Malaga Financial Corporation Reports Increased Earnings And Strong Growth in the Loan Portfolio

PALOS VERDES ESTATES, Calif., Oct. 11, 2019 (GLOBE NEWSWIRE) -- Malaga Financial Corporation (OTCPink:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended September 30, 2019 was $3,882,000 ($0.56 basic and $0.55 fully diluted earnings per share), an increase of $121,000 or 3% from net income of $3,761,000 ($0.54 basic and fully diluted earnings per share) for the quarter ended June 30, 2019. Compared to the same quarter last year, net income increased $16,000 from $3,866,000 ($0.58 basic and fully diluted earnings per share, as adjusted for stock dividend declared on November 19, 2018). Net income for the nine months ended September 30, 2019 was $11,100,000 ($1.60 basic and $1.59 fully diluted earnings per share) compared to $11,460,000 ($1.66 basic and $1.65 fully diluted earnings per share, as adjusted for the stock dividend declared on November 19, 2018) for the nine months ended September 30, 2018. For the first nine months of 2019, the Company’s annualized return on average equity was 10.60% and the annualized return on average assets was 1.30%.

The increase in earnings of $121,000 for the third quarter of 2019 compared to second quarter 2019 was primarily attributable to a $223,000 increase in net interest income and a $269,000 decrease in other operating expenses, partially offset by an increase in provision for loan losses of $265,000, a $56,000 decrease in other operating income and a $50,000 increase in income tax expense. The increase in provision for loan losses of $265,000 is due to increase in loans outstanding of $77,864,000.

Net interest income totaled $8,280,000 in the third quarter of 2019, an increase of $177,000 or 2% from the third quarter of 2018. This resulted from an increase in average interest earning assets of $119,803,000 offset by a decrease in the interest rate spread from 3.07% to 2.77%. The decrease in the interest rate spread is primarily attributable to an increase of 0.36% in yield on average interest-bearing liabilities offset by an increase of 0.06% in yield on average interest-earning assets.

Other operating income increased 4% to $205,000 in the third quarter of 2019 from $197,000 in the third quarter of 2018. 

Operating expenses decreased 7% to $2,723,000 in the third quarter of 2019 from $2,938,000 in the third quarter of 2018. The decrease is due primarily to assessment credits received from FDIC for our contributions to the Deposit Insurance Fund (DIF) reserve ratio exceeding 1.35%.

The Company had one 60-89 days delinquent loan in the amount of $233,000 and one 90+ days delinquent loan in the amount of $321,000. The Company had no foreclosed real estate owned at September 30, 2019. The Company’s allowance for loan losses was $3,468,000, or 0.31% of total loans, at September 30, 2019.

Randy C. Bowers, Chairman, President and CEO, commented, “The 3rd quarter continued to be challenging. Competition for deposits intensified while rates on loan originations continued to decline. Growth in the loan portfolio was strong and helped to mitigate the effects of further flattening of the yield curve. Our capital levels are strong, quality remains excellent and our efficiency ratio continues to be one of the best in the industry. We are optimistic as we approach the 4th quarter and the new year .”

Malaga’s total assets increased 15% to $1.232 billion at September 30, 2019 compared to $1.069 billion at September 30, 2018. The loan portfolio at September 30, 2019 was $1.127 billion, an increase of $148 million or 15% from September 30, 2018. Malaga originates loans principally for its own portfolio and not for sale. 

Malaga funds its assets with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $650.9 million as of September 30, 2019, a $4.0 million decrease from $654.9 million at September 30, 2018. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $124.9 million as of September 30, 2019, a $27.3 million increase from $97.6 million at September 30, 2018. FHLB borrowings increased $127 million or 78% from $163 million at September 30, 2018 to $290 million at September 30, 2019. The increase in State of California certificates of deposit and FHLB borrowings were used to fund the increase in loans.

As of September 30, 2019, Malaga Bank was in compliance with all applicable regulatory capital requirements and was deemed “well-capitalized” under applicable regulations. Core capital and risk-based capital ratios were 13.01% and 22.90%, respectively, at September 30, 2019, 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 with assets over $1 billion, 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 47th consecutive quarter as of June 2019. Since 1985 Malaga 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.