Friendly Hills Bank Approved for U.S. Treasury Investment - but Elects to Decline Capital Infusion From United States Government

WHITTIER, Calif., Dec. 23  /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC:FHLB) (BULLETIN BOARD: FHLB)  has received preliminary approval from the United States Treasury to participate in the Capital Purchase Program.  With this approval the Bank is now eligible to receive up to $1,600,000 of additional capital in the form of Preferred Stock.  However, based on a number of factors, the Bank's Board of Directors has decided not to participate in the program.  These factors include the Bank's current Total Risk-based Capital Ratio of 27 percent (which is well above the "well-capitalized" standard of 10 percent), confidence that the Bank's capital position is sufficient for the bank to sustain itself through the current economic environment and achieve profitability, the strength of the bank's asset base which has no past due or non-accrual loans and the potentially dilutive impact of the additional capital for current shareholders.

Separately, the Bank did elect to participate in the Federal Deposit Insurance Corporation's ("FDIC") Transaction Account Guarantee Program.  This program is part of the FDIC's Temporary Liquidity Guarantee Program and provides unlimited FDIC insurance of 100 percent of funds deposited in non-interest bearing transaction accounts.  This would include both personal and business checking accounts, as well as NOW accounts which bear an interest rate of less than 0.50 percent and certain types of attorney trust accounts.  This coverage is currently effective through December 31, 2009, and is separate from the coverage which is available under the FDIC's general deposit insurance rules which currently insure accounts up to $250,000.

"We are appreciative of the U.S. Treasury's approval of Friendly Hills Bank to participate in the Capital Purchase Program," commented Jeffrey K. Ball, Chief Executive Officer.  "We recognize the stringent standards they are employing for determining the appropriate use of the government investments.  However, in assessing the bank's current position and the potentially dilutive impact of this additional capital to our existing shareholders, we have decided not to accept the proposed investment.  Our initial public offering provided an ample amount of capital from the investment community - most of which came from private investors based in our primary market area.  We have a responsibility to continue working towards an effective return for these investors and feel that the proposed terms of the preferred stock investment - at a full tax-effective cost of 9.4 percent in the first five years - could potentially have a dilutive effect on our existing shareholders in light of the current and projected rate environment.  With a current cost of funds below 1%, and a sound loan portfolio with no past due or non-accrual loans, we feel properly positioned to sustain our efforts through the current economic conditions and achieve profitability without the need for additional capital."

Mr. Ball continued his comments in regards to the Transaction Account Guarantee Program.  "The same strong capital position which has enabled us to bypass the Capital Purchase Program is also a source of comfort for our depositors.  And now, in addition to their awareness that our capital ratios far exceed the regulatory requirements for being a "well capitalized" bank, Friendly Hills Bank depositors have the additional security of this unlimited FDIC insurance on all of their standard checking account deposits.  While this FDIC program is currently effective to December 31, 2009, we feel the additional comfort level provided outweighs the Bank's cost of participating and have chosen to participate as an additional accommodation for the safety of our deposit clients."

Friendly Hills Bank is a community bank which was formed to primarily serve the Southern California communities of Whittier, La Habra, Santa Fe Springs and La Habra Heights, as well as the surrounding markets of Los Angeles and Orange Counties.  The bank was established in 2006 by prominent members of the local community who were seeking an alternative to the larger financial institutions in the area.  The bank is headquartered at 16011 E. Whittier Blvd. in Whittier, California with an additional branch office at 12070 East Telegraph Road, Suite #100 in Santa Fe Springs, California.  For more information on the Bank, please visit http://www.friendlyhillsbank.com/ or call 562-947-1920.

Forward-looking Statements:

The numbers in this press release are unaudited.  Statements such as those regarding the anticipated development and expansion of Friendly Hills Bank's business, and the intent, belief or current expectations of the bank, its directors or its officers, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995).  Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.  These risks and uncertainties include, but are not limited to, risks related to the local and national economy, the bank's performance, including its ability to generate loan and deposit growth, changes in interest rates, and regulatory matters. 

DATASOURCE: Friendly Hills Bank



CONTACT:  Jeffrey K. Ball, Chief Executive Officer, or George W.

Peterson, Chief Financial Officer, both of Friendly Hills Bank,

[phone]



Web Site:  http://www.friendlyhillsbank.com/ 

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