Friendly Hills Bank Reports Third Quarter Results

WHITTIER, Calif., Nov. 1, 2010 /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC Bulletin Board: FHLB) announced unaudited results for the nine months ending September 30, 2010.  During this period the bank reported a loss of $794,000 or ($0.49) per diluted share of common stock.  This figure includes a $514,000 gain on the sale of investment securities and a $206,000 decrease in the value of an interest rate cap which was purchased during the second quarter.  The provision for credit losses for the nine months ended September 30, 2010, of $1,082,000 was 120% more than the $492,000 provision for the same period one year earlier.  As a result, the Allowance for Loan Losses was maintained at the previous level of 2% of gross loans following charge-offs in the amount of $1,003,000 during the recently completed quarter.  The bank reported a net loss of $1,033,000, or ($0.64) per diluted share of common stock for the nine months ended September 30, 2009.  

As of September 30, 2010, the bank reported total assets of $98.6 million, a 28% increase from $76.9 million as of September 30, 2009.  The bank's loan portfolio, net of unearned income, grew 28% from $48.0 million as of September 30, 2009, to $61.6 million as of September 30, 2010.  The portfolio remains diversified with $23.2 million or 38% in Commercial & Industrial Loans to local businesses (including $13.7 million in Owner Occupied Commercial Real Estate Loans), $20.4 million or 33% in Residential Real Estate Loans to investors and $14.3 million or 23% in Commercial Real Estate Loans to investors.  The bank has an additional $18.2 million in unfunded loan commitments.

The bank's overall deposit base has grown 22% in the twelve months ended September 30, 2010, from $63.2 million as of September 30, 2009, to $77.1 million as of September 30, 2010.  Non-interest bearing deposits continue to form a substantial part of the deposit base (31%), growing from $20.0 million to $23.8 million as of September 30, 2010.  During the same time period interest-bearing deposits grew from $43.2 million to $53.3 million on September 30, 2010.   The bank has no deposits which were sourced through brokers or other wholesale funding sources.

At September 30, 2010, shareholders' equity was $12.3 million and the bank's total risk-based regulatory capital ratio was 19.42%, 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.

"We remain concerned about the current economic environment and what appears to be an extended path to recovery," commented Jeffrey K. Ball, Chief Executive Officer.  "While our loan portfolio continues to perform well, regular risk assessments have led us to take significant action from an accounting standpoint towards certain assets.  These are loan assets which we feel have been compromised by the prevailing economic conditions.  External risk factors contribute towards what we perceive to be a greater risk of default in these assets which may result in exposure for the bank.  While we recognize the impact of this action on our profitability and capital position, we feel that it is in the best interest of the company to recognize and account for these risks and their related costs in a timely fashion."

"Another risk component we remain focused on is the bank's sensitivity to a rising interest rate environment," Ball continued.  "While we cannot know for certain when rates will increase, or by how much, we have taken action to minimize the impact on the bank in that scenario.  This action has included the purchase of an interest rate cap, fixed-rate wholesale borrowings and an increase in short-term assets in our investment portfolio.  This risk mitigation has resulted in a lower net interest margin and a mark-to-market adjustment ($206,000 to date) in the value of our interest rate cap.  The bank continues to maintain a strong capital base which is significantly above well capitalized standards, has strong liquidity with over 37% of total assets in cash and securities, a loan loss reserve maintained at 2% of gross loans and profitable operations as demonstrated by an efficiency ratio which continues to be under 100%.  We remain focused on the long-term franchise value of the company and feel properly positioned for 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 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.

SOURCE Friendly Hills Bank