MLGF Malaga Financial Corporation (PK)

Pre-Tax ROE 19.20%

Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported net income for the quarter ended September 30, 2014 was $2,828,000 ($0.47 per share basic and fully diluted), an increase of $17,000 from income of $2,811,000 for the quarter ended June 30, 2014 and a decrease of $118,000 or 4% from net income of $2,946,000 ($0.50 per share basic and $0.49 per share fully diluted) for the quarter ended September 30, 2013. Net income for the nine months ended September 30, 2014 was $8,372,000 ($1.39 basic and fully diluted earnings per share) as compared to $8,714,000 ($1.47 basic and $1.46 fully diluted earnings per share) for the nine months ended September 30, 2013, a 4% decrease. Net income decreased from the prior year primarily due to an increase in allowance for loan losses resulting from growth in outstanding loans and decrease in capitalized compensation related costs due to decrease in loans originated. Net income for the first nine months of 2014 resulted in an annualized pre-tax return on average equity of 19.20%.

The Company did not have any delinquent loans or real estate owned at September 30, 2014. The Company’s allowance for loan losses was $2,963,000, or 0.34% of total loans, at September 30, 2014.

Net interest income totaled $7,445,000 in the third quarter of 2014, and was comparable to third quarter of 2013. During the same period, average interest earning assets increased by $66 million while interest rate spread decreased from 3.44% to 3.20%. The decrease in the interest spread was due to a 0.37% decline in the weighted average yield on interest earning assets, while the weighted average rate on interest-bearing liabilities declined only 0.13%.

Operating expenses increased 3% in the third quarter of 2014, to $2,649,000 from $2,571,000 in the third quarter of 2013. Increased costs resulted primarily from decrease in capitalized compensation related costs due to decrease in loans originated.

Randy C. Bowers, President and CEO, remarked, “Results of operations for the first nine months of 2014 reflect the continued execution of our business plan. Earnings remain strong and asset quality is excellent. We continue to achieve moderate growth in both our deposit base and loan portfolio. We are cautiously optimistic as we plan for the remainder of 2014 and beyond.”

Malaga’s total assets increased by 7% to $937 million at September 30, 2014 compared to $872 million at September 30, 2013. The loan portfolio at September 30, 2014 was $865 million, an increase of $55 million or 7% from September 30, 2013. 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. Deposits totaled $699 million as of September 30, 2014, a $71 million or 11% increase from $628 million at September 30, 2013. FHLB borrowings totaled $105 million at September 30, 2014, a $13 million or 11% decrease from $118 million at September 30, 2013. The weighted average cost of funds for the third quarter of 2014 was 0.78% versus 0.91% for the third quarter of 2013. The decrease was due primarily to a higher mix of lower cost state funds and overnight Federal Home Loan Bank borrowings.

As of September 30, 2014, 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 13.21% and 23.34%, respectively, at September 30, 2014 significantly exceeding the minimum “well capitalized” requirements of 5% and 10% respectively. In the third quarter, Malaga Financial paid a quarterly dividend for the 40th consecutive quarter.

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. 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.

Malaga Financial CorporationRandy BowersPresident and Chief Executive Officer310-375-9000rbowers@malagabank.com

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