Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended December 31, 2014 was $2,839,000 ($0.48 basic and $0.47 fully diluted earnings per share), an increase of $59,000 or 2% from net income of $2,780,000 ($0.47 basic and fully diluted earnings per share) for the quarter ended December 31, 2013. Net income for the twelve months ended December 31, 2014 was $11,211,000 ($1.87 basic and $1.86 fully diluted earnings per share) as compared to $11,494,000 ($1.94 basic and $1.93 fully diluted earnings per share) for the twelve months ended December 31, 2013, a 2% decrease. Earnings for the twelve months ended December 31, 2014 resulted in a pre-tax return on average equity of 19.10%.

The Company did not have any delinquent loans or foreclosed real estate owned at December 31, 2014. The Company’s allowance for loan losses was $2,949,000, or 0.34% of total loans, at December 31, 2014.

For 2014, net interest income totaled $29,692,000, an increase of $49,000 or 0.2% from 2013. This increase reflected higher average interest-earning assets of $62 million, offset by decrease of 0.24% in the interest rate spread to 3.22%. The decrease in the interest rate spread is primarily attributable to a decrease in yield on average interest-earning assets of 0.38%, primarily from a decrease in loan portfolio yield. Partially offsetting this was a decrease of 0.14% in the average cost of funds. The decrease in the average cost of funds was due to a combination of a higher mix of lower cost overnight Federal Home Loan Bank (FHLB) borrowings and maturity and repricing of longer-term FHLB borrowings.

Operating expenses remained stable with an increase of $427,000 or 4% to $10,871,000 in 2014 from $10,444,000 in 2013. The increase is primarily in compensation related costs.

Randy C. Bowers, President and CEO, commented, “We are pleased to report a positive trend in earnings for the fourth quarter. As a result we declared a special yearend dividend for the third consecutive year. We appreciate the loyalty of our shareholders and are delighted to be able to enhance their return on investment.”

Malaga’s total assets increased $60.4 million or 7% to $947 million at December 31, 2014. The loan portfolio at December 31, 2014 was $876 million, an increase of $49 million or 6% from December 31, 2013. 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 $598 million as of December 31, 2014, a $24 million or 4% increase from $574 million at December 31, 2013. Wholesale deposits, comprised mainly of State of California certificates of deposit, totaled $111 million as of December 31, 2014, $50 million or 84% increase from $61 million at December 31, 2013. The retail and wholesale deposit growth was used to fund the increase in loans and decrease in FHLB borrowings. FHLB borrowings decreased $23 million or 18% from $128 million at December 31, 2013 to $105 million at December 31, 2014.

As of December 31, 2014, 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 13.25% and 24.08%, respectively, at December 31, 2014, significantly exceeding the minimum “well capitalized” requirements of 5% and 10% respectively.

In the fourth quarter, the Company declared a quarterly cash dividend of 20 cents per share, payable in January 2015 and a special dividend of 10 cents per share payable in 2014. The quarterly dividend reflected a 14% increase in the quarterly dividend amount in effect for the past four quarters.

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. 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.

Malaga Financial CorporationRandy Bowers, 310-375-9000President and Chief Executive Officerrbowers@malagabank.com

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