PALOS VERDES ESTATES, Calif.–(BUSINESS WIRE)–Malaga Financial Corporation (OTCPink:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended September 30, 2018 was $3,866,000 ($0.58 basic and fully diluted earnings per share), an increase of $609,000 or 19% from income of $3,257,000 for the quarter ended September 30, 2017. Net income for the nine months ended September 30, 2018 was $11,460,000 ($1.74 basic and $1.73 fully diluted earnings per share) compared to $9,427,000 ($1.45 basic and $1.44 fully diluted earnings per share, as adjusted for the stock dividend declared on November 16, 2017) for the nine months ended September 30, 2017, a 22% increase. For the first nine months of 2018, the Company’s annualized return on average equity was 11.74% and the annualized return on average assets was 1.45%, as compared to 10.43% and 1.25%, respectively, for the same period in 2017.
The Company did not have any delinquent loans or real estate owned at September 30, 2018. The Company’s allowance for loan losses was $3,103,000, or 0.32% of total loans, at September 30, 2018.
Net interest income totaled $8,103,000 in the third quarter of 2018, a decrease of $81,000 or 1% from the third quarter of 2017. This resulted mainly from a decrease in interest rate spread from 3.19% to 3.07% offset by increase of $21,565,000 in interest earning assets. This decrease in the interest spread is primarily attributed to an increase of 0.18% in yield on average interest-earning assets offset by an increase of 0.30% in yield on average interest-bearing liabilities.
Operating expenses increased 5% in the third quarter of 2018, to $2,938,000 from $2,791,000 in the third quarter of 2017. Increased costs were primarily related to compensation expense.
Randy C. Bowers, President and CEO, remarked, “Results for the third quarter and also year to date 2018 continue to reflect significant improvement from the prior year. We are pleased to report asset quality and capital levels are strong and expenses well controlled. We look forward to continuing to serve as the local bank of choice in the South Bay region and thank our staff for the outstanding service they provide to our clients.”
Malaga Bank’s total assets increased to $1.069 billion at September 30, 2018 compared to $1.034 billion at September 30, 2017. The loan portfolio at September 30, 2018 was $980 million, an increase of $26 million or 3% from September 30, 2017. Malaga originates loans principally for its own portfolio and not for sale.
Malaga Bank funds its assets with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $655 million as of September 30, 2018, a $15 million decrease from $670 million at September 30, 2017. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $98 million as of September 30, 2018 and September 30, 2017. FHLB borrowings were $163 million as of September 30, 2018, a $43 million increase from $120 million at September 30, 2017. The weighted average cost of funds for the third quarter of 2018 was 0.93% versus 0.63% for the third quarter of 2017.
As of September 30, 2018, Malaga Bank was in compliance with all applicable regulatory capital requirements and was deemed “well-capitalized” under those regulations. Core capital and risk-based capital ratios were 13.70% and 24.73%, respectively, at September 30, 2018 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 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 43rdconsecutive quarter as of June 2018. 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.