Nara Bancorp Announces 42% Increase in Net Income to $5.6 Million for

Nara Bancorp Announces 42% Increase in Net Income to $5.6 Million for the Fourth Quarter of 2004

    Business Editors

    LOS ANGELES--(BUSINESS WIRE)--Jan. 31, 2005--Nara Bancorp, Inc. (Nasdaq:NARA), the holding company of Nara Bank (the "Bank") today announced preliminary unaudited financial results for 2004. Nara Bancorp, Inc. (the "Company") reported net income of $5.6 million or $0.23 earnings per diluted share for the fourth quarter of 2004, a 42% increase compared with $4.0 million or $0.16 for the fourth quarter of 2003. Net income for the year ended December 31, 2004 increased 35% to $19.3 million or $0.78 earnings per diluted share compared with $14.3 million or $0.62 earnings per diluted share for the year ended December 31, 2003. Earnings per share, dividend per share, and shares outstanding have been restated for the two-for-one stock split declared on May 17, 2004 and paid on June 14, 2004.

    Fourth Quarter Highlights:

    (2004 Fourth Quarter vs. 2003 Fourth Quarter)

--	42% increase in net income to $5.6 million compared with $4.0 million
--	44% increase in diluted EPS to $0.23 compared with $0.16
--	24% increase in net interest income to $16.1 million compared with $12.9 million
--	4% increase in non-interest income to $5.7 million compared with $5.5 million
--	12% increase in non-interest expenses to $11.8 million compared with $10.5 million
--	21.99% annualized ROE compared with 18.72%
--	1.57% annualized ROA compared with 1.31%

    Full Year Highlights:

    General

    -- Nara Bancorp included in S&P Small Cap 600 Index

    -- Opened Dallas loan production office

    -- Consistently declared quarterly cash dividend of $0.0275 or
    $0.11 per year Opened Roland Heights branch in California

    -- Opened two loan production offices, Denver, Colorado and
    Dallas, Texas

    -- 20.41% ROE compared with 19.01% in 2003

    -- 1.41% ROA compared with 1.32% in 2003

    Balance Sheet Items - (December 31, 2004 vs. December 31, 2003)

    -- 20% increase in total assets to $1.5 billion

    -- 22% loan growth including loans held for sale to $1.2 billion

    -- 18% increase in deposits to $1.3 billion

    Income Statement Comparison Highlights (2004 vs. 2003)

    -- 35% increase in net income to $19.3 million compared with
    $14.3 million

    -- 26% increase in diluted EPS to $0.78 compared with $0.62

    -- 28% increase in net interest income to $58.4 million compared
    with $45.5 million

    -- 6% increase in non-interest income to $21.6 million compared
    with $20.4 million

    -- 17% increase in non-interest expenses to $43.6 million
    compared with $37.4 million

    The Company reported an increase of 42% in net income for the fourth quarter to $5.6 million, or $0.23 earnings per diluted share compared with $4.0 million, or $0.16 earnings per diluted share for the fourth quarter of 2003. Net income for the year ended December 31, 2004 was $19.3 million, or $0.78 earnings per diluted share, compared with $14.3 million, or $0.62 earnings per diluted share for the same period in 2003.
    The annualized return on average assets (ROA) for the 2004 fourth quarter was 1.57% and the annualized return on average equity (ROE) was 21.99%. The annualized ROA and ROE for the 2003 fourth quarter were 1.31% and 18.72%. The efficiency ratio was 53.97% for the fourth quarter of 2004 compared with 57.02% for the fourth quarter of 2003. The efficiency ratio improved during the fourth quarter of 2004 compared with the fourth quarter of 2003 in spite of realizing securities impairment charges of $394,000 in the fourth quarter of 2004. The ROA for 2004 full year was 1.41% and ROE was 20.41% compared with 1.32% and 19.01% for 2003. The efficiency ratio for the 2004 year was 54.56% compared with 56.84% in 2003. Included in the 2004 efficiency ratio is the recognition of $2.6 million in securities impairment charges.
    Benjamin Hong, President and Chief Executive Officer, commented, "We are very pleased with the strong financial performance of Nara during the fourth quarter of 2004 and for the full year. Our continued focus on balanced growth in all regions while adhering to our strict underwriting criteria provided a consistent growth in our balance sheet and income statements.
    "Based on the current interest rate environment and economic conditions, our estimate for 2005 diluted earnings per share is between $1.00 and $1.04."

