**PRESS RELEASE**
Contact:
Thomas F. Gibney, President and CEO
12 Main Street
Walden, NY 12586
(845) 778-2171
May 13, 2008
HOMETOWN BANCORP, INC. ANNOUNCES FIRST QUARTER 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 $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.
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.
Non-interest income was $383,000 for the quarter ended March 31, 2008
compared to $427,000 for the quarter ended March 31, 2007. Contributing to the
decrease in non-interest income for the three months ended March 31, 2008, were
decreases in banking fees and service charges of $11,000 as compared to the
three months ended March 31, 2007, as a result of customer preference for
service charge free accounts and the competitive environment. Mortgage banking
income, net, decreased $34,000 for the three month period ended March 31, 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. This decrease in mortgage banking activity is the result of current
conditions in the mortgage market.
Non-interest expense was $1.5 million for the quarter ended March 31, 2008
compared to $1.4 million for the quarter ended March 31, 2007. The primary
reason for the increase in non-interest expense during the comparable periods
were the expenses associated with the expansion of the branch offices and the
related compensation expenses for increased staffing. Non-interest expense
includes expenses of $83,000 during the first quarter of 2008 for the Bank's
newest branch opened in September 2007, in the Town of Newburgh. Professional
fees increased by $35,000, primarily due to expenses relating to being a public
company. For the three months ended March 31, 2008, the Bank also incurred
compensation expense of $22,000 for the Employee Stock Ownership Plan ("ESOP")
and Director Retirement Plan established in 2007.
Total assets grew $1.9 million, or 1.4%, to $134.6 million at March 31,
2008 from $132.7 million at December 31, 2007. Loans net, increased $2.5
million, or 2.1%, from $121.5 million at December 31, 2007 to $124.0 million at
March 31, 2008. Loan growth during the first quarter of 2008 consisted of $1.1
million in residential mortgages, $1.1 million in land loans and $566,000 in
commercial business loans. Cash and cash equivalents decreased by $693,000,
while investment securities decreased by $62,000 primarily due to principal
repayments on mortgage-backed investments.
Total deposits were $113.4 million at March 31, 2008 compared to $112.1
million at December 31, 2007, an increase of $1.3 million or 1.2%. The increase
was predominately in certificates of deposit of $1.5 million, offset by
decreases in money market and interest-bearing demand accounts of $500,000,
mostly due to certificate of deposit promotions to fund loan growth and customer
preference for higher deposit rates.
Total stockholders' equity increased $175,000 from $18.5 million at
December 31, 2007 to $18.7 million at March 31, 2008. This increase was
primarily due to earnings of $157,000 for the three months ended March 31, 2008.
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.
Selected Financial and Other Data
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March 31, December 31,
(Dollars in thousands) 2008 2007
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Financial Condition Data:
Total assets $134,578 $132,690
Investment securities 2,715 2,777
Loans receivable, net 124,014 121,510
Deposits 113,370 112,061
Borrowings 1,075 -
Total stockholders' equity 18,655 18,480
Capital Ratios:
Average equity to average assets 14.07 % 10.67 %
Equity to total assets at the end of the period 13.86 13.93
Asset Quality Ratios:
Allowance for loan losses as a percent of total
loans 0.65 % 0.64 %
Allowance for loan losses as a percent of
nonperforming loans 376.52 634.68
Net charge-offs to average outstanding loans
during the period (annualized) - 0.02
Nonperforming loans as a percent of total loans 0.17 0.10
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Three Months Ended March 31,
(Dollars in thousands, except earnings per share) 2008 2007
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Operating Data:
Interest income $ 2,182 $ 2,093
Interest expense 735 757
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Net interest income
1,447 1,336
Provision for loan losses 26 59
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Net interest income after provision for loan
losses 1,421 1,277
Non-interest income 383 427
Non-interest expenses 1,547 1,410
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Income before taxes
257 294
Income tax expense 100 114
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Net income $ 157 $ 180
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Earnings Per Common Share:
Basic and diluted $ 0.07 $ 0.14
Weighted average shares outstanding 2,292 1,309
Performance Ratios (1):
Return on average assets 0.47 % 0.60 %
Return on average equity 3.37 8.31
Interest rate spread (2) 3.83 3.94
Net interest margin (3) 4.57 4.59
Non-interest income to average assets 1.16 1.41
Non-interest expense to average assets 4.67 4.66
Efficiency ratio (4) 84.54 79.98
Average interest-earning assets to average 132.00 125.22
interest-bearing liabilities
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(1) 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.