Malaga Financial Corporation (OTCBB:MLGF), the parent company of Malaga Bank FSB, today reported that net income for the year ended December 31, 2010 was $10,494,000 ($1.80 per share basic and $1.78 per share fully diluted), an increase of $1,000,000 or 11% from net income of $9,494,000 ($1.65 per share basic and $1.64 per share fully diluted) for the year ended December 31, 2009. This record annual net income resulted in an ROAE of 15.58% for the year and was achieved in spite of the on-going challenging economic and regulatory environment in 2010.

Net income for the fourth quarter was $2,714,000 ($0.46 per share basic and fully diluted) compared to $2,364,000 ($0.41 per share basic and fully diluted) for the fourth quarter of 2009, an increase of 15% and a new quarterly record.

Net income increased in 2010 primarily as a result of a $1,345,000 increase in net interest income due to a continued increase in weighted average interest-earning assets and an increase in interest rate spread from 3.24% in 2009 to 3.27% in 2010.

Malaga continues to have exceptional credit quality and no delinquent loans as of December 31, 2010. Malaga recorded a provision for loan losses of $41,000 in 2010 as compared to $120,000 in 2009. The lower provision in 2010 was attributable to lower net loan growth of $7 million in 2010 versus $35 million in 2009. Malaga’s allowance for loan losses was $2.8 million, or 0.37% of loans, at December 31, 2010.

Operating expenses decreased $245,000 or 2% from $10.5 million in 2009 to $10.2 million in 2010. This decrease was due primarily to a $471,000 decrease in FDIC insurance premiums related to special assessments in 2009, offset by an increase in salaries and related benefits of $147,000 and depreciation of $73,000.

Randy C. Bowers, President and CEO, remarked, “We are pleased to report record earnings for the 5 th consecutive year. These numbers were achieved in an extremely challenging period and are the result of the hard work of our dedicated employees who provide exceptional service to our loyal clients on a daily basis.”

Malaga’s total assets increased slightly to $814 million at December 31, 2010 compared to $811 million at December 31, 2009. The loan portfolio at December 31, 2010 was $769 million, an increase of $7 million or 1% from December 31, 2009. Malaga originates loans principally for its own portfolio and not for sale.