Hometown Bancorp, Inc. Announces Third Quarter Earnings

Business Wire, Oct 31, 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 $193,000 for the three months ended September 30, 2008 as compared to $248,000 for the same period in 2007. For the nine months ended September 30, 2008, the Company reported net income of $552,000 compared to $633,000 for the same period in 2007.

For the three months ended September 30, 2008, net interest income increased 8.0% to $1.7 million from $1.5 million for the same period in 2007. For the nine months ended September 30, 2008, net interest income increased 10.3% to $4.7 million from $4.3 million for the same period in 2007. The increase in net interest income for the three and nine month periods in 2008 resulted primarily from a $11.5 million and a $10.2 million increase in the average balance of interest-earning assets and a reduction in the cost of interest-bearing liabilities of 114 and 78 basis points for the respective periods. This gain was partially offset by a 85 and a 60 basis point decrease in the yield on total interest-earning assets for the three and nine months ended September 30, 2008, respectively. Our net interest rate spread in the comparable three and nine month periods ended September 30, 2008 and 2007 increased by 29 basis points to 4.34% and 18 basis points to 4.16%, respectively. The net interest margin decreased 5 basis points to 4.84% and increased 8 basis points to 4.76% for the three and nine month periods of September 30, 2008, respectively, as compared to the same periods in 2007.

The provision for loan losses increased by $68,000 to $134,000 for the three months ended September 30, 2008 and $74,000 to $234,000 for the nine months ended September 30, 2008 as compared to the same periods in 2007. The increase in the three and nine month provisions reflected the increase in the levels of nonperforming loans and weakening economic conditions in our market area. Nonperforming loans as a percentage of total loans increased from 0.10% at December 31, 2007, to 1.39% as of September 30, 2008, due to an increase of $1.7 million in nonperforming loans to $1.8 million as of September 30, 2008. The reasons for the increase in nonperforming loans was the addition of six nonperforming loans; a $112,000 residential mortgage loan, a $533,000 one family spec home loan, two junior liens totaling $372,000 of which $225,000 is expected to be paid in full in the next quarter and two commercial nonresidential mortgage loans totaling $580,000.

Non-interest income was $468,000 for the quarter ended September 30, 2008 compared to $418,000 for the quarter ended September 30, 2007. Contributing primarily to the increase in non-interest income for the three months ended September 30, 2008, was a reduction of an accrued liability due to the settlement of a litigation matter of approximately $83,000, offset by a decrease in mortgage banking income, net, of $18,000 for the three months ended September 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 $1.3 million for both the nine months ended September 30, 2008 and 2007. A reduction of an accrued liability due to the settlement of a litigation matter of approximately $164,000 was offset by decreases in banking fees and service charges of $32,000 as compared to the nine months ended September 30, 2007, as a result of customer preference for service charge free accounts and the competitive banking environment. In addition, mortgage banking income, net, decreased $74,000 for the nine months ended September 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 expense was $1.7 million for the quarter ended September 30, 2008 compared to $1.5 million for the quarter ended September 30, 2007. Non-interest expense was $4.9 million for the nine months ended September 30, 2008 compared to $4.4 million for the nine months ended September 30, 2007. The primary reason for the increase in non-interest expense during the three and nine month comparable periods were the expenses associated with the operating of a new branch office and the related compensation and benefit expenses for increased branch and support staffing. Non-interest expense included expenses of $51,000 and $219,000 for the three and nine months ended September 30, 2008, respectively, for the Bank's sixth branch office which opened in September 2007, in the Town of Newburgh. In addition, non-interest expense for professional fees increased by $29,000 and $130,000, for the three and nine months ended September 30, 2008, as compared to the same periods in the prior year primarily due to expenses relating to being a public company.

Total assets grew $14.6 million, or 11.0%, to $147.3 million at September 30, 2008 from $132.7 million at December 31, 2007. Loans net, increased $9.9 million, or 8.1%, from $121.5 million at December 31, 2007 to $131.4 million at September 30, 2008. Loan growth during the nine months of 2008 consisted of $10.7 million in residential mortgages, $2.2 million in land loans, offset by a decrease of $3.2 million in commercial business loans. During the nine months of 2008, cash and cash equivalents increased by $3.0 million, while investment securities decreased by $488,000 primarily due to principal repayments on mortgage-backed investments.