Hometown Bancorp, Inc. Announces Second Quarter Earnings and 5% Stock Repurchase Plan

Business Wire, July 28, 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 $202,000 for the three months ended June 30, 2008 as compared to $205,000 for the same period in 2007. For the six months ended June 30, 2008, the Company reported net income of $359,000 compared to $385,000 for the same period in 2007.

The Company has approved a stock repurchase program to purchase up to 5% of its outstanding shares (excluding shares held by Hometown Bancorp, MHC, the Company's mutual holding company), or up to 53,561 shares for a period of up to 12 months. The repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company's liquidity requirements and alternative uses of capital. Any repurchases will be held as treasury stock and will be available for general corporate purposes. The Company anticipates conducting such repurchases in accordance with a Rule 10b5-1 trading plan administered by a broker dealer.

For the three months ended June 30, 2008, net interest income increased 14.8% to $1.6 million from $1.4 million for the same period in 2007. For the six months ended June 30, 2008, net interest income increased 11.6% to $3.0 million from $2.7 million for the same period in 2007. The increase in net interest income for the three and six month periods in 2008, resulted primarily from a $7.5 million and a $9.9 million increase in the average balance of interest-earning assets and a reduction in the cost of interest-bearing liabilities of 97 and 58 basis points for the respective periods. This was partially offset by a 53 and a 47 basis point decrease in the yield on total interest-earning assets for the three and six months ended June 30, 2008, respectively. Our net interest rate spread in the comparable three and six month periods ended June 30, 2008 and 2007 increased by 44 and 11 basis points, respectively. The net interest margin increased 36 and 14 basis points for the three and six month periods of June 30, 2008 as compared to the same periods in 2007, respectively.

The provision for loan losses increased by $39,000 to $74,000 and $6,000 to $100,000 for the three and six months ended June 30, 2008 as compared to the same periods in 2007, respectively. The increase in the three and six month provision reflected the increase in the levels of nonperforming loans and weakening economic conditions. Nonperforming loans as a percentage of total loans increased from 0.10% at December 31, 2007, to 0.77% as of June 30, 2008, primarily because of an increase of $864,000 in nonperforming loans to $988,000 as of June 30, 2008. The primary reason for the increase in nonperforming loans was the addition of two nonperforming commercial mortgage loans totaling $580,000.

As previously disclosed in our Form 10Q for the quarter ended March 31, 2008, our largest lending relationship, consisting of two loans to a real estate developer totaling $3.0 million, was determined by the Office of Thrift Supervision to be in excess of our loans to one borrower limit. The Bank sold a participation in these two loans in June to another institution bringing such lending relationship into compliance with our loans to one borrower limit.

Non-interest income was $460,000 for the quarter ended June 30, 2008 compared to $441,000 for the quarter ended June 30, 2007. Contributing primarily to the increase in non-interest income for the three months ended June 30, 2008, was a reduction of an accrued liability due to settlement of a litigation matter of approximately $81,000, offset by decreases in banking fees and service charges of $18,000 as compared to the three months ended June 30, 2007, as a result of customer preference for service charge free accounts and the competitive banking environment. Mortgage banking income, net, decreased $22,000 for the three months ended June 30, 2008 as compared to the same period in 2007, as a result of the decrease in the volume of mortgages sold during the period and the gains derived from these sales.

Non-interest income was $843,000 for the six months ended June 30, 2008 compared to $868,000 for the six months ended June 30, 2007. Non-interest income declined during the six months ended June 30, 2008 primarily due to the decreases in banking fees and service charges of $29,000 as compared to the six months ended June 30, 2007, as a result of customer preference for service charge free accounts and the competitive banking environment. Mortgage banking income, net, decreased $56,000 for the six months ended June 30, 2008 as compared to the same period in 2007, as a result of the decrease in the volume of mortgages sold during the period and the gains derived from these sales. The decrease in non-interest income was partially offset by the $81,000 reduction in

the accrued liability discussed above.

Non-interest expense was $1.6 million for the quarter ended June 30, 2008 compared to $1.5 million for the quarter ended June 30, 2007. Non-interest expense was $3.2 million for the six months ended June 30, 2008 compared to $2.9 million for the six months ended June 30, 2007. The primary reason for the increase in non-interest expense during the three and six month comparable periods were the expenses associated with the opening of a new branch office and the related compensation expenses for increased staffing. Non-interest expense includes expenses of $84,000 and $167,000 for the three and six months ended June 30, 2008 for the Bank's sixth branch which opened in September 2007, in the Town of Newburgh. In addition non-interest expense for professional fees increased by $66,000 and $101,000, for the three and six months ended June 30, 2008, as compared to the same periods in the prior year primarily due to expenses relating to being a public company.