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MALAGA FINANCIAL CORPORATION REPORTS INCREASED EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 2007
Palos Verdes Estates, CA - September 19, 2007 - Malaga Financial Corporation (OTCBB:MLGF),. the parent company of Malaga Bank FSB, today reported that net income for the six months ended June 30, 2007 was $2,997,000 ($0.51 per share basic and fully diluted), an increase of $426,000 or 17% from net income of $2,571,000 ($0.45 per share basic and $0.44 per share fully diluted) for the six months ended June 30, 2006.
Net income increased primarily due to continued growth in interest earning assets and improvement in the interest rate spread. For the six months ended June 30, 2007, net interest income increased by $1,239,000 over the corresponding prior period due to an $74 million (13%) increase in average interest-earning assets (principally loans) combined with higher yields. Higher funding costs for deposits and borrowings partially offset this increase. The interest rate spread increased to 2.36% at June 30, 2007 versus 2.32% at June 30, 2006.
The increase in net interest income was partially offset by higher operating expenses, which increased to $3,784,000 in the first six months of 2007 compared to $3,190,000 in the first six months of 2006. The operating cost increase was centered in higher salary and employee benefit related expenses. Non-operating expense consisted of a legal settlement.
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Randy C. Bowers, President and Chief Executive Officer of Malaga, commented that, "In the current environment, many lenders have experienced significant increases in loan delinquencies and foreclosures. Many sub-prime lenders have gone bankrupt or out of business. We are weathering this negative trend by continuing our long-standing disciplined and prudent approach to lending. During the past year, we have had no delinquent loans over 60 days or nonperforming assets, and have not foreclosed upon any loans. As a result, Malaga is well positioned to take advantage of new opportunities in the future."
During the first six months of 2007, a loan loss provision of $18,000 was booked versus $191,000 provision in the first six of 2006. The reduced provision was attributable to lower loan originations of $52 million in the six months ended June 30, 2007 versus loan originations of $88 million in the corresponding prior period. There were no loan charge-offs or non-performing assets at June 30, 2007 or 2006. Malaga's conservative underwriting standards, particularly with respect to loan to value ratios, continue to mitigate risk exposure to the apparent softening in the Southern California real estate market.
Malaga is increasing its focus on business and consumer lending, as it seeks to deepen its relationship with the members of the local community, which encompasses the areas surrounding its branch offices in Palos Verdes and Torrance.
Malaga's total assets reached $690 million at June 30, 2007 compared to $636 million at June 30, 2006, an increase of $54 million. The total loan portfolio at June 30, 2007 was $638 million versus $607 million at June 30, 2007, an increase of $31 million.
Malaga funds its asset growth with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $334 million as of June 30, 2007, up from $286 million at June 30, 2006, a 17% increase. Wholesale deposits and FHLB borrowings totaled $293 million at June 30, 2007 versus $295 million at June 30, 2006. Increased emphasis on the growth of retail deposits, which have lower costs than other funding sources, has had a positive impact on the overall cost of funds and earnings.
As of June 30, 2007, 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 13.27%.
In the six months ended June 30, 2007, the Company repurchased 103,859 shares of its common stock from the former Chief Executive Officer at an average price of $9.59 per share. There was no repurchase of stock during the six month ended June 30, 2006.
Malaga Bank is a full service community bank located on the Palos Verdes Peninsula that has served the financial needs of this affluent community for over 22 years. Malaga Bank offers a wide range of loan and deposit products and services that compete directly with the larger financial institutions while maintaining a strong relationship-based banking philosophy. Malaga Bank is the largest community bank in the South Bay area and is well known for its "legendary" customer service. The Bank's web site is located at www.malagabank.com.
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