Treasure State Bank Reports Second Quarter 2011 Operating Results

MISSOULA, MT--(Marketwire - Jul 26, 2011) - Treasure State Bank ("the Bank") (OTCBB: TRSU), a Montana chartered community bank, today announced:

• The Bank had a net operating profit of $84,000 for the second quarter ended June 30, 2011 as compared to a net operating loss of $717,000 for the same period last year. Earnings were $144,000 ($576,000 annualized) before provision for loan loss of $60,000 for the quarter ended June 30, 2011, as compared to earnings of $149,000 ($596,000 annualized) before provision for loan loss of $866,000 for the quarter ended June 30, 2010.
  
  
• On a year-to-date basis, the Bank had a net operating profit of $212,000 as compared to a net operating loss of $762,000 for the same period last year. Earnings were $339,000 ($678,000 annualized) before provision for loan loss of $127,000 for the six month period ended June 30, 2011, as compared to a net operating profit of $304,000 ($608,000 annualized) before provision for loan loss of $1,066,000 for the six month period ended June 30, 2010.
  
  
• Annualized return on assets for the quarter was .43%, and annualized return on equity was 6.18%.
  
  
• For the six month period ended June 30, 2011 annualized return on assets was .53%, and annualized return on equity was 7.71%.
  
  
• Earnings before non-cash expenses of depreciation and amortization, loan loss provisions, real estate owned write-downs and stock option expense, were $213,000 ($852,000 annualized) for the quarter ended June 30, 2011, as compared with $215,000 ($860,000 annualized) for the same period last year.
  
  
• Earnings before non-cash expenses of depreciation and amortization, loan loss provisions, real estate owned write-downs and stock option expense, were $458,000 ($916,000 annualized) for the six month period ended June 30, 2011, as compared with $428,000 ($856,000 annualized) for the same period last year.
  
  
• Tier 1 leverage capital increased 13.89% to 6.97% as of June 30, 2011, as compared to 6.12%, as of December 31, 2010. Risk-based capital was 10.43% as of June 30, 2011, as compared to 9.62% as of December 31, 2010. Book value per share was $3.52 as of June 30, 2011 as compared to $3.40 as of December 31, 2010, based on 1,559,045 shares outstanding.
  
  
• Total assets have decreased $8.4MM, or 9.71%, to $78.1MM at June 30, 2011, as compared with $86.5MM at June 30, 2010, due to continued progress in the planned reduction of the Bank's total assets. Assets were $80.3MM at December 31, 2010 and $91.3MM at December 31, 2009.
  
  
• Cost of funds at June 30, 2011 was 1.50%. This is a 14.77% decline from 1.76% at December 31, 2010, a 34.50% decline from 2.29% at June 30, 2010 and a 56.65% decline from the cost of funds of 3.46% at September 30, 2009.
  
  
• The net interest margin (interest income less interest expense divided by average assets) for the quarter ended June 30, 2011 was 3.32% as compared with 2.80% for the quarter ended December 31, 2010 and 3.02% for the quarter ended June 30, 2010.
  
  
• Loan loss reserves to total loans were 4.16% at June 30, 2011 as compared to 4.54% at December 31, 2010 and 3.23% as of June 30, 2010.
  
  
• Total liquidity as of June 30, 2011 was 20.83%, and available liquidity was 16.73%.
  
  
• Excluding expenses of $37,000 related to foreclosure activity and repossessed assets for the quarter ended June 30, 2011 and $85,000 for the quarter ended June 30 2010, the Bank reduced operating expenses $46,000, or 8.17%, in the second quarter of 2011 as compared to the second quarter of 2010.
  
  
• Excluding expenses of $75,000 related to foreclosure activity and repossessed assets for the six month period ended June 30, 2011 and $123,000 for the six month period ended June 30 2010, the Bank reduced operating expenses $116,000, or 10.18%, for the six month period ended June 30, 2011 as compared to the same six month period of 2010.

President and Chief Executive Officer Jim Salisbury stated, "It is nice to report a second consecutive quarter of profitability. The Bank is reporting a year to date net operating profit of $212,000 as compared to a net operating loss of $762,000 for the same period last year, or an improvement of $974,000. The Bank believes that the large loan loss provisions reflected in the 2010 financial results have put the Bank in a position to manage the Bank's non-performing assets. The Bank now has an allowance for loan losses to gross loans of 4.16% ($2.3MM) to act as a cushion to absorb potential losses on existing troubled loans. The Bank continues to work diligently to address non-performing assets. During the six month period ended June 30, 2011 the Bank sold $1.24MM of non-performing assets. The Bank has $3.8MM of repossessed property at June 30, 2011 as compared to $5.0MM at December 31, 2010. Total non-performing assets, which include repossessed assets, increased $400,000 to $9.7MM at June 30, 2011 from $9.3MM at December 31, 2010. One loan, in the amount of $1.9MM, was placed on non-accrual status in March 2011. The terms of the loan have been re-negotiated. Because the loan must perform for six consecutive months prior to being considered performing, it is still reflected in the June 30, 2011 non-performing assets amount of $9.7MM. The loan has now received timely payments for three consecutive months as of the date of this release.

In an effort to build the capital ratios back to acceptable levels, assets have decreased $2.6MM to $78.1MM at June 30, 2011 from $80.7MM at December 31, 2010, and decreased $13.0MM from $91.1MM at December 31, 2009. Gross loans have decreased $1.9MM to $54.8MM at June 30, 2011 from $56.7MM at December 31, 2010, and decreased $14.4MM from $69.2MM at December 31, 2009, including transfers to real estate owned. The Bank continues to lend to qualified borrowers and is actively seeking qualified borrowers. During the six month period ended June 30, 2011, the Bank originated $3.0MM in new loans.

The Bank has diligently reduced its cost of funds to 1.50% at June 30, 2011 from 3.46% at September 30, 2009 and 1.76% at December 31, 2010. The ability to further reduce the Bank's cost of funds is now limited, but reducing the cost of funds to acceptable levels has positioned the Bank to have a net interest margin that allows the Bank to be profitable in spite of the large dollar amount of non-performing assets.

Nearly twenty one cents of every dollar is held in liquid assets to cushion the Bank from a rising interest rate environment. The Bank has positioned itself to be asset sensitive. Therefore, if interest rates were to increase, the effect on the Bank's net interest income should not be material. The Western Montana economy continues to present challenges to the Bank in its efforts to dispose of repossessed vacant land and certain portions of its loan portfolio. We will continue to work diligently to improve the asset quality of the Bank, generate profits to enhance stockholders' equity and retain adequate liquidity in these uncertain economic times."

For more information regarding this release, or the Bank in general, you may contact James A. Salisbury, President and CEO at 406-543-8700.

About Treasure State Bank
Treasure State Bank, a Montana chartered community bank, is headquartered in Missoula, Montana. The Bank was founded in January 2007. Treasure State Bank currently trades on the OTCBB under the ticker symbol "TRSU". Treasure State Bank serves businesses, professionals, non-profit organizations and individuals through customized banking services and products. For more information, please visit www.treasurestatebank.com.

Safe Harbor Statement
This communication contains statements that may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations of Treasure State Bank and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-statements include fluctuation of operating results, the ability to compete successfully, and the ability to complete before-mentioned transactions. The Bank undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.