Friendly Hills Bank Continues Growth Through Third Quarter; Announces Hiring of Chief Financial Officer

WHITTIER, Calif., Nov. 9 /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC Bulletin Board: FHLB) reported results for the third quarter of 2009, its twelfth full quarter of operations, since opening on September 18, 2006. As of September 30, 2009, the bank reported total assets of $76.9 million, a 26% increase from $60.9 million as of September 30, 2008.

The bank's overall deposit base has grown over 35% in the twelve months ended September 30, 2009, from $46.9 million as of September 30, 2008, to $63.2 million as of September 30, 2009. Non-interest bearing deposits continue to form a substantial part of the deposit base (32%), growing from $17.4 million to $20.0 million as of September 30, 2009. During the same time period, interest bearing deposits grew from $29.5 million to $43.2 million on September 30, 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 28% from $36.8 million as of September 30, 2008, to $47.0 million as of September 30, 2009. The portfolio remains diversified with $11.8 million or 25% in Commercial & Industrial Loans to local businesses and $18.3 million or 38% in Commercial Real Estate Loans. Owner Occupied properties represent the largest component of the Commercial Real Estate Portfolio (57%) with $10.3 million outstanding. The bank has an additional $22.2 million in unfunded loan commitments.

While the bank's loan portfolio is 28% larger than it was a year ago, net interest income increased by 12% from $1.8 million in the nine months ended September 30, 2008, to $2.1 million in the nine months ended September 30, 2009. Net interest income is the bank's primary source of income and the lower rate of income growth is reflective of the significant drop in interest rates in comparison to the same time period a year ago.

For the most recent nine month period ending September 30, 2009, the bank reported a net loss of $1,036,282 or ($0.64) per diluted share of common stock. This figure includes a loan loss provision of $485,687 for the nine months ended September 30, 2009, which was 105% higher than the $237,313 provision for the same period one year earlier. The bank reported a net loss of $578,916, or ($0.36) per diluted share of common stock for the nine months ended September 30, 2008. The increase in the allowance for loan losses 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 a special deposit insurance assessment which was imposed on all insured institutions by the Federal Deposit Insurance Corporation and the recurring effect of accounting rules that require companies to include stock compensation as an expense. Total accrual for the special assessment was $23,800 for the nine months ending September 30, 2009, and there was no special assessment in the prior year.

The bank also announces that Daniel L. Erickson has joined the executive management team as Executive Vice President/Chief Financial Officer. Mr. Erickson brings an extensive amount of experience in financial, technological and operational management with community banks.

"The current economic environment presents a number of challenges to community banks across the country and ours is no exception," commented Jeffrey K. Ball, Chief Executive Officer. "While we continue to actively manage our loan portfolio, and remain pleased with the continued performance of our borrowers, many businesses in our market area are struggling and we expect this to be a continuing challenge going into the next year. As part of our active management of the loan portfolio we have taken action in restructuring one of our borrower relationships and placed the related loans on non-accrual status until performance under the new structure is demonstrated. We feel that this was a prudent action given the continued uncertainty of the local economy and we remain confident in the repayment capability of all of our borrowers.

"Another impact of the current environment," continued Ball, "is the change in interest rates which has resulted in a year-over-year decline in our Net Interest Margin. This has resulted in the growth of our Net Interest Income not keeping pace with the rate of growth for the overall bank and our loan portfolio. However, we remain focused on maintaining a low cost of funds in our deposit base which is the result of our continued focus on relationship development. And with the addition of Mr. Erickson we are confident that we will be able to better utilize the bank's liquidity position to maximize earnings within our defined risk parameters while enhancing the operational efficiency of our institution. Despite the challenges of the current economic environment, the bank continues to demonstrate the growth needed for our primary focus of attaining profitability."

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.

                                Friendly Hills Bank
                                   Balance Sheet
                                    (Unaudited)

        (in thousands, except per share information)

                                             9/30/09    12/31/08     9/30/08
                                             -------    --------     -------
    Assets
    Cash and cash equivalents                 $4,393      $2,678      $2,145
    Fed funds sold                             7,430       6,980       5,090
    Investment securities
     available -for-sale                      16,565      15,527      15,443
    Loans, net of unearned income             48,012      36,987      37,305
                                              ------      ------      ------
      Allowance for loan losses                 (977)       (555)       (469)
                                                ----        ----        ----
      Net loans                               47,035      36,432      36,837
    Premises and equipment, net                1,061       1,259       1,069
    Accrued interest receivable and
     other assets                                419         632         343
                                                 ---         ---         ---
      Total Assets                           $76,903     $63,508     $60,926
                                             =======     =======     =======

    Liabilities
    Deposits
        Noninterest-bearing deposits         $19,980     $18,583     $17,434
        Interest-bearing deposits             43,184      30,475      29,482
                                              ------      ------      ------
      Total Deposits                          63,164      49,058      46,916
    Accrued interest payable and other
     liabilities                                 307         155         109
                                                 ---         ---         ---
        Total Liabilities                    $63,471     $49,213      47,025

    Stockholders' Equity
    Common stock                             $15,958     $15,958     $15,958
    Accumulated deficit                       (3,834)     (2,797)     (2,593)
    Additional paid-in-capital                   728         543         493
    Accumulated other comprehensive
     gain (loss)                                 580         591          43
                                                 ---         ---         ---
        Total Stockholders' Equity            13,432      14,295      13,901
                                              ------      ------      ------
        Total Liability & Stockholders'
         Equity                              $76,903     $63,508     $60,926
                                             -------     -------     -------

      Book Value Per Share                     $8.31       $8.85       $8.60





                                 Friendly Hills Bank
                               Statement of Operations
                                     (Unaudited)

    (in thousands, except per share information)

                                              For the nine     For the nine
                                              months ended     months ended
                                                9/30/09           9/30/08
                                             --------------   --------------

    Interest Income                              $2,409            $2,153

    Interest Expense                                355               314
                                                    ---               ---
      Net Interest Income                         2,054             1,839

    Provision for Credit Losses                     485               237
      Net Interest Income after Provision
       for Credit Losses                          1,569             1,602

    Other Income                                    112                90

    Operating Expenses                            2,716             2,307
                                                  -----             -----

    Gain (Loss) on Securities                        (0)               37
                                                    ---               ---

    Loss before Provision for Income Taxes       (1,035)             (578)

    Provision for Income Taxes                       (1)               (1)
                                                    ---               ---
        Net Loss                                $(1,036)            $(579)
                                                =======             =====

    Basic and Diluted Income (Loss)
     Per Share                                   $(0.64)           $(0.36)
                                                 ======            ======