    Net Income

    Net income increased by 42% to $5.6 million for the quarter ended December 31, 2004 from $4.0 million for the corresponding quarter of the prior year primarily as a result of an increase in net interest income and a decrease in provision for loan losses partially offset by an increase in non-interest expenses and income tax provision.
    Net income for the year ended December 31, 2004 increased 35% to $19.3 million or $0.78 earnings per diluted share compared with $14.3 million or $0.62 per diluted share for the year ended December 31, 2003 primarily as a result of an increase in net interest income a decrease in the provision for loan losses, increase in non-interest income partially offset by an increase in non-interest expenses and income tax provision.

    Net Interest Income

    Net interest income for the 2004 fourth quarter increased by $3.2 million, or 24%, to $16.1 million compared with $12.9 million in the same period of 2003. This increase was primarily due to $208 million increase in the average balance of the total interest earning assets. Annualized net interest margin also increased to 4.84% for the quarter ended December 31, 2004 from 4.61% for the corresponding quarter of 2003 due to the increases in the yield on average interest-earning assets which was only partially offset by increases in the rate paid on interest bearing liabilities.
    Net interest income increased by $12.9 million, or 28%, to $58.4 million for the full year 2004 compared with $45.5 million for 2003. This increase was primarily due to $252 million increase in the average balance of total interest earning assets. The net interest margin also increased to 4.63% for the full year 2004 from 4.51% in 2003 due to the combination of yield increases in interest earning assets and a decrease in cost of interest bearing liabilities.

    Non-interest Income

    Non-interest income increased $237,000, or 4%, to $5.7 million for the fourth quarter ended December 31, 2004 compared with $5.5 million for the corresponding quarter of 2003 primarily as a result of an increase in gain on sale of SBA loans and a recognition of loan referral income offset by a decrease in income from service charges on deposits and a recognition of other than temporary securities impairment charges in 2004. During the fourth quarter of 2004 gain on sale of SBA loans increased by $646,000 to $1.7 million compared with $1.1 million in the fourth quarter of 2003 due to an increase in SBA loans funded and sold during the fourth quarter of 2004 compared with the fourth quarter of 2003. Recognition of loan referral income was $266,000 in the fourth quarter of 2004 compared with none in the 2003 fourth quarter due to a new loan sales referral arrangement entered into with GE Capital and Zion Bancorp. Service charges on deposits decreased $359,000 to $1.7 million in the fourth quarter of 2004 compared with the fourth quarter of 2003 due to the reduction of money servicing business during the year. Recognition of impairment charges related to other than temporary decline in market value of securities were $394,000 in the fourth quarter of 2004 and there were no impaired securities in 2003.
    Non-interest income increased $1.2 million, or 6%, to $21.6 million in 2004 compared with $20.4 million in 2003, primarily as a result of increases in gain on sale of SBA loans and loan referral income offset by recognition of valuation losses in interest rate hedges and other than temporary securities impairment charges in 2004. During 2004, gain on sale of SBA loans increased $2.3 million to $6.5 million due to an increase in SBA loans funded and sold during the 2004 year compared with the 2003 year. Recognition of loan referral income was $1.0 million compared to none in 2003 due to a new loan sales referral arrangement entered into with GE Capital and Zion Bancorp. During 2004, valuation losses in interest rate hedges were $382,000 compared with a valuation gain of $80,000 in 2003 due to a decline in the aggregate value of the interest rate hedges. Recognition of impairment charges related to other than temporary declines in market value of securities were $2.6 million in 2004 compared to none in 2003.

