PALOS VERDES ESTATES, Calif.--(BUSINESS WIRE)--
Malaga Financial Corporation (MLGF), the parent company of Malaga Bank FSB, today reported that net income for the twelve months ended December 31, 2018 was $15,305,000 ($2.22 basic and $2.20 fully diluted earnings per share) compared to $13,500,000 ($1.98 basic and $1.96 fully diluted earnings per share, as adjusted for the stock dividend declared on November 19, 2018) for the twelve months ended December 31, 2017, a 13% increase. Net income for the quarter ended December 31, 2018 was $3,845,000 ($0.56 basic and $0.55 fully diluted earnings per share), a decrease of $228,000 or 6% from income of $4,073,000 for the quarter ended December 31, 2017 ($0.59 basic and fully diluted earnings per share as adjusted for the stock dividend declared on November 19, 2018). Net income for the fourth quarter and year ended December 31, 2017 included an $823,000 decrease in income tax expense provision related to the remeasurement of deferred tax liabilities as a result of the Tax Cut and Jobs Act enacted on December 22, 2017. For the twelve months ended December 31, 2018, the Company’s annualized return on average equity was 11.65% and the annualized return on average assets was 1.44%, as compared to 11.12% and 1.33%, respectively, for the same period in 2017.
The Company did not have any delinquent loans or real estate owned at December 31, 2018. The Company’s allowance for loan losses was $3,158,000, or 0.32% of total loans, at December 31, 2018.
For 2018, net interest income totaled $32,577,000, an increase of $321,000 or 1% from 2017. This increase reflected higher average interest-earning assets of $34.9 million offset by a decrease of 0.11% in the interest rate spread to 3.07%. The decrease in the interest rate spread is primarily attributable to an increase in the average cost of funds of 0.29% offset by an increase in the yield on average interest-earning assets of 0.18%.
Operating expenses increased of $370,000 or 3% to $11,954,000 in 2018 from $11,584,000 in 2017. The increase is primarily in compensation related costs.
Randy C. Bowers, President and CEO, remarked, “We are pleased to report that the 4th quarter contributed to our achievement of record annual earnings at Malaga Financial Corporation in 2018. Along with strong capital, well controlled expenses and excellent asset quality this has enabled us to continue to reward our shareholders with quarterly cash dividends in addition to a special 5% stock dividend issued on December 28, 2018.”
Malaga Bank’s total assets increased to $1.088 billion at December 31, 2018 compared to $1.041 billion at December 31, 2017. The loan portfolio at December 31, 2018 was $994 million, an increase of $37 million or 4% from December 31, 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 $661 million as of December 31, 2018, a $2 million increase from $659 million at December 31, 2017. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $97 million as of December 31, 2018 and December 31, 2017. FHLB borrowings were $175 million as of December 31, 2018, a $36 million increase from $139 million at December 31, 2017. The increase in FHLB borrowings was used to fund the increase in loans.
As of December 31, 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 13.64% and 25.22%, respectively, at December 31, 2018 significantly exceeding the minimum “well capitalized” requirements of 5% and 10%, respectively.
In the fourth quarter, the Company declared a quarterly cash dividend of 25 cents per share payable in January 2019, and a special stock dividend of 5% per share payable on December 28, 2018, to shareholders of record on December 14, 2018.
Mr. Bowers concluded, “We appreciate the support and loyalty of our employees, shareholders and Board of Directors and look forward to continuing to serve as the local community bank of choice in the South Bay region.”
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 44th consecutive quarter as of September 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.