Treasure State Bank Reports Second Quarter 2010 Operating Results

The Bank had pre-provision earnings of $149,000 for the second quarter ended June 30, 2010, as compared to a loss of $23,000 for the same period last year and $155,000 for the quarter ended March 31, 2010. The Bank set aside $866,000 in additional loan loss reserves for the quarter ended June 30, 2010, as compared to $998,000 for the same period last year and $200,000 for the quarter ended March 31, 2010. The provision for loan losses resulted in a $717,000 net loss for the quarter ended June 30, 2010, as compared to a $1,021,000 loss for the same quarter last year and a $45,000 loss for the quarter ended March 31, 2010.
Earnings, before non-cash expenses of depreciation and amortizations, loan loss provisions and stock option expense, were $310,000 for the quarter ended June 30, 2010, or $1.2 MM annualized. This compares to $57,000 for the same period last year and $320,000 for the quarter ended March 31, 2010.
Tier 1 leverage capital was 10.10% for the quarter ended June 30, 2010, as compared to 10.72% for the quarter ended March 31, 2010, 10.09% at December 31, 2009 and 9.24% at June 30, 2009. Risk-based capital was 14.27% for the quarter ended June 30, 2010, as compared to 15.02% for the quarter ended March 31, 2010, 14.20% at December 31, 2009 and 11.86% at June 30, 2009. Book value per share was $5.81 as of June 30, 2010.
Total assets decreased $5.0MM, or 5.5%, to $86.5 MM at June 30, 2010, as compared to $91.5 MM at December 31, 2009, due to continued progress in the planned reduction of the Banka�s total assets.
Cost of funds declined 25.6% to 2.29% at the quarter ended June 30, 2010 from 3.08% for the quarter ended December 31, 2009. This compares to cost of funds of 2.40% for the quarter ended March 31, 2010 and 3.04% for the quarter ended June 30, 2009.
The net interest margin (interest income less interest expense divided by average assets) for the quarter ended June 30, 2010 was 2.95% as compared to 3.16% for the quarter ended March 31, 2010, 2.84% for the quarter ended December 31, 2009 and 2.79% for the quarter ended June 30, 2009.
Mortgage loan origination fees of $66,000 for the quarter helped offset $79,000 in Real Estate Owned expenses.
Loan loss reserves to total loans were 3.23% as of June 30, 2010, as compared to 2.44% as of December 31, 2009.
Total liquidity as of June 30, 2010 is 18.69%, and available liquidity was 16.84%.
President and Chief Executive Officer Jim Salisbury stated aAsset quality continues to be a challenge in a weak Montana and national economy. While the Bank continues to diligently address its non-performing assets the amount of loans that are 90 or more days past due, on non-accrual status or in real estate owned increased to $10.5 MM at June 30, 2010, up from $8.3 MM at March 31, 2010 and $6.3 MM at December 31, 2009. The Bank set aside $866,000 in additional loan loss reserves for the quarter ended June 30, 2010 to reflect the continued increase in non-performing assets. This has resulted in loan loss reserves of $2.1 MM, or 3.23% of gross loans. Cash earnings continue to exceed $1.0 MM annualized, and strong mortgage loan origination fees of $66,000 helped offset $79,000 in real estate owned expenses for the quarter. Tier 1 leverage capital continues to be in excess of 10.0% at 10.10% for the quarter ended June 30, 2010, while liquidity remains strong with total liquidity of 18.69% and available liquidity of 16.84% as of June 30, 2010. In addition, the Bank has made very good progress in reducing its cost of funds. Cost of funds declined 25.6% to 2.29% for the quarter ended June 30, 2010 from 3.08% at the quarter ended December 31, 2009.a

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 Over the Counter Bulletin Board (OTCBB) under the ticker symbol aTRSUa. 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.

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Treasure State Bank Reports Second Quarter 2010 Operating Results