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Malaga Financial Corporation Reports 23% Increase in First Half 2018 Earnings

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Malaga Financial Corporation (OTC:MLGF), the parent company
of Malaga Bank FSB, today reported that net income for the quarter ended
June 30, 2018 was $3,745,000 ($0.57 basic and fully diluted earnings per
share), an increase of $627,000 or 20% from income of $3,118,000 for the
quarter ended June 30, 2017. Net income for the six months ended June
30, 2018 was $7,594,000 ($1.16 basic and $1.15 fully diluted earnings
per share) compared to $6,170,000 ($0.95 basic and $0.94 fully diluted
earnings per share, as adjusted for the stock dividend declared on
November 16, 2017) for the six months ended June 30, 2017, a 23%
increase. For the first six months 2018, the Company's annualized return
on average equity was 11.78% and the annualized return on average assets
was 1.45%, as compared to 10.32% and 1.24%, respectively, for the same
period in 2017.

The Company did not have any delinquent loans or real estate owned at
June 30, 2018. The Company's allowance for loan losses was $3,164,000,
or 0.33% of total loans, at June 30, 2018.

Net interest income totaled $8,099,000 in the second quarter of 2018, an
increase of $93,000 or 1% from the second quarter of 2017. This resulted
from an increase in average interest-earning assets of $38 million
offset by a decrease in interest rate spread from 3.18% to 3.06%. This
decrease in the interest spread is primarily attributed to an increase
of 0.17% in yield on average interest-earning assets offset by an
increase of 0.29% in yield on average interest-bearing liabilities.

Operating expenses increased 5% in the second quarter of 2018, to
$2,950,000 from $2,820,000 in the second quarter of 2017. Increased
costs were primarily related to compensation expense.

Randy C. Bowers, President and CEO, remarked, "We are pleased to report
a significant increase in 2nd Quarter earnings year over
year. Capital levels are strong, asset quality remains excellent and our
efficiency ratio continues to be one of the best in the industry. In
addition, we are delighted to have completed the purchase of the
historic building that has housed our corporate headquarters since 1985.
This is a clear indication we are here to stay and continue to be the
local bank of choice."

Malaga Bank's total assets increased to $1.063 billion at June 30, 2018
compared to $1.020 billion at June 30, 2017. The loan portfolio at June
30, 2018 was $973 million, an increase of $32 million or 3% from June
30, 2017. Malaga originates loans principally for its own portfolio and
not for sale.

Malaga Bank funds its assets with a mix of retail deposits, wholesale
deposits and FHLB borrowings. Retail deposits totaled $649 million as of
June 30, 2018, a $17 million decrease from $666 million at June 30,
2017. Wholesale deposits, comprised mainly of State of California
certificates of deposit, totaled $95 million as of June 30, 2018, a $2
million decrease from $97 million at June 30, 2017. FHLB borrowings were
$167 million as of June 30, 2018, a $50 million increase from $117
million at June 30, 2017. The weighted average cost of funds for the
second quarter of 2018 was 0.86% versus 0.57% for the second quarter of
2017.

As of June 30, 2018, Malaga Bank was in compliance with all applicable
regulatory capital requirements and was deemed "well-capitalized" under
those regulations. Core capital and risk-based capital ratios were
13.52% and 24.74%, respectively, at June 30, 2018 significantly
exceeding the minimum "well capitalized" requirements of 5% and 10%,
respectively.

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. For
over ten years Malaga Bank has been consistently recommended by one of
the nation's leading independent bank rating and research firms, Bauer
Financial Inc.
Malaga Bank was awarded their premier Top 5-Star
rating for the 42
nd consecutive quarter as of
March 2018.
Since 1985, 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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