Hometown Bancorp, Inc. Announces Third Quarter Earnings

Business Wire, Oct 19, 2007

WALDEN, N.Y. -- Hometown Bancorp, Inc., (the "Company") (OTCBB: HTWC) the mid-tier holding company for Walden Federal Savings and Loan Association (the "Bank"), announced earnings of $248,000 for the three months ended September 30, 2007 as compared to $209,000 for the same period in 2006. For the nine months ended September 30, 2007, the Company reported net income of $633,000 compared to $418,000 for the same period in 2006.

For the three and nine months ended September 30, 2007, net interest income increased 11.1% to $1.5 million from $1.4 million, and increased 10.7% to $4.3 million compared to $3.8 million, respectively, compared to the same periods in 2006. The increase in net interest income resulted primarily from an $11.9 million increase in the average balance of net interest-earning assets, partially offset by a 55 basis point decrease in our net interest rate spread in the comparable three months periods ended September 30, 2007 and 2006. The increase in net interest income for the nine months ended September 30, 2007, resulted primarily from a $5.8 million increase in the average balance of net interest-earning assets, partially offset by a 50 basis point decrease in our net interest rate spread in the comparable nine months periods. The net interest margin decreased 32 and 30 basis points for the comparable three and nine month periods of September 30, 2007.

The provision for loan losses increased $47,000 and $97,000 for the three and nine months ended September 30, 2007, respectively. The increase in the three and nine month provision is related to the increase in the loan portfolio, mostly in the commercial business and mortgage loan portfolios. Nonperforming loans as percentage of total loans decreased from 0.45% at December 31, 2006, to 0.09% as of September 30, 2007, primarily because of a decrease in nonperforming loans of $338,000 to $101,000 as of September 30, 2007.

Non-interest income was $418,000 for the quarter ended September 30, 2007 compared to $321,000 for the quarter ended September 30, 2006. Non-interest income was $1.3 million for the nine months ended for 2007 compared to $862,000 for the same period in 2006. Contributing to the increase in non-interest income for the three and nine months ended September 30, 2007, were increases in banking fees and service charges of $73,000 and $272,000, respectively, as a result of the branch expansion in late 2005 and 2006, and new deposit services offered. Mortgage banking income, net, increased $11,000 and $83,000 for the three and nine month periods, respectively, as a result of the increase in the volume of mortgages sold during the periods and the gains derived from the sales.

Non-interest expense was $1.5 million for the quarter ended September 30, 2007 compared to $1.4 million for the quarter ended September 30, 2006. Non-interest expense was $4.4 million for the nine months ended September 30, 2007 compared to $4.0 million for the same period in 2006. The primary reasons for the increases in operating costs during the respective periods were the expenses associated with the expansion of the branch offices and the related compensation expenses for increased staffing. This includes expenses of $33,000 for the Bank's newest branch opened in September 2007, in the Town of Newburgh. In the nine months ended September 30, 2007, the Bank incurred compensation expenses for the newly started Employee Stock Ownership Plan ("ESOP") of $33,000 related to the shares committed for release under the plan. For the nine months ended September 30, 2007 the Bank recorded an expense of $33,000 for its Director Retirement Plan, which was adopted in March 2007, for the estimated net periodic pension expense.

Total assets grew $12.5 million, or 10.6%, to $129.9 million at September 30, 2007 from $117.4 million at December 31, 2006. Loans net, increased $18.9 million, or 19.3%, from December 31, 2006 to $116.7 million at September 30, 2007. The primary loan growth during 2007 was increased volume of $7.7 million in residential mortgages, $5.0 million in commercial business loans and $3.2 million in non-residential mortgage loans. Cash and cash equivalents increased by $2.6 million, while securities decreased by $9.2 million. A $9.0 million security was called on the last day of the quarter and $7.0 million of these funds were used to pay off borrowings and the balance went to interest-earning deposits.

Total deposits were $109.7 million at September 30, 2007 compared to $104.5 million at December 31, 2006, an increase of $5.2 million or 4.9%. The increase was predominately in certificates of deposit of $11.1 million, offset by decreases in money market accounts of $5.1 million, mostly due to certificates of deposit promotions to fund loan growth and customer's preference for higher deposit rates.

Total stockholders' equity increased $9.7 million from $8.5 million at December 31, 2006 to $18.3 million at September 30, 2007. The increase in equity is related to the Company completing its stock offering on June 28, 2007, during which the Company sold 1,071,225 shares of common stock to subscribers at a price of $10.00 per share. The Company also issued 1,309,275 shares of its common stock to Hometown Bancorp MHC. The net offering proceeds after offering and ESOP expenses were $9.1 million, of which $6.0 million was provided to the Bank. Equity also increased by earnings of $633,000 for the nine months ended September 30, 2007.