Why Nara Bancorp (NASDAQ:NARA), Center Financial Corporation (Nasdaq:CLFC) Deal Makes Sense

Using the Nara Bancorp (NASDAQ:NARA), Center Financial Corporation (Nasdaq:CLFC) as a backdrop to assert M&A in 2011 may be dominated by small cap players, FBR Capital talks deals in general, and the Nara, Center deal specifically.

FBR said, "Last night, after the market close, NARA announced a merger of equals with Center Financial Corporation (unrated), another Korean-American bank in an all-stock transaction. The transaction underscores our broader view that the anticipated M&A wave in 2011 will be much more prevalent in the small cap space as the cost of increased regulatory burden drives bank mergers. NARA's transaction today with CLFC makes sense to us for many reasons: 1) lends additional mass to weather the new regulatory burden, 2) takes out an active and formidable competitor in a highly competitive market, 3) accretes to earnings through cost efficiencies and potential revenue enhancements, and 4) affords the company the opportunity to acquire whole franchises or producers from other franchises. Financially, we believe that management's assumptions for cost synergies (10% of combined expense base) are conservative and should lower the payback period (FBR estimate is 3.5-4 years) down."

FBR Capital maintains a "Market Perform" rating on Nara Bancorp, which closed Friday at $9.39, up $0.72, or 8.30 percent. Center Financial closed at $7.15, up $0.51, or 7.68 percent.