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 March 31, 2018 was $3,849,000 ($0.59 basic and $0.58 fully diluted earnings per share), an increase of $797,000 or 26% from net income of $3,052,000 ($0.49 basic and fully diluted earnings per share) for the quarter ended March 31, 2017. Pre-tax net income increased by 6% to $5,267,000 for the first quarter ended March 31, 2018 compared to $4,985,000 for the first quarter 2017. For the first quarter 2018, the Company’s annualized return on average equity was 12.03% and the annualized return on average assets was 1.48%, as compared to 10.27% and 1.24%, respectively, for the same period in 2017.
The Company did not have any delinquent loans or foreclosed real estate owned at March 31, 2018. The Company’s allowance for loan losses was $3,146,000, or 0.33% of total loans, at March 31, 2018.
Net interest income totaled $8,132,000 in the first quarter of 2018, an increase of $341,000 or 4% from the first quarter of 2017. This resulted from an increase in the average interest-earning assets of $49 million offset by a decrease in the interest rate spread from 3.15% to 3.11%. The decrease in the interest rate spread is primarily attributable to an increase of 0.13% in yield on average interest-earning assets offset by an increase of 0.17% in yield on average interest-bearing liabilities.
Operating expenses increased 2% in the first quarter of 2018 to $3,062,000 from $2,992,000 in the first quarter 2017. Increased costs were primarily related to compensation expenses.
Randy C. Bowers, President and CEO, commented, “We are pleased to report a significant increase in 1st Quarter earnings year over year. Capital levels are strong, quality remains excellent and our efficiency ratio continues to be one of the best in the industry. We are excited about the potential for the rest of 2018 and thankful for the contributions of our colleagues and support of our shareholders.”
Malaga’s total assets increased by 5% to $1.047 billion at March 31, 2018 compared to $993 million at March 31, 2017. The loan portfolio at March 31, 2018 was $968 million, an increase of $52 million or 6% from March 31, 2017. 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 $660 million as of March 31, 2018, an $18 million or 3% decrease from $678 million at March 31, 2017. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $97 million as of March 31, 2018, a $20 million or 26% increase from $77 million at March 31, 2017. The increase in wholesale deposits was used to fund the decrease in retail deposits. FHLB borrowings increased $43 million or 43% from $99 million at March 31, 2017 to $142 million at March 31, 2018. The increase in FHLB borrowings was used to fund increase in loans.
As of March 31, 2018, 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 13.42% and 24.25%, respectively, at March 31, 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 41st consecutive quarter as of December 2017. 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.