PALOS VERDES ESTATES, Calif.--(BUSINESS WIRE)--Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended June 30, 2014 was $2,811,000 ($0.46 per share basic and fully diluted), an increase of $78,000 from income of $2,733,000 for the quarter ended March 31 ,2014 and a decrease of $253,000 or 8% from net income of $3,064,000 ($0.51 per share basic and fully diluted) for the quarter ended June 30, 2013. Net income for the six months ended June 30, 2014 was $5,544,000 ($0.92 basic and fully diluted earnings per share) as compared to $5,768,000 ($0.97 basic and fully diluted earnings per share) for the six months ended June 30, 2013, a 4% decrease. Net income decreased from the prior year primarily due to decrease in net interest income and increase in other operating expense. Net income for the first six months of 2014 resulted in an annualized pre-tax return on average equity of 19.26%.
The Company did not have any delinquent loans or real estate owned at June 30, 2014. The Company’s allowance for loan losses was $2,901,000, or 0.34% of total loans, at June 30, 2014.
Net interest income totaled $7,463,000 in the second quarter of 2014, a decrease of $180,000 or 2% from the second quarter of 2013. This decrease resulted from a decrease in the interest spread from 3.60% to 3.27%. The decrease in the interest spread was due to a 0.48% decline in the weighted average yield on interest earning assets, while the weighted average rate on interest-bearing liabilities declined only 0.15%.
Operating expenses increased 10% in the second quarter of 2014, to $2,767,000 from $2,508,000 in the second quarter of 2013. Increased costs resulted primarily from decrease in capitalized compensation related costs due to decrease in loans originated and professional service fees.
Randy C. Bowers, President and CEO, remarked, “We are generally satisfied with our results for the first half of 2014 considering the challenges facing the banking industry as a whole. Earnings continue to be strong and stable and asset quality is excellent. Expenses are well controlled and we are experiencing growth in our loan portfolio and total assets. We wish to recognize and thank our colleagues for their hard work in achieving these results.”
Malaga’s total assets increased by 6% to $926 million at June 30, 2014 compared to $870 million at June 30, 2013. The loan portfolio at June 30, 2014 was $856 million, an increase of $51 million or 6% from June 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. Retail deposits totaled $567 million as of June 30, 2014, a $16 million or 3% increase from $551 million at June 30, 2013. The continued retail and wholesale deposit growth combined with earnings growth and increase in FHLB borrowings was used to fund loan growth of $51 million. The weighted average cost of funds for the second quarter of 2014 was 0.81% versus 0.96% for the second 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 June 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 13.17% and 20.87%, respectively, at June 30, 2014 significantly exceeding the minimum “well capitalized” requirements of 5% and 10% respectively. In the second quarter, Malaga Financial paid a quarterly dividend for the 39th consecutive quarter.
Mr. Bowers concluded, “Half way through our 30th year serving the South Bay we look forward to continuing to support our community and its various organizations, rewarding our shareholders and providing a safe and friendly place to bank locally.”
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.