MALAGA FINANCIAL CORPORATION REPORTS 3% INCREASE IN QUARTER EARNINGS; NO NON-PERFORMING ASSETS
Palos Verdes Estates, CA - May 20, 2008 - Malaga Financial Corporation (OTCBB: MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended March 31, 2008 was $1,592,000 ($0.28 per share basic and fully diluted), an increase of $44,000 or 3% from net income of $1,548,000 ($0.26 per share basic and fully diluted) for the quarter ended March 31, 2007. Net income increased primarily due to continued growth in interest earning assets and improvement in the interest rate spread and was partially offset by increased loan loss provision and higher operating costs.
Despite the deteriorating real estate market in Southern California, Malaga did not have any delinquent loans or non-performing assets at March 31, 2008. The Company did increase its provision for loan losses to $122,000 in the first quarter of 2008 from $12,000 in the first quarter of 2007, due to an increase in the size of the loan portfolio and economic conditions. The Company's allowance for loan losses was $2,555,000 or 0.37% of total loans, at March 31, 2008.
Net interest income totaled $4,867,000 in the first quarter 2008, up $518,000 or 12% from the first quarter of 2007. This increase resulted from a $40 million or 6% increase in average interest earning assets to $663 million and a 0.16% increase in the interest rate spread to 2.54%. The improvement in the interest rate spread was due to a 0.49% decline in the weighted average cost of funds, while the weighted average yield on interest earnings assets declined only 0.33%. Malaga's liabilities reprice more frequently than its interest earning assets, and thus Malaga will generally see an improvement in its interest rate spread during periods of declining market interest rates.
Operating expenses increased 10% in the first quarter of 2008, to $2,152,000 from $1,951,000 in the first quarter of 2007. Increased costs were centered in $62,000 in salary and related benefits due to more employees and $67,000 in occupancy expense due primarily to Malaga's new San Pedro branch.
Randy C. Bowers, President and CEO of Malaga Bank, remarked, "We are pleased to report that, in spite of an extremely challenging environment for the banking industry, we achieved a 3% increase in quarterly earnings over the corresponding prior period. Additionally, Los Angeles Business Journal named Malaga Bank the 'Most Profitable Savings and Loan' in Los Angeles county ranked by return on assets for the year ended December 31, 2007. We are delighted to announce that we opened our new full-service branch in San Pedro on April 29, 2008, and we expect to begin construction on the new Torrance branch location at Crenshaw Blvd. and Rolling Hills Road in the next few weeks.
"Although we engage almost exclusively in real estate lending, we continue to report no delinquent loans or non-performing assets. We are now reaping the benefits of our prudent loan underwriting practices and our historical policy not to engage in riskier types of lending," Mr. Bowers continued.
Malaga's total assets reached $728 million at March 31, 2008 compared to $677 million at March 31, 2007, an increase of $51 million. The loan portfolio at March 31, 2008 was $687 million versus $643 million at March 31, 2007, an increase of $44 million. Malaga originates loans principally for its own portfolio and not for sale. At March 31, 2008, the loan portfolio was comprised of the following types of loans outstanding: multi-family loans - 77%; single family residential loans - 12%; commercial real estate loans - 7%; home equity lines of credit - 2%; and commercial and other loans - 2%.
Malaga funds its assets with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $311 million as of March 31, 2008, down from $329 million at March 31, 2007, a 5% decrease. Wholesale deposits and FHLB borrowings totaled $348 million at March 31, 2008 versus $281 million at March 31, 2007, a 24% increase. The weighted average cost of funds for the first three months of 2008 was 4.00% versus 4.49% for the first three months of 2007.
Malaga's stockholders' equity was $50.0 million at March 31, 2008, or $8.70 per fully diluted common share. The Company paid a quarterly dividend for the 15th consecutive quarter.
As of March 31, 2008, Malaga Bank was in compliance with all applicable regulatory capital requirements and was deemed "well-capitalized" under applicable regulations, with a risk-based capital ratio of 12.75%.
Malaga Bank is a full-service community bank headquartered on the Palos Verdes Peninsula with branch offices located on the Peninsula, in Torrance and now in San Pedro. For over 23 years, Malaga has been delivering not only competitive banking services to residents and businesses of the South Bay, but also 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.
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