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.

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