Net income increased as a result of continued growth in interest earning assets and an improvement in the interest rate spread. Net interest income increased by $2,021,000 due to a $62 million (10%) increase in average interest-earning assets (principally loans). The interest rate spread (the difference between the weighted average yield on average earning assets and the weighted average rate paid on average interest-bearing liabilities) increased from 2.25% in 2006 to 2.29% in 2007.

Malaga’s provision for loan losses was $124,000 in 2007 as compared to $310,000 in 2006. The reduced provision was attributable to lower net loan growth (loan originations less amortizations and payoffs) of $28 million in 2007 versus $85 million in 2006. Malaga charged-off no loans in 2007 and had no delinquent loans or non-performing assets at December 31, 2007.

Operating expenses increased 13.6% from $6,869,000 in 2006 to $7,804,000 in 2007. Salary and related benefits increased $476,000 due primarily to higher employee benefit cost of $188,000 and lower capitalized loan cost of $147,000 due to lower loan production in 2007. Rental of additional office space and Malaga’s new branch in San Pedro contributed to higher occupancy expense of $147,000. Other factors contributing to higher operating expenses were $100,000 paid to settle a property dispute and increased professional fees totaling $127,000.

Randy C. Bowers, President and CEO of Malaga Bank, remarked, “We are pleased to report that in spite of an extremely difficult year for the banking industry, we were able to post a 14% increase in earnings. Our prudent lending practices resulted in slower growth than in the prior several years but have resulted in a loan portfolio with no non-performing assets. As a result, these practices coupled with our regulatory capital levels and the efforts of our dedicated staff leave us well positioned to take advantage of future opportunities.”

Malaga’s total assets reached $704 million at December 31, 2007 compared to $673 million at December 31, 2006. The loan portfolio at December 31, 2007 was $665 million, an increase of $28 million or 4% from December 31, 2006. Malaga originates loans principally for its own portfolio and not for sale. At December 31, 2007, the loan portfolio was comprised of the following types of loans outstanding: multi-family loans – 77%; single family residential loans – 12%; commercial real estate loans– 7%; home equity lines of credit – 2% and commercial and other loans- 2%.

Loan growth in 2007 was funded by a $35 million increase in FHLB advances. Deposits declined $6 million as maturing brokered deposits were replaced with less costly FHLB advances.

As of December 31, 2007, Malaga Bank was in compliance with all applicable regulatory capital requirements and was deemed “well-capitalized” under applicable regulations. Risk-based capital at December 31, 2007 was 12.79%. In 2007, Malaga repurchased 298,593 shares of common stock at an average price of $9.86 per share. This included 194,734 shares purchased in the fourth quarter at an average price of $10.01 pursuant to Malaga’s tender offer to all shareholders.

Malaga Bank, a subsidiary of MFC, is a full service community bank located on the Palos Verdes Peninsula that has served the financial needs of this affluent community for over 22 years. Malaga Bank offers a wide range of loan and deposit products and services that compete directly with the larger financial institutions while maintaining a strong relationship-based banking philosophy. Malaga Bank is the largest community bank in the South Bay area and is well known for its “legendary” customer service. The Bank’s web site is located at www.malagabank.com.