Malaga Financial Corporation Reports Strong First Quarter Earnings

Rhea-AI Summary

Malaga Financial , the parent company of Malaga Bank FSB, reported strong first-quarter earnings in 2024, with a net income of $6,012,000, showing a 2% increase from the previous year. The company's annualized return on average equity was 12.06%, and on average assets was 1.64%. Net interest income decreased by 5% due to a lower interest rate spread, partially offset by an increase in excess interest-earning assets. Operating expenses increased by 2%, primarily due to higher deposit insurance premiums and data processing costs. The company also benefited from the Employee Retention Credit related to the COVID-19 pandemic.

Positive

• Strong first-quarter earnings with a net income of $6,012,000, a 2% increase from the previous year.
• Annualized return on average equity was 12.06%, and on average assets was 1.64%.
• Net interest income decreased by 5% due to a lower interest rate spread.
• Operating expenses increased by 2%, attributed to higher deposit insurance premiums and data processing costs.
• Company benefited from the Employee Retention Credit related to the COVID-19 pandemic.

Negative

• None.

PALOS VERDES ESTATES, Calif., April 15, 2024 (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, 2024 was $6,012,000 ($0.67 basic and fully diluted earnings per share), an increase of $137,000 or 2% from net income of $5,875,000 ($0.65 basic and fully diluted earnings per share, as adjusted for the stock dividend declared on November 9, 2023) for the quarter ended March 31, 2023. For the first quarter of 2024, the Company’s annualized return on average equity was 12.06% and the annualized return on average assets was 1.64%, as compared to 12.70% and 1.57%, respectively, for the same period in 2023.

The Company did not have any delinquent loans or foreclosed real estate owned at March 31, 2024. The Company’s allowances for credit losses were $3,881,000, or 0.31% of total loans, at March 31, 2024.

Net interest income totaled $11,173,000 in the first quarter of 2024, a decrease of $600,000 or 5% from the first quarter of 2023. This decrease was due to a decrease of 0.19% in the interest rate spread to 2.86% offset partially by an increase in excess interest-earning assets over interest-bearing liabilities of $13.6 million. The decrease in the interest rate spread is primarily attributable to a 0.67% increase in the average cost of funds offset by an increase of 0.48% in the yield on average interest-earning assets.

The CARES Act provided for an Employee Retention Credit (ERC), which is a broad-based refundable payroll tax credit that incentivized businesses to retain employees on the payroll during the COVID-19 pandemic. The ERC is a credit against certain employment taxes for eligible employers based on certain wages paid after March 12, 2020, through September 30, 2021. The Company qualified for the ERC based on the partial suspension of our business due to government orders related to Covid-19 pandemic. In the first quarter of 2024, the Company recorded non-operating income of $712,000 related to ERC for the second quarter 2020 through the first quarter 2021. The tax effects of the ERC increased tax expense by $218,000 with total net ERC income of $494,000 reported as non-operating income.

In the first quarter of 2024, operating expenses increased 2% to $3,540,000 from $3,487,000 in the first quarter of 2023. The increase is primarily attributed to increases in deposit insurance premiums of $61,000, data processing of $15,000, and office rent and utilities of $10,000 offset by decreases in general and administrative expenses of $28,000 and depreciation and amortization of $10,000.

Randy C. Bowers, Chairman, President and CEO, commented, “We are pleased to report strong earnings for the first quarter of 2024. The operating environment has been challenging with continued pressure on the net interest margin and the impact of inflation on expenses. There is considerable uncertainty with regards to interest rates and the economy for the remainder of the year, in addition to the various other issues we must consider as we plan for the future. We are anticipating the effect of a variety of potential scenarios to be better prepared to adapt as appropriate and are cautiously optimistic about the remainder of the year.”

Malaga’s total assets decreased to $1.456 billion at March 31, 2024, compared to $1.499 billion at March 31, 2023. The loan portfolio at March 31, 2024 was $1.263 billion, a decrease of $25 million or 2% from March 31, 2023. 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 $750 million as of March 31, 2024, a $40 million decrease from $790 million at March 31, 2023. 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 $169 million as of March 31, 2024, a $9 million increase from $160 million at March 31, 2023. FHLB borrowings decreased $25 million or 7% from $335 million at March 31, 2023, to $310 million at March 31, 2024. Malaga Bank utilizes FHLB borrowings and longer-term wholesale deposits as a tool to manage interest rate risk associated with growth of the loan portfolio.

As of March 31, 2024, 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 14.51% and 25.61%, respectively, at March 31, 2024, 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 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 65th consecutive quarter as of December 2023. 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 was Malaga Financial 's net income for the first quarter of 2024?

Malaga Financial reported a net income of $6,012,000 for the first quarter of 2024.

What was the annualized return on average equity for Malaga Financial in the first quarter of 2024?

The annualized return on average equity for Malaga Financial was 12.06% in the first quarter of 2024.

How did Malaga Financial 's net interest income change in the first quarter of 2024 compared to the previous year?

Malaga Financial 's net interest income decreased by 5% in the first quarter of 2024 compared to the previous year.

What factors contributed to the increase in operating expenses for Malaga Financial in the first quarter of 2024?

The increase in operating expenses for Malaga Financial in the first quarter of 2024 was primarily attributed to higher deposit insurance premiums and data processing costs.

How did Malaga Financial benefit from the Employee Retention Credit in the first quarter of 2024?

Malaga Financial recorded non-operating income of $712,000 related to the Employee Retention Credit in the first quarter of 2024.