Malaga Financial Corporation (MLGF.OB), the parent company of Malaga Bank FSB, today reported that net income for the quarter ended September 30, 2011 was $2,749,000 ($0.47 basic and fully diluted earnings per share), an increase of $41,000 or 2% from net income of $2,708,000 ($0.47 basic and $0.46 fully diluted earnings per share) for the quarter ended September 30, 2010. Net income for the nine months ended September 30, 2011 was $8,209,000 ($1.40 basic and $1.39 fully diluted earnings per share) as compared to $7,780,000 ($1.34 basic and $1.32 fully diluted earnings per share) for the nine months ended September 30, 2010, a 6% increase. Earnings for the third quarter and first nine months were the highest in Malaga’s history for those periods.

The Company did not have any foreclosures or real estate owned at September 30, 2011. The Company’s allowance for loan losses was $2,857,000, or 0.36% of total loans, at September 30, 2011.

Net interest income totaled $7,169,000 in the third quarter of 2011, up $186,000 or 3% from the third quarter of 2010. This increase resulted primarily due to an increase of 0.10% in the interest rate spread to 3.42%. The increase in the interest rate spread was due to a decline in the weighted average cost of funds of 0.33%, which exceeded the 0.23% decline in the weighted average yield on interest earning assets.

Operating expenses remained stable with a nominal increase of $9,000 in the third quarter of 2011, to $2,570,000 from $2,561,000 in the third quarter of 2010.

Randy C. Bowers, President and CEO, remarked, “We are pleased to continue to report record earnings. Our results for both the 3 rd quarter and year-to-date 2011 reflect the disciplined execution of our business plan emphasizing high asset quality, strong cost control and modest growth during a period of uncertain economic conditions.”

Malaga’s total assets were stable at $821 million at September 30, 2011 and 2010. The loan portfolio at September 30, 2011 was $787 million, an increase of $24 million or 3% from September 30, 2010. 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 $488 million as of September 30, 2011, a $21 million or 4% increase from $467 million at September 30, 2010. The retail deposit growth was used to partially repay wholesale deposits and FHLB borrowings, which decreased $30 million or 12% from $255 million at September 30, 2010 to $225 million at September 30, 2011. The weighted average cost of funds for the third quarter of 2011 was 1.69% versus 2.02% for the third quarter of 2010.

As of September 30, 2011, 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 12.24% and 20.05%, respectively, at September 30, 2011, significantly exceeding the minimum “well capitalized” requirements of 5% and 10% respectively.

Mr. Bowers concluded, “We are honored that, earlier this year, we were recognized by both US Banker magazine and SNL Financial for our overall financial performance. In addition, for over ten years, Malaga Bank has been consistently recommended by one of the nation’s leading independent bank rating and research firms, BauerFinancial Inc. Again this quarter, Malaga Bank received their premier Top 5-Star rating. This recognition is a direct result of the contributions of our dedicated staff and board of directors, in addition to our loyal shareholders and customers.”

Malaga Bank, a subsidiary of Malaga Financial Corporation, is a full-service community bank headquartered on the Palos Verdes Peninsula with five offices located in the South Bay area of Los Angeles. In its 27 th year, 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.

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