    Non-interest Expenses

    Non-interest expenses for the fourth quarter increased by $1.3 million to $11.8 million compared with the corresponding quarter of 2003 primarily as a result of the increases in salaries and employee benefits and profession fees expenses. During the fourth quarter of 2004 salaries and employee benefits expenses increased by $360,000 to $5.8 million compared with the fourth quarter of 2003 due to the hiring of new employees required to support the growth of the Bank. Profession fees increased by $541,000 to $994,000 compared with the fourth quarter of 2003 primarily due to the expenses associated with Sarbanes-Oxley compliance.
    Non-interest expenses increased $6.2 million to $43.3 million in 2004 compared with 2003 primarily due to the increases in salaries and employee benefits, occupancy, advertising and marketing, professional fees, business referral fees, and amortization of intangible assets expenses. During the 2004 year, salaries and employee benefits increased $2.2 million to $22.4 million as a result of hiring new employees to support the growth of the Bank. Occupancy expenses increased $620,000 to $5.4 million compared to 2003 due to the opening of new branches and loan production offices. Advertising and marketing expenses increased $463,000 to $1.9 million compared to 2003 due to the additional advertising provided to support new deposit and loan promotions conducted during the year. Professional fees expenses increased $1.1 million to $2.5 million compared to 2003 primarily due to the expenses associated with Sarbanes-Oxley and Bank Secrecy Act compliance during the year. Business referral fees which were primarily loan referral payments to the loan brokers increased $562,000 to $1.5 million compared with 2003. Amortization of intangible assets expenses increased $421,000 in 2004 to $830,000 compared with 2003 due to the amortization of core deposit premiums associated with the acquisitions made during the second half of 2003.

    Loan Growth

    Loans including loans held for sale and net of unamortized deferred loan fees increased $49 million during the fourth quarter of 2004 to $1.2 billion or an annualized rate of 17%. During the quarter, commercial real estate increased $45.7 million, commercial loans increased $12.6 million, trade finance increased $736,000, SBA loans decreased $8.2 million, and consumer loans decreased $1.4 million. During the fourth quarter of 2004, SBA department originated $20.3 million SBA loans and sold $23.4 million.
    For the 2004 year, loans including loans held for sale and net of unamortized deferred loan fees increased $225.2 million or 22% to $1.2 billion compared with December 31, 2003. During the year, real estate and construction loans increased $141.8 million, commercial loans increased $57.5 million, trade finance increased $5.4 million, SBA loans increased $19.6 million, and consumer loans increased $1.5 million.

    Credit Quality

    Total non-performing assets at December 31, 2004 were $2.9 million. Net loan charge-offs were $334,000 for the quarter ended December 31, 2004 compared with $822,000 during the fourth quarter of 2003. The annualized net charge-off rate on average loans for the fourth quarter of 2004 was 0.11% compared with 0.34% for the fourth quarter of 2003. During the 2004 fourth quarter, a $200,000 in provision for loan losses was provided compared with $1.6 million during the fourth quarter of 2003.
    Net loan charge-offs were $1.7 million for the 2004 year compared with $1.9 million for 2003. The net charge-off rate on average loans for 2004 was 0.16% compared with 0.23% for 2003. The Company provided $3.9 million in provision for loan losses in 2004 compared with $5.3 million the year before which brought the allowance for loan losses to $14.6 million, or 1.19% of the gross loans at December 31, 2004 compared with $12.5 million, or 1.25%, at December 31, 2003.

    Securities

    Securities, including available for sale and held to maturity totaled $140.2 million at December 31, 2004, an increase of $5.8 million from 2003. During the fourth quarter of 2004, as a result of an other than temporary decline in market value of securities, a $394,000 charge was recognized for government sponsored enterprises Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) floating rate preferred stocks. For the twelve months ended December 31, 2004, a total of $2.6 million in securities impairment charges were recognized for those floating rate preferred stocks. Subsequent to December 31, 2004, all floating rate FNMA and FHLMC preferred stocks were sold with a slight gain from the December 31, 2004 adjusted book value, eliminating any future impairment issues.

