FHLB Friendly Hills Bancorp (PK)

Friendly Hills Bank (the "bank") (OTCBB: FHLB) reported results for the third quarter of 2012. For the nine month period ending September 30, 2012, the bank reported a profit of $313,000 or $0.19 per diluted share of common stock. The bank reported a profit of $6,000 or zero dollars per diluted share of common stock for the nine months ended September 30, 2011.

As of September 30, 2012, the bank reported total assets of $100.1 million, a 1% decrease from $100.9 million as of September 30, 2011. The bank's loan portfolio, net of unearned income, decreased 5% from $61.1 million as of September 30, 2011, to $58.3 million as of September 30, 2012. The portfolio remains diversified with $27.9 million or 47% in Commercial & Industrial Loans to local businesses (including $16.5 million in Owner Occupied Commercial Real Estate Loans), $16.0 million or 27% in Residential Real Estate Loans to investors and $10.5 million or 18% in Commercial Real Estate Loans to investors. The bank has an additional $15.0 million in unfunded loan commitments.

The bank's overall deposit base has decreased by 2% in the twelve months ended September 30, 2012, from $79.4 million as of September 30, 2011, to $77.9 million as of September 30, 2012. Non-interest bearing deposits continue to form a substantial part of the deposit base (39.6%), growing from $28.2 million to $30.9 million as of September 30, 2012. During the same time period interest-bearing deposits decreased from $51.2 million to $47.0 million on September 30, 2012. The bank has no deposits which were sourced through brokers or other wholesale funding sources.

At September 30, 2012, shareholders' equity was $13.1 million and the bank's total risk-based capital ratio was 20.4%, significantly exceeding the minimum "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.

"During this most recently completed quarter the bank recognized six full years of serving the communities of Southern California," commented Jeffrey K. Ball, Chief Executive Officer. "While we never could have anticipated the economic conditions we face today, we are proud of our achievements while providing the communities that we serve with a meaningful alternative to the larger institutions. As market conditions continue to present unique challenges we have selectively decreased the size of the bank while maintaining profitability. This prudent decrease in interest-bearing deposits corresponds to a reduction in loan assets primarily associated with lower utilization of committed lines of credit by our clients. We remain focused on expense management during this period of contraction while maintaining a consistent underwriting approach with our relationship focused approach to banking. The bank is well positioned in terms of capital, liquidity and reserves to properly address the current market conditions while maintaining an appropriate interest rate risk profile. We are appreciative of our shareholders, clients and employees as we strive to deliver shareholder value through our effective delivery of the many positive attributes associated with a community bank model."

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.

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                            Friendly Hills Bank
                         Balance Sheets (Unaudited)
                (in thousands, except per share information)
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                                             9/30/12    12/31/11   9/30/11
                                            ---------  ---------  ---------
ASSETS
Cash and due from banks                     $   2,327  $   2,305  $   3,183
Interest bearing deposits with other
 financial institutions                         3,607      4,575     16,936
                                            ---------  ---------  ---------
    Cash and Cash Equivalents                   5,934      6,880     20,119
Investment securities available-for-sale       32,571     26,826     19,348
Federal Home Loan Bank stock                      605        610        610
Loans, net of unearned income                  58,321     60,916     61,145
Allowance for loan losses                      (1,572)    (1,677)    (1,708)
                                            ---------  ---------  ---------
    Net Loans                                  56,749     59,239     59,437
Premises and equipment, net                       662        739        752
Accrued interest receivable and other
 assets                                         3,588      3,673        661
                                            ---------  ---------  ---------
    Total Assets                            $ 100,109  $  97,967  $ 100,927
                                            =========  =========  =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
  Noninterest-bearing deposits              $  30,887  $  27,111  $  28,241
  Interest-bearing deposits                    47,029     49,269     51,201
                                            ---------  ---------  ---------
    Total Deposits                             77,916     76,380     79,442
FHLB advances                                   8,750      8,750      8,750
Accrued interest payable and other
 liabilities                                      315        247        239
                                            ---------  ---------  ---------
    Total Liabilities                          86,981     85,377     88,431
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                    1,073      1,053      1,041
  Accumulated deficit                          (4,500)    (4,813)    (4,956)
  Accumulated other comprehensive income          597        392        453
                                            ---------  ---------  ---------
    Total Shareholders' Equity                 13,128     12,590     12,496
                                            ---------  ---------  ---------
    Total Liabilities and Shareholders'
     Equity                                 $ 100,109  $  97,967  $ 100,927
                                            =========  =========  =========

Book Value Per Share                        $    8.12  $    7.79  $    7.73
                                            =========  =========  =========




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                            Friendly Hills Bank
                    Statements of Operations (Unaudited)
                (in thousands, except per share information)
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                                                 For the nine  For the nine
                                                 months ended  months ended
                                                    9/30/12       9/30/11
                                                 ------------  ------------
Interest Income                                  $      3,143  $      3,536
Interest Expense                                          377           473
                                                 ------------  ------------
  Net Interest Income                                   2,766         3,063
Provision for Credit Losses                               (84)          169
                                                 ------------  ------------
  Net Interest Income after Provision for Credit
   Losses                                               2,850         2,894
Other Income                                              207           133
Operating Expenses                                      2,785         2,779
Gain (Loss) on Securities & Hedging Contracts              42          (216)
                                                 ------------  ------------
Earnings before Provision for Income Taxes                314            32
Income Tax Expense                                         (1)          (26)
                                                 ------------  ------------
  Net Earnings                                   $        313  $          6
                                                 ------------  ------------

Basic and Diluted Earnings Per Share             $       0.19  $        ---
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