Nara Scales Back Stock Offering as Profits Soar

Nara Bancorp Inc. announced this week that it intends to raise $55 million in connection with its pending acquisition of Center Financial Corp. — a far cry from the $150 million it initially said it would need to seal the deal.

The $3 billion-asset company said in a news release late Tuesday that it will offer nearly 7.6 million shares to the public at $7.25 each. Nara intends to use the proceeds for general corporate purposes, including enhancing capital to support the acquisition.

In September, shareholders at Nara and Center Financial approved the merger between the two Los Angeles companies, which would create a $5.5 billion-asset bank that would be the largest in the nation that caters to Korean-Americans. The deal, announced in December 2010, is expected to close in the fourth quarter.

Money raised from the offering also would also support internal growth in Nara's banking business, fund working capital requirements and possibly retire debt, preferred stock or other securities, the company said.

Keefe, Bruyette & Woods and D.A. Davidson & Co. will serve as lead underwriters for the offering. Nara will grant an option to the underwriters to purchase up to an additional 15% of the amount of stock offered to cover overallotments.

A research note from Sandler O’Neill & Partners L.P. stated that assuming that Nara raises the full amount, the third-quarter tangible common equity ratio would increase from 10.4% to 12,  or 12.3% with the overallotment. Sandler O'Neill anticipated a strong subscription to the offering and stated that the pricing might be favorable given the third-quarter results.

Nara was able to scale back the offering partly due to its strong performance of late. On Monday, the company reported third-quarter earnings of $8.7 million, more than double from a year earlier. Earnings per share totaled 23 cents, seven cents better than the estimates of analysts polled by Thomson Reuters. 

The positive results were spurred by solid loan and interest margin growth. Gross loans receivable climbed 3% from the second quarter to $2.3 billion for the third quarter. The net interest margin increased 44 basis points year over year to 4.29%. This was due to lower rates paid on time deposits and interest-bearing demand deposits.

Sandler O'Neill noted that after a spike in chargeoffs in the second quarter due to problem note sales, loan losses declined to just $3.7 million. The provision for loan losses was down 68%, to $3.5 million, for the quarter compared with a year ago.

Nara's president and chief executive Alvin Kang said in a press release that the company's third-quarter results gave it momentum as it looked toward receiving regulatory approval for the merger.

"We are seeing solid balance sheet growth, due in part to our successful efforts to attract more commercial loan and deposit relationships," Kang said. "We are also seeing more stability in our loan portfolio and a reduction in our credit costs as a result of the steady progress we have made in improving our asset quality over the past several quarters."

In heavy trading, Nara's shores rose more than 8% Tuesday, to close at $7.50.