**PRESS RELEASE**
Contact:
Thomas F. Gibney, President and CEO
12 Main Street
Walden, NY 12586
(845) 778-2171
February 27, 2008
HOMETOWN BANCORP, INC. ANNOUNCES FOURTH QUARTER AND ANNUAL EARNINGS
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.
Total assets grew $15.3 million, or 13.0%, to $132.7 million at
December 31, 2007 from $117.4 million at December 31, 2006, due primarily to
loan growth which was offset in part by a reduction in securities. Loans net,
increased $23.7 million, or 24.2%, from December 31, 2006 to $121.5 million at
December 31, 2007. The primary loan growth during 2007 was increased volume of
$9.3 million in residential mortgages, $5.3 million in commercial business
loans, $5.3 million in non-residential mortgage loans and $2.7 million in land
loans. Cash and cash equivalents increased by $748,000, while securities
decreased by $9.3 million. The decrease in securities was primarily due to a
$9.0 million security being called in September 2007. Approximately $7.0 million
of these funds were used to pay off borrowings and the balance went to
interest-earning deposits.
Total deposits were $112.1 million at December 31, 2007 compared to
$104.5 million at December 31, 2006, an increase of $7.5 million or 7.2%. The
increase was predominately in certificates of deposit of $13.4 million, offset
by decreases in money market accounts of $4.8 million, mostly due to
certificates of deposit promotions to fund loan growth and customer's preference
for higher deposit rates.
Total stockholders' equity increased $10.0 million from $8.5 million at
December 31, 2006 to $18.5 million at December 31, 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 $850,000 for the year ended December
31, 2007.
Hometown Bancorp, Inc. is the holding company for Walden Federal
Savings & Loan Association. Established in 1919, Walden Federal is a
community-oriented financial institution headquartered in Walden, New York.
Through its six offices, Walden Federal offers a full-range of financial
services to individuals and businesses within its market area.
This press release contains certain forward-looking statements that are based on
assumptions and may describe future plans, strategies and expectations of the
Company. Forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts. They often include words
like "believe," "expect," "anticipate," "estimate" and "intend" or future or
conditional verbs such as "will," "would," "should," "could" or "may." Certain
factors that could cause actual results to differ materially from expected
results include changes in the interest rate environment, changes in general
economic conditions, legislative and regulatory changes that adversely affect
the business of the Company and the Bank, and changes in the securities markets.
Except as required by law, the Company does not undertake any obligation to
update any forward-looking statements to reflect changes in belief, expectations
or events.
For the Year Ended
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December 31, December 31,
(Dollars in thousands) 2007 2006
- --------------------------------------------------- ----------------------------------------
Financial Condition Data:
Total assets $132,690 $117,413
Investment securities 2,777 12,041
Loans receivable, net 121,510 97,833
Deposits 112,061 104,518
Borrowings - 2,525
Total stockholders' equity 18,480 8,520
Capital Ratios:
Average equity to average assets 10.67 % 7.24 %
Equity to total assets at the end of the period 13.93 7.26
Asset Quality Ratios:
Allowance for loan losses as a percent of total
loans 0.64 % 0.64 %
Allowance for loan losses as a percent of
nonperforming loans 634.68 141.91
Net charge-offs to average outstanding loans
during the period 0.02 0.01
Nonperforming loans as a percent of total loans 0.10 0.45
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Three Months Ended
December 31, Year Ended December 31,
(Dollars in thousands, except earnings per share) 2007 2006 2007 2006
---- ---- ---- ----
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Operating Data:
Interest income $ 2,316 $ 2,048 $ 8,915 $ 7,494
Interest expense 768 705 3,109 2,303
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Net interest income 1,548 1,343 5,806 5,191
Provision for loan losses 25 39 185 102
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Net interest income after provision for loan
losses 1,523 1,304 5,621 5,089
Non-interest income 443 745 1,729 1,607
Non-interest expenses 1,560 1,331 5,920 5,316
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Income before taxes 406 718 1,430 1,380
Income tax expense 189 273 580 517
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Net income $ 217 $ 445 $ 850 $ 863
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Earnings Per Common Share:
Basic and diluted $ 0.09 $ 0.34 $ 0.47 $ 0.66
Weighted average shares outstanding 2,291 1,309 1,812 1,309
Performance Ratios (1):
Return on average assets 0.67 % 1.50 % 0.67 % 0.78 %
Return on average equity 4.71 21.64 6.24 10.77
Interest rate spread (2) 4.10 4.15 4.02 4.40
Net interest margin (3) 4.94 4.75 4.75 4.92
Non-interest income to average assets 1.36 2.52 1.35 1.45
Non-interest expense to average assets 4.79 4.50 4.64 4.80
Efficiency ratio (4) 78.35 63.75 78.57 78.20
Average interest-earning assets to average
interest-bearing liabilities 134.20 124.10 128.79 123.70
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(1) Quarterly performance ratios are annualized.
(2) Represents the difference between the weighted average yield on average
interest-earning assets and the weighted average cost
of interest-bearing liabilities.
(3) Represents net interest income as a percent of average interest-earning
assets.
(4) Represents noninterest expense divided by the sum of net interest
income and noninterest income.