Hometown Bancorp, Inc. Announces Fourth Quarter and Annual Earnings

Business Wire, Feb 27, 2008

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 $217,000 for the three months ended December 31, 2007 as compared to $445,000 for the same period in 2006. The quarterly results for 2006 were higher primarily due to a $436,000 non-recurring gain on the sale of foreclosed assets, which net of taxes contributed approximately $262,000 to the net income for the quarter ended December 31, 2006. For the year ended December 31, 2007, the Company reported net income of $850,000 compared to $863,000 for 2006. Annual earnings in 2006 were also higher than 2007 due to non-recurring items of non-interest income in 2006, primarily a $383,000 gain on the sale of foreclosed assets, which net of taxes contributed approximately $230,000 to net income for the year ended December 31, 2006.

Net interest income increased 15.3% to $1.5 million from $1.3 million, for the three months ended December 31, 2007 and increased 11.8% to $5.8 million from $5.2 million for the year ended December 31, 2007 in comparison to the same periods in 2006. The increase in net interest income resulted primarily from a $9.9 million increase in the average balance of net interest-earning assets, partially offset by a 5 basis point decrease in our net interest rate spread in the comparable three month periods ended December 31, 2007 and 2006. The increase in net interest income for the year ended December 31, 2007, resulted primarily from a $7.1 million increase in the average balance of net interest-earning assets, partially offset by a 38 basis point decrease in our net interest rate spread in the comparable year periods. The net interest margin increased 19 and decreased 17 basis points for the comparable three month and annual periods ended December 31, 2007 and 2006.

The provision for loan losses decreased $14,000 for the three months ended December 31, 2007 as compared to the three months ended December 31, 2006. The decrease in the fourth quarter provision reflects managements' assessment of the change in the composition of the loan portfolio resulting from an increase in the amount of lower risk residential mortgages in the portfolio as compared to non-residential portfolio loans. The annual provision for loan losses increased $83,000 for 2007 as compared to 2006 primarily due to the increase in the overall loan portfolio from 2006 to 2007. Nonperforming loans as a percentage of total loans decreased from 0.45% at December 31, 2006, to 0.10% as of December 31, 2007, primarily because of a decrease in nonperforming loans of $315,000 to $124,000 as of December 31, 2007.

Non-interest income was $443,000 for the quarter ended December 31, 2007 compared to $745,000 for the quarter ended December 31, 2006. Excluding the effect of non-recurring gain on foreclosed assets of $436,000 in the fourth quarter of 2006, the non-interest income increased by $134,000. Contributing to the increase in recurring non-interest income for the quarter ended December 31, 2007, were increases in banking fees and service charges as a result of the branch expansion in 2006 and 2007 and new deposit services of $54,000. Mortgage banking income, net, increase by $11,000 as a result of gains on mortgage loans sold. The fourth quarter of 2006 included a loss of $77,000 on the sale of securities.

Non-interest income was $1.7 million for the year ended December 31, 2007 compared to $1.6 million for the year ended December 31, 2006. Excluding the effect of non-recurring gain on foreclosed assets of $383,000 in 2006, the non-interest income increased by $505,000. Contributing to the increase in non-interest income for the year ended December 31, 2007, were increases in banking fees and service charges as a result of the branch expansion in 2006 and 2007 and new deposit services of $326,000. Mortgage banking income, net, increased by $94,000 as a result of the increase in the volume of mortgages sold and the gains derived from sales. The period of 2006 included a loss of $77,000 on the sale of securities.

Non-interest expense was $1.6 million for the quarter ended December 31, 2007 compared to $1.3 million for the quarter ended December 31, 2006. Non-interest expense was $5.9 million for the year ended December 31, 2007 compared to $5.3 million for 2006. The primary reasons for the increases in non-interest expense during the respective periods were the expenses associated with the expansion of the branch offices including compensation expenses for increased staffing. Non-interest expense includes expenses of $107,000 for the fourth quarter of 2007 and $148,000 for the year ended December 31, 2007, for the Bank's newest branch opened in September 2007 in the Town of Newburgh. For the year ended December 31, 2007, the Bank incurred compensation expenses for the newly started Employee Stock Ownership Plan ("ESOP") of $42,000 related to the shares committed for release under the plan, and additionally for the year ended December 31, 2007, the Bank recorded an expense of $48,000 for its Director Retirement Plan, which was adopted in March 2007, for the estimated net periodic pension expense.