    Deposits

    Deposits increased $2.8 million during the 2004 fourth quarter to $1.3 billion. For the 2004 year, deposits increased $194.6 million or 18% compared with December 31, 2003.
    The average cost of deposits for the quarter ended December 31, 2004 increased to 1.53% from 1.21% for the corresponding quarter of the prior year due to the increases in market interest rates during the fourth quarter of 2004. The average cost of deposits decreased to 1.32% for 2004 from 1.43% for 2003 due to generally lower market interest rates for the first three quarters of 2004 compared to 2003.

    Income Taxes

    The effective tax rate for the fourth quarter ended December 31, 2004 was 43.1% compared with 37.1% for the same period in 2003. The increase in the effective tax rate is primarily due to less tax exempt income in 2004 and no benefit in 2004 from real estate investment trust tax credits as were recognized in 20003. The effective tax rate for the year-ended 2004 was 40.6% compared with 38.3% for 2003.

    Capital

    Stockholders' equity increased $18.2 million to $103.2 million at the end of 2004 compared with $85.0 million at year-end 2003. The Tier 1 Leverage Ratio of the Company was 9.13% and 8.84% at December 31, 2004 and 2003, respectively. The Company's capital ratios exceed regulatory requirements and the Company continues to be categorized as "Well Capitalized."

    Fourth Quarter Earnings Teleconference and Webcast

    Nara will hold a conference call and audio webcast, Tuesday, February 1, 2005, at 8:00 a.m. Pacific time to discuss the financial results of the fourth quarter. The webcast will be available through a link on the Investor Relations page of the Company's website at www.narabank.com and may be accessed through Thompson StreetEvents www.fulldisclosure.com. The dial in number is 800-901-5213 and the passcode is 17315625. If you are unable to listen to the webcast, a replay will be available at both websites temporarily.

    About Nara Bancorp

    Nara Bancorp, Inc. is the parent company of Nara Bank, which was founded in 1989. Nara Bank is a full-service commercial bank headquartered in Los Angeles with twenty-five branches and loan production offices in the United States, and one representative 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 call our Los Angeles office at 213-639-1700 or New York office at 212-279-2790 or 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 may contain forward-looking statements 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 Nara Bancorp's operations, markets, products, services, and pricing. Nara Bancorp undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect Nara Bancorp's financial results, described in other documents the Company files from time to time with the Securities and Exchange Commission, including its quarterly Form 10-Q for the quarter ended September 30, 2004 and Annual Report on Form 10-K/A for the fiscal year ended December 31, 2003, 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.

Nara Bancorp, Inc. Consolidated Statement of Financial Condition Unaudited (Dollars in Thousands)

December 31, 2004 2003 ---- ---- Assets Cash and due from banks $27,712 $34,238 Term fed funds sold 12,000 5,000 Federal funds sold 47,500 37,200 Securities available for sale, at fair value 133,386 126,412 Securities held to maturity, at cost (fair value $2,088 at December 31, 2004 and $2,149 at December 31, 2003) 2,001 2,001 FHLB and FRB stocks 4,802 5,958 Loans held for sale 4,730 3,927 Loans 1,221,735 997,338 Allowance for loan losses (14,627) (12,471) Net loans 1,207,108 984,867 Accrued interest receivable 5,124 4,718 Premises and equipment, net 7,363 6,766 Goodwill and intangible assets, net 1,909 1,909 Intangible assets, net 4,204 4,855 Other assets 52,789 46,104 Total assets $1,505,898 $1,260,028

Liabilities

Deposits $1,255,975 $1,061,415 FHLB borrowings 90,000 60,000 Trust preferred securities 39,268 39,268 Accrued interest payable 3,412 3,291 Other liabilities 14,036 11,057

