Malaga Financial Corporation Reports 23% Increase in YOY First Quarter Earnings

Rhea-AI Summary

Malaga Financial Corporation (OTCPink: MLGF) reported a net income of $5,875,000 ($0.69 per share) for Q1 2023, up 23% from $4,795,000 ($0.56 per share) in Q1 2022. The company's annualized return on average equity rose to 12.70% from 11.20%, while the return on average assets increased to 1.57% from 1.29%. Net interest income for the quarter reached $11,773,000, a 19% increase year-over-year, attributed to a higher interest rate spread of 3.05%.

The total assets slightly increased to $1.499 billion, and the loan portfolio rose by 5% to $1.288 billion. While retail deposits decreased by $85 million to $776 million, the company remained compliant with all regulatory capital requirements.

Positive

• Net income increased by 23% year-over-year to $5,875,000.
• Net interest income rose by 19% to $11,773,000.
• Annualized return on average equity improved to 12.70%, up from 11.20%.
• Loan portfolio increased by 5% to $1.288 billion.
• Malaga Bank was deemed 'well-capitalized' under regulatory requirements.

Negative

• Retail deposits decreased by $85 million to $776 million, reflecting outflows to higher-return alternatives.
• Operating expenses increased by 5% to $3,525,000, driven by rising compensation and utility costs.

PALOS VERDES ESTATES, Calif., April 19, 2023 (GLOBE NEWSWIRE) -- Malaga Financial Corporation “Company” (OTCPink:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended March 31, 2023 was $5,875,000 ($0.69 basic and fully diluted earnings per share), an increase of $1,080,000 or 23% from net income of $4,795,000 ($0.56 basic and fully diluted earnings per share, as adjusted for the stock dividend declared on November 14, 2022) for the quarter ended March 31, 2022. For the first quarter of 2023, the Company’s annualized return on average equity was 12.70% and the annualized return on average assets was 1.57%, as compared to 11.20% and 1.29%, respectively, for the same period in 2022.

The Company did not have any delinquent loans or foreclosed real estate owned at March 31, 2023. The Company’s allowances for credit losses were $3,960,000, or 0.31% of total loans, at March 31, 2023.

Net interest income totaled $11,773,000 in the first quarter of 2023, an increase of $1,898,000 or 19% from the first quarter of 2022. This increase was due to an increase in excess interest-earning assets over interest-bearing liabilities of $15.8 million and an increase of 0.42% in the interest rate spread to 3.05%. The increase in the interest rate spread is primarily attributable to an increase of 1.06% in the yield on average interest-earning assets offset by a 0.64% increase in the average cost of funds.

In the first quarter of 2023, operating expenses increased 5% to $3,525,000 from $3,369,000 in the first quarter of 2022. The increase is primarily attributed to increases in compensation of $129,000, office rent and utilities of $44,000, and data processing of $24,000 offset by decreases in professional services of $30,000 and general and administrative expenses of $10,000.

Randy C. Bowers, Chairman, President and CEO, commented, “We are pleased to report a significant increase in first quarter earnings year over year. As is generally the case in the banking industry, we have experienced the impact of increased interest rates as the Federal Reserve attempts to reduce inflation. We are carefully monitoring the flow of deposits and cost of funds to be prepared to successfully address challenges to liquidity and profitability as we adapt to the changing market. We are thankful for the loyalty of our colleagues, clients and shareholders during these uncertain times.”

Malaga’s total assets increased slightly to $1.499 billion at March 31, 2023, compared to $1.496 billion at March 31, 2022. The loan portfolio at March 31, 2023 was $1.288 billion, an increase of $59 million or 5% from March 31, 2022. 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 $776 million as of March 31, 2023, a $85 million decrease from $861 million at March 31, 2022. Much of this outflow was a result of depositors seeking higher returns in alternative investments. Wholesale deposits, comprised mainly of State of California certificates of deposit and brokered deposits, totaled $174 million as of March 31, 2023, a $14 million decrease from $188 million at March 31, 2022. FHLB borrowings increased $85 million or 34% from $250 million at March 31, 2022, to $335 million at March 31, 2023. Malaga Bank utilizes FHLB borrowings as a tool to manage interest rate risk associated with growth of the loan portfolio.

As of March 31, 2023, 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 13.10% and 23.59%, respectively, at March 31, 2023, 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. Malaga Bank has been awarded an A+ financial health rating by DepositAccounts.com. A more detailed breakdown of Malaga Bank’s A+ health score may be found in the health section of its dedicated page at www.depositaccounts.com/banks/malaga-bank-fsb.html#health. For over fifteen 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 Bauer’s premier Top 5-Star rating for the 61st consecutive quarter as of December 2022. 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.

Contact:	Randy Bowers
	Chairman, President and Chief Executive Officer
	Malaga Financial Corporation
	310-375-9000
	rbowers@malagabank.com

FAQ

What are the earnings results for Malaga Financial Corporation in Q1 2023?

Malaga Financial Corporation reported a net income of $5,875,000 for Q1 2023, an increase of 23% compared to Q1 2022.

How did the interest income change for Malaga Financial Corporation?

Malaga Financial Corporation's net interest income increased by 19% to $11,773,000 in Q1 2023.

What is the future outlook for Malaga Financial Corporation following the recent earnings report?

The company is monitoring deposit flows and cost of funds amid rising interest rates to address liquidity and profitability challenges.

What is the stock performance outlook for MLGF after the latest earnings release?

The strong earnings growth and compliance with capital requirements may positively influence investor sentiment towards MLGF.