FHLB Friendly Hills Bancorp (PK)

Friendly Hills Bank (the "bank") (OTCBB:FHLB) reported results for the year ended December 31, 2013, after completing its seventh full year of operations since opening on September 18, 2006. The bank also announced that it has opened a new Loan Production Office located in Orange County.

For the twelve month period ending December 31, 2013, the bank reported a profit of $372,000 or $0.23 per diluted share of common stock. This figure includes a $99,000 provision for loan losses, $129,000 increase in the value of interest rate caps, and a $181,000 gain on securities sold. The bank reported a profit of $145,000 or $0.09 per diluted share of common stock for the twelve months ended December 31, 2012. This figure includes a $213,000 provision for loan losses and a $74,000 increase in the value of interest rate caps.

Excluding the provision for loan losses, adjustments to the carrying value of interest rate caps, and investment securities gains ("Core Earnings"), the bank reported net income of $161,000 for the twelve months ended December 31, 2013 compared to a net income of $284,000 for the same period in 2012.

As of December 31, 2013, the bank reported total assets of $107.9 million, a 3% increase from $104.7 million as of December 31, 2012. The bank's loan portfolio, net of unearned income, decreased 4% from $60.0 million as of December 31, 2012, to $57.6 million as of December 31, 2013. The portfolio remains diversified with $21.9 million or 38% in Commercial & Industrial Loans to local businesses (including $15.5 million in Owner Occupied Commercial Real Estate Loans), $17.2 million or 30% in Residential Real Estate Loans to investors and $12.5 million or 22% in Commercial Real Estate Loans to investors. The bank has an additional $17.8 million in unfunded loan commitments.

The bank's overall deposit base has grown 4% in the twelve months ended December 31, 2013, from $82.8 million as of December 31, 2012, to $86.3 million as of December 31, 2013. Non-interest bearing deposits continue to form a substantial part of the deposit base (43%), growing from $33.7 million to $37.4 million as of December 31, 2013. During the same time period interest-bearing deposits decreased from $49.1 million to $48.9 million on December 31, 2013. The bank has no deposits which were sourced through brokers or other wholesale funding sources.  

At December 31, 2013, shareholders' equity was $12.5 million and the bank's total risk-based capital ratio was 20%, 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.

"While market conditions have made quality loan growth a challenge during the past year," commented Jeffrey K. Ball, Chief Executive Officer, "we feel the company is properly positioned for potential market changes and future growth. Quality loan growth is a challenge throughout the industry and we are positioning our bank to be able to capture expanded opportunities and selectively grow our portfolio. But we are doing so with a focus on maintaining sound risk management, particularly in the areas of credit risk and interest rate risk."

"As part of our effort to grow the loan portfolio, we are pleased to announce the opening of a Loan Production Office in Irvine, California, effective February 3, 2014. This office will enable us to more effectively broaden our geographic reach in pursuit of new loan relationship opportunities and is complemented by an expanded team of qualified professionals who are focused on the quality loan growth we need."

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 in Whittier, California with an additional branch office in Santa Fe Springs, California and a loan production office in Irvine, 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)
	12/31/2013	12/31/2012
ASSETS
Cash and due from banks	$3,217	$3,679
Interest bearing deposits with other financial institutions	5,893	7,515
Cash and Cash Equivalents	9,110	11,194
Investment securities available-for-sale	37,750	29,906
Federal Home Loan Bank stock	646	605
Loans, net of unearned income	57,635	59,991
Allowance for loan losses	(1,457)	(1,168)
Net Loans	56,178	58,823
Premises and equipment, net	561	627
Accrued interest receivable and other assets	3,667	3,552
Total Assets	$107,912	$104,707
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing deposits	$37,436	$33,698
Interest-bearing deposits	48,911	49,092
Total Deposits	86,347	82,790
FHLB advances	8,750	8,750
Accrued interest payable and other liabilities	333	326
Total Liabilities	95,430	91,866
Shareholders' Equity
Common stock, no par value, 10,000,000 shares authorized:
1,616,000 shares issued and outstanding	15,958	15,958
Additional paid-in-capital	1,090	1,076
Accumulated deficit	(4,295)	(4,668)
Accumulated other comprehensive income (loss)	(271)	475
Total Shareholders' Equity	12,482	12,841
Total Liabilities and Shareholders' Equity	$107,912	$104,707
Book Value Per Share	$7.72	$7.95
Friendly Hills Bank
Statements of Operations (Unaudited)
(in thousands, except per share information)
	For the twelve months ended	For the twelve months ended
	12/31/2013	12/31/2012
Interest Income	$3,806	$4,142
Interest Expense	422	497
Net Interest Income	3,384	3,645
Provision for Loan Losses	99	213
Net Interest Income after Provision for Loan Losses	3,285	3,432
Other Income	303	273
Operating Expenses	3,525	3,633
Gain on Investment Securities & Hedging Contracts	310	74
Earnings before Provision for Income Taxes	373	146
Income Tax Expense	1	1
Net Earnings	$372	$145
Basic and Diluted Earnings Per Share	$0.23	$0.09

CONTACT: Jeffrey K. Ball (President & CEO)
         Daniel L. Erickson (EVP & CFO)
         (562) 947-1920