----------- Non-interest- bearing demand deposits 20.4% 22.1% 23.8% 23.4% Money market and other 14.7% 14.4% 10.7% 12.3% Saving deposits 8.2% 8.0% 8.3% 8.4% Time deposits of $100,000 or more 47.9% 46.1% 44.9% 44.1% Other time deposits 8.8% 9.4% 12.3% 11.8% ----------- ----------- ------------ ----------- Total deposit balances 100.0% 100.0% 100.0% 100.0% =========== =========== ============ =========== CAPITAL RATIOS 9/30/2007 6/30/2007 12/31/2006 9/30/2006 ----------- ----------- ------------ ----------- Total stockholders' equity $ 212,627 $ 202,327 $ 186,627 $ 176,622 Tier 1 risk- based capital ratio 11.67% 11.87% 12.16% 12.09% Total risk-based capital ratio 12.60% 12.83% 13.21% 13.17% Tier 1 leverage ratio 10.98% 11.10% 11.18% 10.91% Book value per share $ 8.12 $ 7.73 $ 7.15 $ 6.77 Tangible book value per share $ 7.94 $ 7.54 $ 6.95 $ 6.56 Tangible equity to tangible assets 8.88% 8.93% 8.88% 8.68% Non-GAAP Disclosure Reconciliation For the Three and Nine Months Ended September 30, 2007 Net Income as Adjusted is a measure of income that differs from net income measured in accordance with generally accepted accounting principles ("GAAP"). Net income as Adjusted excludes the $668 thousand arbitration settlement costs incurred during the quarter. (Dollars in Thousands, Except for Per Share Data) Net 3rd Quarter 2007 Income as Net Income Adjustments Adjusted ------------ ----------- --------- Income before income taxes $ 14,890 $ 668 $15,558 Income taxes 6,108 274 6,382 ------------ ----------- --------- Net income $ 8,782 $ 394 $ 9,176 ============ =========== ========= EPS - diluted $ 0.331 $0.015 $ 0.346 ============ =========== ========= Diluted Average Shares outstanding 26,497,773 Quarterly Effective Tax Rate 41.02% (Dollars in Thousands, Except for Per Share Data) Net YTD 2007 Income as Net Income Adjustments Adjusted ------------ ----------- --------- Income before income taxes $ 42,211 $ 668 $42,879 Income taxes 17,351 274 17,625 ------------ ----------- --------- Net income $ 24,860 $ 394 $25,254 ============ =========== ========= EPS - diluted $ 0.938 $0.015 $ 0.952 ============ =========== ========= Diluted Average Shares outstanding 26,514,819 YTD Effective Tax Rate 41.11% CONTACT: Investors and Financial Media: Tony Rossi Financial Relations Board 213-486-6545 -----END PRIVACY-ENHANCED MESSAGE-----