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Business Services Industry

Hometown Bancorp, Inc. Announces First Quarter Earnings

Business Wire, May 13, 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 $157,000 for the three months ended March 31, 2008 as compared to $180,000 for the same period in 2007.

For the three months ended March 31, 2008, net interest income increased 8.3% to $1.4 million from $1.3 million for the same period in 2007. The increase in net interest income resulted primarily from a $7.2 million increase in the average balance of net interest-earning assets, partially offset by a 11 basis point decrease in our net interest rate spread in the comparable three month periods ended March 31, 2008 and 2007. The net interest margin decreased 2 basis points for the three month period of March 31, 2008 as compared to the same period in 2007.

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The provision for loan losses decreased $33,000 to $26,000 for the three months ended March 31, 2008 as compared to the same period in 2007. The decrease in the three month provision reflects the change in the composition of the loan portfolio due to an increase in lower risk residential mortgages as compared to non-residential portfolio loans and reflects the decrease in the volume of originations in the first quarter of 2008 compared to the same period in 2007. Nonperforming loans as a percentage of total loans increased from 0.10% at December 31, 2007, to 0.17% as of March 31, 2008, primarily because of an increase of $92,000 in nonperforming loans to $216,000 as of March 31, 2008.

Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of Thrift Supervision has the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. "Substandard assets" must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. "Doubtful assets" have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified "loss" is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a "special mention" category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful we evaluate the need to establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified as loss.

Substandard classified and criticized assets increased from $63,000 at December 31, 2007 to $123,000 as of March 31, 2008. Special mention assets increased from $283,000 to $5.5 million as of March 31, 2008. The increase in the special mention assets is related to management's assessment of the current trends in the local economy and, in particular, the recent trends in the real estate market in the Bank's market area. Management has begun to closely monitor its higher risk loans and loans which may be adversely affected by these trends. In this regard, $1.3 million of the Bank's special mention assets consist of two (2) loans to real estate developers operating in the Bank's local market that have experienced a slow down in sales. One of these loans for $533,000 is performing in accordance with its original terms as of March 31, 2008 and the other loan for $719,000 was 30 days delinquent as of March 31, 2008, but subsequently has been brought current. Both loans are secured by single family residences. Special mention assets also include two (2) loans to a real estate broker totaling $528,000 which are secured by a commercial property and are performing in accordance with their original terms. Special mention assets also include three loans totaling $732,000 which are secured by commercial properties and were 60 days delinquent as of March 31, 2008. The remaining special mention assets consist of two (2) loans secured by single family residences and one loan secured by a residential lot totaling $102,000. No specific loss allocation was deemed necessary for any loan in the special mention classification.

Special mention assets at March 31, 2008 also included our largest lending relationship consisting of two loans to a real estate developer totaling $3.0 million and were partially secured by marketable securities with a market value of approximately $1.1 million, leaving the balance of such loans unsecured. As of March 31, 2008, the Company's loans to one borrower limit was $2.2 million, not including the effect of loans, or portions thereof, secured by marketable equity securities which, in certain circumstances, permit a bank to exceed the loans to one borrower limit. We believed such lending relationship as March 31, 2008 complied with all applicable laws and regulations, including the loans to one borrower limit. In connection with a recent examination, the Office of Thrift Supervision advised the Bank that this $3.0 million lending relationship should be aggregated with other borrowing relationships such that the Bank exceeded its loans to one borrower limit. We believe that the amount in excess of our loans to one borrower limit to be $1.8 million at March 31, 2008. The Bank intends to take the appropriate remedial action to correct this apparent violation. All of the loans subject to the OTS' loans to one borrower analysis are performing in accordance with their original terms and no specific loss allocation was deemed necessary for these loans.

Business Services Industry

Hometown Bancorp, Inc. Announces First Quarter Earnings

Business Wire, May 13, 2008

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