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Friendly Hills Bank Reports First Quarter Results


May 13, 2013 - Whittier, CA

Friendly Hills Bank (the "bank") (OTCBB: FHLB) reported results for the first quarter of 2013.

For the three month period ending March 31, 2013, the bank reported a loss of $47,000 or ($0.03) per diluted share of common stock. This figure includes a $33,000 increase in the value of the interest rate caps and a $99,000 provision for loan loss. The bank reported a profit of $75,000 or $0.05 per diluted share of common stock for the three months ended March 31, 2012. This figure includes an $8,000 increase in the value of an interest rate cap.

As of March 31, 2013, the bank reported total assets of $102.6 million, a 4% increase from $98.8 million as of March 31, 2012. The bank's loan portfolio, net of unearned income, increased 6% from $57.6 million as of March 31, 2012, to $60.9 million as of March 31, 2013. The portfolio remains diversified with $27.7 million or 46% in Commercial & Industrial Loans to local businesses (including $17.4 million in Owner Occupied Commercial Real Estate Loans), $16.4 million or 27% in Residential Real Estate Loans to investors and $12.2 million or 20% in Commercial Real Estate Loans to investors. The bank has an additional $15.3 million in unfunded loan commitments.

The bank's overall deposit base has increased 5% in the twelve months ended March 31, 2013, from $77.1 million as of March 31, 2012, to $80.8 million as of March 31, 2013. Non-interest bearing deposits continue to form a substantial part of the deposit base (41%), growing from $29.3 million to $33.4 million as of March 31, 2013. During the same time period interest-bearing deposits decreased slightly from $47.8 million to $47.4 million on March 31, 2013. The bank has no deposits which were sourced through brokers or other wholesale funding sources.

At March 31, 2013, shareholders' equity was $12.8 million and the bank's total risk-based capital ratio was 18%, significantly exceeding the "well-capitalized" level of 10% prescribed under regulatory requirements. The bank also continues to maintain substantial liquidity positions, retaining significant balances of liquidity as well as available collateralized borrowings and other potential sources of liquidity.

"First quarter earnings were negatively impacted by the continued narrowing of interest rate margins resulting from the current economic environment," commented Jeffrey K. Ball, Chief Executive Officer. "Despite 4% growth of the overall bank and a 6% increase in loans, Interest Income was $145,000, or 14%, lower than the same period last year. This was partially offset by an $18,000, or 14%, reduction in Interest Expense and an $81,000, or 9%, reduction in Operating Expenses over the same time period. Meanwhile, as our local economy remains soft, we have increased our loan loss provision as part of our continued risk management process. Although disappointed by the short-term impact of these factors, we feel that the bank remains in a strong position for future growth with sufficient capital and liquidity to support long-term shareholder value."

Company Profile:
Friendly Hills Bank is a community bank which was formed to primarily serve the Southern California communities of eastern Los Angeles County and northern Orange County. 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 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 Sheets (Unaudited)
(in thousands, except per share information)
---------------------------------------------------------------------------

3/31/13 12/31/12 3/31/12
-------- -------- -------
ASSETS
Cash and due from banks $ 2,923 $ 3,679 $ 3,003
Interest bearing deposits with other financial
institutions 6,161 7,515 9,932
-------- -------- -------
Cash and Cash Equivalents 9,084 11,194 12,935
Investment securities available-for-sale 29,011 29,906 25,082
Federal Home Loan Bank stock 605 605 610
Loans, net of unearned income 60,939 59,991 57,595
Allowance for loan losses (1,266) (1,168) (1,813)
-------- -------- -------
Net Loans 59,673 58,823 55,782
Premises and equipment, net 620 627 724
Accrued interest receivable and other assets 3,631 3,552 3,647
-------- -------- -------
Total Assets $102,624 $104,707 $98,780
======== ======== =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing deposits $ 33,383 $ 33,698 $29,260
Interest-bearing deposits 47,398 49,092 47,807
-------- -------- -------
Total Deposits 80,781 82,790 77,067
FHLB advances 8,750 8,750 8,750
Accrued interest payable and other liabilities 321 326 247
-------- -------- -------
Total Liabilities 89,852 91,866 86,064
Shareholders' Equity
Common stock, no par value, 10,000,000 shares
authorized:
1,616,000 shares issued and outstanding 15,958 15,958 15,958
Additional paid-in-capital 1,079 1,076 1,060
Accumulated deficit (4,715) (4,668) (4,738)
Accumulated other comprehensive income 450 475 436
-------- -------- -------
Total Shareholders' Equity 12,772 12,841 12,716
-------- -------- -------
Total Liabilities and Shareholders'
Equity $102,624 $104,707 $98,780
======== ======== =======
Book Value Per Share $ 7.90 $ 7.95 $ 7.87
======== ======== =======




Friendly Hills Bank
Statements of Operations (Unaudited)
(in thousands, except per share information)
----------------------------------------------------------------------------

For the For the
three three
months months
ended ended
3/31/13 3/31/12
--------- ---------
Interest Income $ 933 $ 1,078
Interest Expense 112 130
--------- ---------
Net Interest Income 821 948
Provision for Credit Losses 99 0
--------- ---------
Net Interest Income after Provision for Credit Losses 722 948
Other Income 67 69
Operating Expenses 869 950
Gain on Hedging Contracts 33 8
--------- ---------
Earnings before Provision for Income Taxes (47) 75
Income Tax Expense 0 0
--------- ---------
Net Earnings $ (47) $ 75
--------- ---------

Basic and Diluted Earnings Per Share $ (0.03) $ 0.05
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