Malaga Financial Corporation Reports 22% Increase in First Nine Months 2018 Earnings

PALOS VERDES ESTATES, Calif.–(BUSINESS WIRE)–Malaga Financial Corporation (OTCPink:MLGF), the parent company
of Malaga Bank FSB, today reported that net income for the quarter ended
September 30, 2018 was $3,866,000 ($0.58 basic and fully diluted
earnings per share), an increase of $609,000 or 19% from income of
$3,257,000 for the quarter ended September 30, 2017. Net income for the
nine months ended September 30, 2018 was $11,460,000 ($1.74 basic and
$1.73 fully diluted earnings per share) compared to $9,427,000 ($1.45
basic and $1.44 fully diluted earnings per share, as adjusted for the
stock dividend declared on November 16, 2017) for the nine months ended
September 30, 2017, a 22% increase. For the first nine months of 2018,
the Company’s annualized return on average equity was 11.74% and the
annualized return on average assets was 1.45%, as compared to 10.43% and
1.25%, respectively, for the same period in 2017.

The Company did not have any delinquent loans or real estate owned at
September 30, 2018. The Company’s allowance for loan losses was
$3,103,000, or 0.32% of total loans, at September 30, 2018.

Net interest income totaled $8,103,000 in the third quarter of 2018, a
decrease of $81,000 or 1% from the third quarter of 2017. This resulted
mainly from a decrease in interest rate spread from 3.19% to 3.07%
offset by increase of $21,565,000 in interest earning assets. This
decrease in the interest spread is primarily attributed to an increase
of 0.18% in yield on average interest-earning assets offset by an
increase of 0.30% in yield on average interest-bearing liabilities.

Operating expenses increased 5% in the third quarter of 2018, to
$2,938,000 from $2,791,000 in the third quarter of 2017. Increased costs
were primarily related to compensation expense.

Randy C. Bowers, President and CEO, remarked, “Results for the third
quarter and also year to date 2018 continue to reflect significant
improvement from the prior year. We are pleased to report asset quality
and capital levels are strong and expenses well controlled. We look
forward to continuing to serve as the local bank of choice in the South
Bay region and thank our staff for the outstanding service they provide
to our clients.”

Malaga Bank’s total assets increased to $1.069 billion at September 30,
2018 compared to $1.034 billion at September 30, 2017. The loan
portfolio at September 30, 2018 was $980 million, an increase of $26
million or 3% from September 30, 2017. Malaga originates loans
principally for its own portfolio and not for sale.

Malaga Bank funds its assets with a mix of retail deposits, wholesale
deposits and FHLB borrowings. Retail deposits totaled $655 million as of
September 30, 2018, a $15 million decrease from $670 million at
September 30, 2017. Wholesale deposits, comprised mainly of State of
California certificates of deposit, totaled $98 million as of September
30, 2018 and September 30, 2017. FHLB borrowings were $163 million as of
September 30, 2018, a $43 million increase from $120 million at
September 30, 2017. The weighted average cost of funds for the third
quarter of 2018 was 0.93% versus 0.63% for the third quarter of 2017.

As of September 30, 2018, Malaga Bank was in compliance with all
applicable regulatory capital requirements and was deemed
“well-capitalized” under those regulations. Core capital and risk-based
capital ratios were 13.70% and 24.73%, respectively, at September 30,
2018 significantly exceeding the minimum “well capitalized” requirements
of 5% and 10%, respectively.

Malaga Bank, a subsidiary of Malaga Financial Corporation, is a
full-service community bank headquartered on the Palos Verdes Peninsula
with six offices located in the South Bay area of Los Angeles. For
over ten years, Malaga Bank has been consistently recommended by one of
the nation’s leading independent bank rating and research firms, Bauer
Financial Inc.
Malaga Bank was awarded their premier Top 5-Star
rating for the 43
rd consecutive quarter as of
June 2018.
Since 1985, Malaga Bank has been delivering competitive
banking services to residents and businesses of the South Bay, including
real estate loan products custom-tailored to consumers and investors. As
the largest community bank in the South Bay, Malaga is proud of its
continuing tradition of relationship-based banking and legendary
customer service. The Bank’s web site is located at www.malagabank.com.

Contacts

Malaga Financial Corporation
Randy Bowers, 310-375-9000
President
and Chief Executive Officer
rbowers@malagabank.com

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