Total liabilities 1,402,691 $1,175,031

Stockholders' Equity

Common stock, $0.001 par value, authorized 40,000,000 shares at December 31, 2004 and 20,000,000 shares at December 31, 2003, shares issued and outstanding 23,333,338 and 11,560,089 shares at December 31, 2004 and December 31, 2003 $23 $12 Capital surplus 44,903 43,058 Deferred compensation (3) (10) Retained earnings 58,801 41,992 Accumulated other comprehensive (loss) income (517) (55)

Total stockholders' equity 103,207 84,997

Total liabilities and stockholders' equity $1,505,898 $1,260,028

Nara Bancorp, Inc. Consolidated Statements of Income (Unaudited: Dollars in Thousands, Except for Per Share Data)

Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 ---- ---- ---- ---- INCOME STATEMENT Interest income: Loans $19,742 $14,393 $68,215 $51,429 Securities 1,186 1,415 5,038 5,768 Federal funds sold and other investments 195 104 710 796 Interest rate swaps 574 890 3,108 3,432 Total interest income 21,697 16,802 77,071 61,425

Interest expenses: Deposits 4,770 3,065 15,511 12,774 Borrowings 821 789 3,175 3,160 Total interest expense 5,591 3,854 18,686 15,934

Net interest income 16,106 12,948 58,385 45,491 Provision for loan losses 200 1,635 3,900 5,250 Net interest income after provision for loan losses 15,906 11,313 54,485 40,241

Noninterest income: Service charge on deposits 1,739 2,098 7,640 7,678 Gain on sale of loans 1,739 1,226 6,722 4,397 Gain on sale of securities 310 449 743 854 Loan referral fee 266 - 1,013 - Interest rate hedging (188) (357) (382) 80 Other than temporary impairment charge (394) - (2,593) - Other charges and fees 2,262 2,081 8,469 7,369 Total noninterest income 5,734 5,497 21,612 20,378

Noninterest expense: Salaries and employee benefits 5,849 5,489 22,394 20,204 Occupancy 1,386 1,386 5,413 4,793 Furniture and equipment 514 440 1,931 1,582 Advertising and marketing 560 459 1,855 1,392 Communications 209 151 685 631 Data processing 593 565 2,400 2,087 Professional fees 994 453 2,482 1,426 Business referral 334 246 1,476 914 Office supplies and forms 128 149 460 447 Amortization of intangible assets 207 175 830 409 Other expenses 1,012 1,004 3,717 3,555 Total noninterest expense 11,786 10,517 43,643 37,440 Income before income taxes 9,854 6,293 32,454 23,179 Income tax provision 4,244 2,334 13,173 8,866 Net Income $5,610 $3,959 $19,281 $14,313

Earnings Per Share: Basic $0.24 $0.17 $0.83 $0.65 Diluted $0.23 $0.16 $0.78 $0.62

Average Shares Outstanding Basic 23,326,621 23,087,402 23,228,672 22,055,890 Diluted 24,743,578 24,011,148 24,576,174 23,104,682

Nara Bancorp, Inc. Supplemental Data Unaudited (Dollars in Thousands, Except for Per Share Data)

(Annualized) At or for the three At or for the twelve months ended months ended December 31, December 31, 2004 2003 2004 2003 ---- ---- ---- ---- Profitability measures: ROA 1.57% 1.31% 1.41% 1.32% ROE 21.99% 18.72% 20.41% 19.01% Net interest margin 4.84% 4.61% 4.63% 4.51% Efficiency ratio 53.97% 57.02% 54.56% 56.84% Yield on average interest-earning assets 6.52% 5.99% 6.11% 6.09% Cost of interest bearing liabilities 2.29% 1.91% 2.03% 2.17% Cost of interest bearing deposits 2.09% 1.74% 1.84% 2.02% Average cost of all deposits during the period 1.53% 1.21% 1.32% 1.43%

