Friendly Hills Bank Continues Growth Pattern

WHITTIER, Calif., Oct. 31  /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC:FHLB) (BULLETIN BOARD: FHLB)  reported results for the third quarter of 2008, its eighth full quarter of operations, since opening on September 18, 2006.  As of September 30, 2008, the bank reported total assets of $60.9 million, a 34% increase from $45.5 million as of December 31, 2007.

The bank's overall deposit base has grown over 41% in the nine months ended September 30, 2008, from $31.5 million as of December 31, 2007, to $46.9 million as of September 30, 2008.  Non-interest bearing deposits continue to form a substantial part of the deposit base (37%), growing from $12.9 million at year-end to $17.4 million as of September 30, 2008.  During the same time period interest bearing deposits advanced over 60% from $18.0 million to $29.5 million on September 30, 2008.  The bank has no deposits which were sourced through brokers or originated on the basis of above-market rate programs.

The bank's loan portfolio, net of an allowance for loan losses, also continued to grow, more than doubling from $18.3 million as of December 31, 2007, to $36.8 million as of September 30, 2008.  The portfolio remains diversified with $9.8 million or 26% in Commercial & Industrial Loans to local businesses and $16.7 million or 45% in Commercial Real Estate Loans.  Owner Occupied properties represent the largest component of the Commercial Real Estate Portfolio (over 52%) with $8.5 million outstanding.  The bank has an additional $17.0 million in unfunded loan commitments with no non-performing loans or residential 'sub-prime' mortgage loans.

The bank's primary source of income is Net Interest Income which increased by over 67% from $1.1 million in the nine months ended September 30, 2007, to $1.8 million in the nine months ended September 30, 2008.  This increase was a contributing factor in the bank reducing its net loss for the nine months ended September 30, 2008, by 32% from $854,610, or ($0.53) per diluted share of common stock for the nine months ended September 30, 2007, to $578,916, or ($0.36) per diluted share of common stock.  These figures include a loan loss provision of $237,313 for the nine months ended September 30, 2008, which was 115% higher than the $110,227 provision for the same period one year earlier. The increase in reserves reflects the growth in the loan portfolio as the bank maintained its Allowance for Loan Losses at 1.25% of loans outstanding.  The net loss numbers also reflect the impact of accounting rules that require companies to include stock compensation as an expense.

On October 10, 2008, the bank opened its second banking office.  This new full service branch is located at 12070 East Telegraph Road, Suite #100, in the City of Santa Fe Springs, California.

"We all recognize the unprecedented challenges which face the banking industry today," commented Jeffrey K. Ball, Chief Executive Officer.  "Through the course of our bank's history we have managed our institution with an emphasis on balance sheet strength and cost efficiencies.  This strategy has enabled us to maintain a low cost of funds and a thorough underwriting approach with strong asset quality focused on well established local businesses and professionals.  We feel that these factors, combined with our current base of capital, have positioned the bank very soundly for dealing with these uncertain times in the market.  We are proud to provide our market area with a reliable, local banking alternative with continued access to credit while other institutions have been forced to compromise on their service and reliability.  This approach has afforded us the opportunity to open a second location in Santa Fe Springs ... a market which has been highly receptive to our consultative approach to banking.  While the current economic environment provides a great deal of uncertainty, we know that our clients, our employees and our shareholders can feel confident in the current position of Friendly Hills Bank."

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.

                             Friendly Hills Bank
                                Balance Sheet
                                 (Unaudited)

                                      9/30/08       12/31/07      9/30/07
  Assets
  Cash and cash equivalents         $2,145,156     $1,357,598   $1,486,188
  Fed funds sold                     5,090,000      7,365,000   13,825,000
  Investment securities
   available-for-sale               15,442,684     17,339,953   11,855,776
  Loans, net of unearned income     37,305,116     18,492,128   13,365,651
    Allowance for loan losses         (468,584)      (231,271)    (166,913)
    Net loans                       36,836,532     18,260,857   13,198,738
  Premises and equipment, net        1,068,679        960,604      986,309
  Accrued interest receivable and
   other assets                        342,509        218,938      188,739
    Total Assets                   $60,925,560    $45,502,950  $41,540,750

  Liabilities
  Deposits
    Noninterest-bearing deposits   $17,434,259    $12,935,372   $9,562,144
    Interest-bearing deposits       29,481,871     18,025,171   17,531,193
  Accrued interest payable and
   other liabilities                   109,417         94,926       61,314
    Total Liabilities               47,025,547    $31,055,469   27,154,651

  Stockholders' Equity
  Common stock                     $15,957,620    $15,957,620  $15,957,620
  Accumulated deficit               (2,593,240)    (2,014,323)  (1,799,918)
  Additional paid-in-capital           492,591        303,591      250,602
  Accumulated other comprehensive
   gain (loss)                          43,042        200,593      (22,205)
    Total Stockholders' Equity      13,900,013     14,447,481   14,386,099
    Total Liability &
     Stockholders' Equity          $60,925,560    $45,502,950  $41,540,750



                             Friendly Hills Bank
                           Statement of Operations
                                 (Unaudited)

                                               For the nine   For the nine
                                               months ended   months ended
                                                  9/30/08        9/30/07

  Interest Income                                $2,152,793     $1,369,097

  Interest Expense                                  314,139        270,306
    Net Interest Income                           1,838,654      1,098,791

  Provision for Credit Losses                       237,313        110,227
    Net Interest Income after Provision for
     Credit Losses                                1,601,341        988,564

  Other Income                                       90,300         31,807

  Operating Expenses                              2,306,687      1,874,171

  Gain (Loss) on Securities                          36,934              -
  Loss before Provision for Income Taxes           (578,112)      (853,800)

  Provision for Income Taxes                           (804)          (810)
    Net Loss                                      $(578,916)     $(854,610)

  Basic Income (Loss) Per Share                      $(0.36)        $(0.53)

  Book Value Per Share                                $8.60          $8.90

  Shares Outstanding                              1,616,000      1,616,000


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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