Malaga Financial Corporation (OTCPink:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended December 31, 2017 was $4,073,000 ($0.66 basic and $0.65 fully diluted earnings per share), an increase of $983,000 or 32% from net income of $3,090,000 ($0.50 basic and fully diluted earnings per share) for the quarter ended December 31, 2016. Net income for the twelve months ended December 31, 2017 was $13,500,000 ($2.18 basic and $2.16 fully diluted earnings per share) as compared to $11,559,000 ($1.89 basic and $1.88 fully diluted earnings per share) for the twelve months ended December 31, 2016, a 17% increase. As a result of the Tax Cut and Jobs Act enacted on December 22, 2017, the Company was required to remeasure its deferred tax assets and liabilities. Net income for the fourth quarter and year ended December 31, 2017 included an $823,000 or $0.13 per diluted share decrease in income tax expense provision related to the remeasurement of deferred tax liabilities. Earnings for the twelve months ended December 31, 2017 resulted in a pre-tax return on average equity of 17.58%.

The Company had one 30 day delinquent loan (with a balance that represented 0.02% of total loans) and no foreclosed real estate owned at December 31, 2017. The Company’s allowance for loan losses was $3,111,000, or 0.33% of total loans, at December 31, 2017.

For 2017, net interest income totaled $32,256,000, an increase of $1,685,000 or 6% from 2016. This increase reflected higher average interest-earning assets of $12.4 million, and an increase of 0.14% in the interest rate spread to 3.18%. The increase in the interest rate spread is primarily attributable to an increase in yield on average interest-earning assets of 0.05%, and decrease in the average cost of funds of 0.09%. The increase in yield on average interest-earning assets is primarily due to increase in average loan outstanding offset by decrease in average loan yield of 0.09%. The decrease in rates paid on the average interest-bearing liabilities was due primarily to a shift to lower cost FHLB overnight borrowings and maturity/repayment of senior subordinated notes of $10,000,000 on December 30, 2016.

Operating expenses remained stable with an increase of $147,000 or 1% to $11,584,000 in 2017 from $11,437,000 in 2016. The increase is primarily in compensation related costs.

Randy C. Bowers, President and CEO, commented, “We are pleased to report record earnings for the 4th quarter and full year 2017. Earnings benefited from the Tax Cut and Job Act enacted on December 22, 2017. We anticipate the lower tax rate will continue to have a positive impact on earnings in 2018 and future years.”

Malaga’s total assets increased $60 million or 6% to $1.041 billion at December 31, 2017. The loan portfolio at December 31, 2017 was $957 million, an increase of $53 million or 6% from December 31, 2016. 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 $659 million as of December 31, 2017, a $17 million or 3% decrease from $676 million at December 31, 2016. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $97 million as of December 31, 2017, a $19 million or 24% increase from $78 million at December 31, 2016. FHLB borrowings increased $49 million or 54% from $90 million at December 31, 2016 to $139 million at December 31, 2017. The increase in wholesale deposits was used to fund the decrease in retail deposits and the increase in FHLB borrowings was used to fund the increase in loans.

As of December 31, 2017, 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 13.23% and 24.18%, respectively, at December 31, 2017, 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 2018, and a special stock dividend of 5% per share payable on December 29, 2017, to shareholders of record on December 15, 2017.

Mr. Bowers concluded, “Excellent asset quality combined with well controlled expenses and strong capital levels enabled us to continue to reward shareholders with quarterly cash dividends in addition to a special 5% stock dividend at year end 2017. We are grateful for the support and loyalty of our employees, shareholders and Board of Directors and look forward to 2018 with optimism.”

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 40th consecutive quarter as of September 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.