For the three months For the twelve months ended December 31, ended December 31, 2004 2003 2004 2003 ---- ---- ---- ---- AVERAGE BALANCES Net loans, includes loans held for sale 1,177,449 $966,377 1,099,722 828,794 Other interest earning assets 152,865 155,932 161,460 180,480 Net interest earning assets 1,330,314 1,122,309 1,261,182 1,009,274 Other assets 100,204 90,888 103,907 77,779 Total assets $1,430,518 $1,213,197 $1,365,089 $1,087,053

Savings and interest bearing demand deposits $481,168 $279,957 $398,878 $245,646 Time deposits 433,478 426,488 444,842 387,304 Total interest-bearing deposits 914,646 706,445 843,720 632,950 Borrowings 25,787 78,211 38,400 79,126 Junior subordinated debentures 37,138 24,349 37,126 20,663 Total Interest bearing liabilities 977,571 809,005 919,246 732,739 Noninterest bearing demand deposits 330,626 303,652 333,537 262,993 Other Liabilities 20,288 15,959 351,394 279,030 Total liabilities 1,328,485 1,128,616 1,270,640 1,011,769 Stockholders' Equity 102,033 84,581 94,449 75,284 Total liabilities and stockholders' equity $1,430,518 $1,213,197 $1,365,089 $1,087,053 Total deposits $1,245,272 $1,010,097 $1,177,257 $895,943

LOAN PORTFOLIO ANALYSIS: December 31, 2004 2003 ---- ---- Real Estate $717,747 $575,930 Commercial 296,276 238,798 Trade Finance 68,186 62,741 SBA Loans, includes loans held for sale 82,209 62,589 Consumer and Other Loans 64,845 63,371 Loans outstanding 1,229,263 1,003,429 Unamortized Deferred Loan Fees (2,798) (2,164) Loans, net of unearned loan fees $1,226,465 $1,001,265

For the twelve months ended December 31, ALLOWANCE FOR LOAN LOSSES: 2004 2003 ---- ---- Balance at Beginning of Period $12,471 $8,458 Provision for Loan Losses 3,900 5,250 Recoveries 801 510 Charge Offs (2,545) (2,416) Allowance made with business acquisition - 669 Balance at End of Period $14,627 $12,471 Net charge-off/Average gross loans 0.16% 0.23% Gross loans 1,113,750 828,796

NON-PERFORMING ASSETS December 31, 2004 2003 ---- ---- Delinquent Loans 90 days or more on Non-Accrual Status $2,679 $4,855 Delinquent Loans 90 days or more on Accrual Status - 209 Total Non-Performing Loans 2,679 5,064 Other real estate owned - - Restructured Loans 229 529 Total Non-Performing Assets $2,908 $5,593 Non-Performing Assets/ Total Assets 0.19% 0.44% Non-Performing Loans/Gross Loans 0.22% 0.51% Allowance for loan losses/ Gross Loans 1.19% 1.25% Allowance for loan losses/ Non-Performing Loans 546% 246%

SELECTED DEPOSIT DATA December 31, 2004 2003 ---- ---- Noninterest bearing demand deposits $328,326 $325,647 Savings and interest bearing demand deposits 442,334 291,628 Time deposits 485,315 444,140 Total deposit balances$1,255,975 $1,061,415 Average total deposits $843,720 $632,950

SELECTED EQUITY DATA December 31, 2004 2003 ---- ---- Total stockholders' equity $103,179 $84,997 Tier 1 risk-based capital ratio 9.95% 9.82% Total risk-based capital ratio 11.58% 11.78% Tier 1 leverage ratio 9.13% 8.84% Book value per share $4.42 $3.68 (1)

(1) As restated for 2004 two-for-one stock split

--30--AMP/la*

CONTACT: Nara Bancorp, Inc. Benjamin Hong, 213-639-1700 Chief Executive Officer or Timothy T. Chang, 213-637-2596 Chief Financial Officer email: timchang@narabank.com or Annie Ahn, 213-427-6315 Public Relations email: annie@narabank.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING EARNINGS CONFERENCE CALLS SOURCE: Nara Bancorp, Inc.

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