Malaga Financial Corp. (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the nine months ended Sept. 30, 2007 was $4,477,000 ($0.76 per share basic and fully diluted), an increase of $564,000 or 14 percent from net income of $3,913,000 ($0.68 per share basic and $0.67 per share fully diluted) for the nine months ended Sept. 30, 2006.

Earnings for the third quarter increased $138,000 from $1,343,000 to $1,480,000. Earnings per share were
$0.25 compared to $0.23 ($0.23 versus $0.20 fully diluted) for the quarters ended Sept. 30, 2007 and 2006, respectively.

The company completed its tender offer on Nov. 14 and repurchased 194,734 shares for $1,950,000. There was no repurchase of stock during the nine months ended Sept. 30, 2006. Net income increased primarily due to continued growth in interest earning assets and improvement in the interest rate spread.

For the nine months ended Sept. 30, 2007, net interest income increased by $1,685,000 over the corresponding prior period due to a $69 million (11 percent) increase in average interest-earning assets (principally loans) combined with a 5 basis point improvement in the net interest spread for the nine months ended Sept. 30, 2007.

During the first nine months of 2007, a loan loss provision of $43,000 was booked versus $257,000 provision in the first nine months of 2006. The reduced provision was attributable to lower net loan growth (loan originations less amortizations and payoffs) of $5 million in the nine months ended Sept. 30, 2007 versus net loan growth of $71 million during the corresponding prior period. There were no loan charge-offs or non-performing assets at Sept. 30, 2007 or 2006.

Noninterest income increase by $45,000 to $289,000 for the nine month period ended Sept. 30, 2007 from $244,000 for the same period in the prior year. Higher customer service fees combined with an increase in loan placement fees were the primary sources of the increase. Operating expenses increased to $5,780,000 in the first nine months of 2007 compared to $4,824,000 in the first nine months of 2006. Lower loan production in 2007 resulted in lower capitalized cost of $220,000. Additional contributors were a one time adjustment to reflect vacation accrual of $140,000, salary increase of $195,000, higher medical insurance expense of $100,000, and a $100,000 legal settlement.

The bank plans to open a new full service banking center in the South Shores area of San Pedro early in 2008, and plans to begin building the permanent site for its Torrance banking center at Crenshaw Boulevard and Rolling Hills Road, said Randy C. Bowers, president and CEO of Malaga.

Malaga’s total assets reached $709 million at Sept. 30, 2007 compared to $655 million at Sept. 30, 2006, an increase of $54 million. The total loan portfolio at Sept. 30, 2007 was $643 million versus $623 million at Sept. 30, 2006, an increase of $20 million.

Malaga’s loan portfolio is comprised of the following: 77 percent multi-family loans, 13 percent residential loans, 7 percent commercial real estate loans, 1 percent construction loans and 2 percent other. The remainder of net asset growth was in federal funds sold of $33 million.

Malaga funds its asset growth with a mix of retail deposits, wholesale deposits and FHLB borrowings. Retail deposits totaled $336 million as of Sept. 30, 2007, up from $282 million at Sept. 30, 2006, a 19 percent
increase. Wholesale deposits and FHLB borrowings totaled $303 million at Sept. 30, 2007 versus $309 million at Sept. 30, 2006.

Increased emphasis on the growth of retail deposits, which have lower costs than other funding sources, has helped the overall cost of funds and earnings.

As of Sept. 30, 2007, Malaga Bank was in compliance with all applicable regulatory capital requirements and was deemed "well-capitalized" under applicable regulations, with a risk-based capital ratio of 12.69 percent.

Information: Malaga's Web site