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MALAGA FINANCIAL CORPORATION REPORTS INCREASED EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND RESULTS OF TENDER OFFER
Palos Verdes Estates, CA - November 23, 2007 - Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the nine months ended September 30, 2007 was $4,477,000 ($0.76 per share basic and fully diluted), an increase of $564,000 or 14% from net income of $3,913,000 ($0.68 per share basic and $0.67 per share fully diluted) for the nine months ended September 30, 2006. Earnings for the third quarter increased $138,000 from $1,343,000 to $1,480,000. Earnings per share were $0.25 compared to $0.23 ($0.23 versus $0.20 fully diluted) for the quarters ended September 30, 2007 and 2006, respectively.
The Company successfully completed its tender offer on November 14, 2007 and repurchased a total of 194,734 shares for $1,950,000. There was no repurchase of stock during the nine months ended September 30, 2006.
Net income increased primarily due to continued growth in interest earning assets and improvement in the interest rate spread. For the nine months ended September 30, 2007, net interest income increased by $1,685,000 over the corresponding prior period due to a $69 million (11%) increase in average interest-earning assets (principally loans) combined with a 5 basis point improvement in the net interest spread for the nine months ended September 30, 2007.
During the first nine months of 2007, a loan loss provision of $43,000 was booked versus $257,000 provision in the first nine months of 2006. The reduced provision was attributable to lower net loan growth (loan originations less amortizations and payoffs) of $5 million in the nine months ended September 30, 2007 versus net loan growth of $71 million during the corresponding prior period. There were no loan charge-offs or non-performing assets at September 30, 2007 or 2006.
Noninterest income increase by $45,000 to $289,000 for the nine month period ended September 30, 2007 from $244,000 for the same period in the prior year. Higher customer service fees combined with an increase in loan placement fees were the primary sources of the increase.
Operating expenses increased to $5,780,000 in the first nine months of 2007 compared to $4,824,000 in the first nine months of 2006. Lower loan production in 2007 resulted in lower capitalized cost of $220,000. Additional contributors were a one time adjustment to reflect vacation accrual of $140,000, salary increase of $195,000, higher medical insurance expense of $100,000, and a $100,000 legal settlement.
Randy C. Bowers, President and Chief Executive Officer of Malaga, commented that, "As a result of our strong balance sheet and lack of delinquent or non-performing loans, we are well positioned for growth. We look forward to opening a new full service banking center in the South Shores area of San Pedro early in 2008. Early next year, we also anticipate beginning construction on the permanent site for our Torrance banking center at the corner of Crenshaw Boulevard and Rolling Hills Road."
Malaga's total assets reached $709 million at September 30, 2007 compared to $655 million at September 30, 2006, an increase of $54 million. The total loan portfolio at September 30, 2007 was $643 million versus $623 million at September 30, 2006, an increase of $20 million. Malaga's loan portfolio is comprised of the following: 77% multi-family loans, 13% residential loans, 7% commercial real estate loans, 1% construction loans and 2% other. The remainder of net asset growth was in Federal funds sold of $33 million.
Malaga funds its asset growth with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $336 million as of September 30, 2007, up from $282 million at September 30, 2006, a 19% increase. Wholesale deposits and FHLB borrowings totaled $303 million at September 30, 2007 versus $309 million at September 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 September 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 12.69%.
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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