SOURCE: Friendly Hills Bank

Friendly Hills Bank

February 20, 2013 15:00 ET

Friendly Hills Bank Reports Year End Results

WHITTIER, CA--(Marketwire - Feb 20, 2013) -  Friendly Hills Bank (the "bank") (OTCBB: FHLB) reported results for the year ended December 31, 2012, after completing its sixth full year of operations since opening on September 18, 2006. 

For the twelve month period ending December 31, 2012, the bank reported a profit of $145,000 or $0.09 per diluted share of common stock. This figure includes a $213,000 provision for loan losses, and a $73,000 increase in the value of interest rate caps. The bank reported a profit of $149,000 or $0.09 per diluted share of common stock for the twelve months ended December 31, 2011. This figure includes a $141,000 provision for loan losses, a $48,000 loss on the sale of investment securities, and a $147,000 decrease in the value of interest rate caps. 

Excluding the provision for loan losses, investment securities losses, and adjustments to the carrying value of interest rate caps ("Core Earnings"), the bank reported net income of $285,000 for the twelve months ended December 31, 2012 compared to a net income of $485,000 for the same period in 2011.

As of December 31, 2012, the bank reported total assets of $104.7 million, a 7% increase from $98.0 million as of December 31, 2011. The bank's loan portfolio, net of unearned income, decreased 2% from $60.9 million as of December 1, 2011, to $60.0 million as of December 31, 2012. The portfolio remains diversified with $27.3 million or 45% in Commercial & Industrial Loans to local businesses (including $17.7 million in Owner Occupied Commercial Real Estate Loans), $16.9 million or 28% in Residential Real Estate Loans to investors and $11.3 million or 19% 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 grown 8% in the twelve months ended December 31, 2012, from $76.4 million as of December 31, 2011, to $82.8 million as of December 31, 2012. Non-interest bearing deposits continue to form a substantial part of the deposit base (41%), growing from $27.1 million to $33.7 million as of December 31, 2012. During the same time period interest-bearing deposits decreased from $49.3 million to $49.1 million on December 31, 2012. The bank has no deposits which were sourced through brokers or other wholesale funding sources. 

At December 31, 2012, shareholders' equity was $12.8 million and the bank's total risk-based capital ratio was 19%, 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.

"Margin compression continues to have a significant impact on the core earnings of the bank," commented Jeffrey K. Ball, Chief Executive Officer, "primarily as a result of macro-economic conditions and our asset mix. The current interest rate environment has negatively impacted our loan yields particularly in the underwriting of new and maturing assets. Despite the temptation to accelerate loan growth as a means to preserve net interest income, we have chosen to maintain our underwriting discipline with a consistent focus on relationship banking. Therefore, with our continued growth in non-interest bearing deposits, our asset mix has gone from 60% Net Loans to Total Assets down to 56% Net Loans to Total Assets."

"We have maintained profitability for the bank for the past year by offsetting the resultant 11% reduction in Net Interest Income with a focus on expense reduction and lowering our cost of funds. This has been achieved while managing the bank's current and longer term exposure to a rising interest rate environment with the use of fixed rate borrowings and interest rate caps. While the environment remains challenging, the company has sufficient capital and liquidity to pursue additional opportunities for earnings growth as economic conditions improve."

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 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)  
Cash and due from banks   $ 3,679     $ 2,305  
Interest bearing deposits with other financial institutions     7,515       4,575  
    Cash and Cash Equivalents     11,194       6,880  
Investment securities available-for-sale     29,906       26,826  
Federal Home Loan Bank stock     605       610  
Loans, net of unearned income     59,991       60,916  
Allowance for loan losses     (1,168 )     (1,677 )
    Net Loans     58,823       59,239  
Premises and equipment, net     627       739  
Accrued interest receivable and other assets     3,552       3,673  
    Total Assets   $ 104,707     $ 97,967  
  Noninterest-bearing deposits   $ 33,698     $ 27,111  
  Interest-bearing deposits     49,092       49,269  
    Total Deposits     82,790       76,380  
FHLB advances     8,750       8,750  
Accrued interest payable and other liabilities     326       247  
    Total Liabilities     91,866       85,377  
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     1,076       1,053  
  Accumulated deficit     (4,668 )     (4,813 )
  Accumulated other comprehensive income (loss)     475       392  
    Total Shareholders' Equity     12,841       12,590  
    Total Liabilities and Shareholders' Equity   $ 104,707     $ 97,967  
Book Value Per Share   $ 7.95     $ 7.79  
Friendly Hills Bank  
Statements of Operations (Unaudited)  
(in thousands, except per share information)  
    For the twelve months ended   For the twelve months ended  
    12/31/12   12/31/11  
Interest Income   $ 4,142   $ 4,648  
  Interest Expense     497     610  
  Net Interest Income     3,645     4,038  
Provision for Loan Losses     213     141  
  Net Interest Income after Provision for Loan Losses     3,432     3,897  
Other Income     273     186  
Operating Expenses     3,633     3,678  
Gain (Loss) on Investment Securities & Hedging Contracts     74     (195 )
Earnings (Loss) before Provision for Income Taxes     146     210  
Income Tax Expense     1     61  
  Net Earnings (Loss)   $ 145   $ 149  
Basic and Diluted Earnings (Loss) Per Share   $ 0.09   $ 0.09