PALOS VERDES ESTATES, Calif.--(EON: Enhanced Online News)--Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended September 30, 2013 was $2,946,000 ($0.50 basic and $0.49 fully diluted earnings per share), an increase of $185,000 or 7% from net income of $2,761,000 ($0.47 basic and $0.46 fully diluted earnings per share) for the quarter ended September 30, 2012. Net income for the nine months ended September 30, 2013 was $8,714,000 ($1.47 basic and $1.46 fully diluted earnings per share) as compared to $8,932,000 ($1.51 basic and $1.50 fully diluted earnings per share) for the nine months ended September 30, 2012, a 2% decrease. Net income for the third quarter increased primarily due to an increase in net interest income. Net income for the first nine months of 2013 resulted in an annualized pre-tax return on average equity of 21.48%.
The Company did not have any delinquent loans or real estate owned at September 30, 2013. The Company’s allowance for loan losses was $2,792,000, or 0.34% of total loans, at September 30, 2013.
Net interest income totaled $7,446,000 in the third quarter of 2013, an increase of $295,000 or 4% from the third quarter of 2012. The increase in net interest income reflected higher average interest-earning assets of $44 million, partially offset by a decrease in the interest spread from 3.47% to 3.44% from the third quarter 2012 to the third quarter of 2013. 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 0.34%.
Operating expenses decreased 5% in the third quarter of 2013, to $2,571,000 from $2,699,000 in the third quarter of 2012. Decreased costs resulted primarily from an increase in capitalized compensation related costs due to an increase in loans originated.
Randy C. Bowers, President and CEO, remarked, "We are pleased to report a 7% increase in earnings compared with the 3rd quarter of last year. This positive trend is the result of growth in our high quality loan portfolio and continued containment of expenses. We are especially thankful to our dedicated employees for their efforts in helping to achieve these results."
Malaga’s total assets increased 4% to $872 million at September 30, 2013 compared to $836 million at September 30, 2012. Fed Funds Sold increased $18 million as of September 30, 2013 due to an increase in on-balance sheet liquidity. The loan portfolio at September 30, 2013 was $810 million, an increase of $19 million or 2% from September 30, 2012. 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 $568 million as of September 30, 2013, a $49 million or 10% increase from $519 million at September 30, 2012. The continued retail deposit growth was used to repay FHLB borrowings, which decreased $27 million or 19% from $145 million at September 30, 2012 to $118 million at September 30, 2013. The weighted average cost of funds for the third quarter of 2013 was 0.91% versus 1.25% for the third quarter 2012. The decrease was due primarily to lower interest rate environment and the change to lower cost deposits from higher cost FHLB borrowings.
As of September 30, 2013, 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 13.39% and 23.41%, respectively, at September 30, 2013 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 28 years, 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.