Friendly Hills Bank Maintains Asset Quality With Continued Growth

WHITTIER, Calif., May 7  /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC Bulletin Board: FHLB) reported results for the first quarter of 2009, its tenth full quarter of operations, since opening on September 18, 2006.  As of March 31, 2009, the bank reported total assets of $66.6 million, a 35% increase from $49.2 million as of March 31, 2008, and a 5% increase from $63.5 million as of December 31, 2008.

The bank's overall deposit base has grown over 52% in the twelve months ended March 31, 2009, from $34.5 million as of March 31, 2008, to $52.5 million as of March 31, 2009.  Non-interest bearing deposits continue to form a substantial part of the deposit base (37%), growing from $14.4 million to $19.2 million as of March 31, 2009.  During the same time period interest bearing deposits grew from $20.1 million to $33.3 million on March 31, 2009.  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, grew 57% from $22.8 million as of March 31, 2008, to $35.7 million as of March 31, 2009.  The portfolio remains diversified with $9.5 million or 26% in Commercial & Industrial Loans to local businesses and $15.1 million or 41% in Commercial Real Estate Loans.  Owner Occupied properties represent the largest component of the Commercial Real Estate Portfolio (24%) with $8.6 million outstanding.  The bank has an additional $15.1 million in unfunded loan commitments with no delinquent loans, non-performing loans or residential 'sub-prime' mortgage loans.

The bank's primary source of income is net interest income which increased by 13% from $533,811 in the three months ended March 31, 2008, to $600,719 in the three months ended March 31, 2009.  For the most recent quarter ending March 31, 2009, the bank reported a net loss of $419,216, or ($0.26) per diluted share of common stock.  This figure includes a loan loss provision of $174,281 for the three months ended March 31, 2009, which was 203% higher than the $57,470 provision for the same period one year earlier.  The bank reported a net loss of $251,819, or ($0.16) per diluted share of common stock for the three months ended March 31, 2008.  The increase in reserves reflects the growth in the loan portfolio and an increased provision reflective of management's cautionary position towards potential risks associated with current economic conditions.  The net loss numbers also reflect the impact of accounting rules that require companies to include stock compensation as an expense.

"The first quarter of this year has presented a number of unique challenges for the banking industry which have made us appreciative of the conservative manner in which we are operating our institution," commented Jeffrey K. Ball, Chief Executive Officer.  "While in a normal economic environment we would expect more growth, current economic conditions have resulted in a more limited growth rate allowing us to preserve our asset quality and a low cost of funds.  We are proud of our position in the midst of this environment and are encouraged by the increasing opportunities for growth with our Relationship Banking focus."

"Despite having no past due or non-accrual loans," continued Ball, "our Board of Directors felt that it was appropriate to raise the bank's allowance for loan losses from 1.50% to 2.00% of gross loans.  This increase reflects the continuing uncertainty of the current economic environment and is a responsible measure in preserving the long-term sustainability of our franchise.  Recognizing that this change would have a significant impact on the bank's continuing progress towards the primary objective of achieving profitability, we felt that it was an important step in our continuing focus on overall risk management.  The appropriateness of this provision is continually being assessed to reflect any change in market conditions.  At the same time our capital and liquidity positions are strong enough to support our continued growth."

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 Southern California.  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)

  (in thousands, except
   per share information)

                                          3/31/09   12/31/08    3/31/08
   Assets
   Cash and cash equivalents              $2,825     $2,678     $2,017
   Fed funds sold                         12,240      6,980      2,575
   Investment securities
    available-for-sale                    13,966     15,527     20,582
   Loans, net of unearned income          36,449     36,987     23,073
      Allowance for loan losses             (730)      (555)      (289)
      Net loans                           35,719     36,432     22,784
   Premises and equipment, net             1,215      1,259        931
   Accrued interest receivable and
    other assets                             659        632        316
      Total Assets                       $66,624    $63,508    $49,205

   Liabilities
   Deposits
      Noninterest-bearing deposits       $19,193    $18,583    $14,439
      Interest-bearing deposits           33,283     30,475     20,081
   Accrued interest payable and other
    liabilities                              242        155         94
      Total Liabilities                  $52,718    $49,213     34,614

   Stockholders' Equity
   Common stock                          $15,958    $15,958    $15,958
   Accumulated deficit                    (3,217)    (2,797)    (2,267)
   Additional paid-in-capital                605        543        367
   Accumulated other comprehensive gain
    (loss)                                   560        591        533
      Total Stockholders' Equity          13,906     14,295     14,591
      Total Liability & Stockholders'
       Equity                            $66,624    $63,508    $49,205

      Book Value Per Share                 $8.61      $8.85      $9.03



                              Friendly Hills Bank
                            Statement of Operations
                                  (Unaudited)

   (in thousands, except
    per share information)
                                                     For the     For the
                                                  three months three months
                                                      ended      ended
                                                     3/31/09     3/31/08

   Interest Income                                     $717       $646

   Interest Expense                                     116        112
      Net Interest Income                               601        534

   Provision for Credit Losses                          174         57
      Net Interest Income after Provision
       for Credit Losses                                427        477

   Other Income                                          33         27

   Operating Expenses                                   879        755

   Loss before Provision for Income Taxes              (419)      (251)

   Provision for Income Taxes                            (0)        (1)
         Net Loss                                     $(419)     $(252)

   Basic and Diluted Income (Loss) Per Share         $(0.26)    $(0.16)


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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