**PRESS RELEASE**
Contact:
Thomas F. Gibney, President and CEO
12 Main Street
Walden, NY 12586
(845) 778-2171
February 20, 2009
HOMETOWN BANCORP, INC. ANNOUNCES FOURTH QUARTER AND 2008
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 $13,000 for the three months ended December 31, 2008 as compared to
$217,000 for the same period in 2007. For the year ended December 31, 2008, the
Company reported net income of $565,000 compared to $850,000 for 2007. The
primary reason for the decline in earnings for both the fourth quarter and the
year ended December 31, 2008 was an increase in the Company's provision for loan
losses.
The provision for loan losses for the quarter ended December 31, 2008
increased $320,000 as compared to the provision for the fourth quarter in 2007.
The provision for loan losses for 2008 increased $394,000 as compared to the
provision for 2007. As a result, the allowance for loan losses totaled $1.3
million at December 31, 2008 (or 0.97% of total loans), as compared to $787,000
(or 0.64% of total loans) as of December 31, 2007. The increase in the provision
for loan losses during the fourth quarter and year ending December 31, 2008 was
partially the result of management's consideration of decreases in the real
estate values in our market area and increases in our non-accrual loans. The
increase in the provision for loan losses for the quarter and year also reflects
management's review of $1.2 million of land and construction loan participations
secured by a residential subdivision located in the Bank's market area. During
the fourth quarter of 2008 management determined to establish a specific loan
loss allowance of $389,000 against such loans due to updated appraisal on the
project indicating lower collateral values given current market conditions.
Net interest income decreased by $14,000 or 0.9% to $1.5 million for the
three months ended December 31, 2008. Net interest income increased 7.3% to $6.2
million for the year ended December 31, 2008, from $5.8 million for the year
ended December 31, 2007.
The decrease in net interest income during the fourth quarter resulted
primarily from a $2.2 million decrease in the average balance of net
interest-earning assets and a 20 basis point decrease in our net interest rate
spread in the three month period ended December 31, 2008 as compared with the
three month period ended December 31, 2007. The increase in net interest income
for the year ended December 31, 2008, resulted primarily from a $3.9 million
increase in the average balance of net interest-earning assets, and a 7 basis
point increase in our net interest rate spread in the comparable year periods.
The net interest margin decreased 55 and 9 basis points for the comparable three
month and annual periods ended December 31, 2008 and 2007, respectively.
Non-interest income was $433,000 for the quarter ended December 31, 2008
compared to $443,000 for the quarter ended December 31, 2007. Excluding the
effect of non-recurring income from the settlement of a litigation matter of
$22,000 in the fourth quarter of 2008, non-interest income decreased by $32,000.
Contributing to the decrease in recurring non-interest income for the quarter
ended December 31, 2008, were decreases in banking fees and service charges of
$11,000 as a result of customer preference for service charge free accounts and
the competitive banking environment. Mortgage banking income, net, decreased by
$27,000 as a result of the decrease in the volume of mortgages sold and the
gains derived from such sales.
Non-interest income was $1.7 million for both the years ended December 31,
2008 and 2007. Excluding the effect of non-recurring income from the settlement
of a litigation matter of $186,000 in 2008, non-interest income decreased by
$170,000. Contributing to the decrease in non-interest income for the year ended
December 31, 2008, were decreases in banking fees and service charges of $43,000
as a result of customer preference for service charge free accounts and the
competitive banking environment. Mortgage banking income, net, decreased by
$101,000 as a result of the decrease in the volume of mortgages sold and the
gains derived from such sales.
Non-interest expense increased by $64,000 and was $1.6 million for the
quarters ended December 31, 2008 and December 31, 2007. Expense for the FDIC
deposit insurance premium increased $17,000 in the fourth quarter of 2008.
Professional fees increased by $51,000 for the quarter ended December 31, 2008,
primarily due to expenses relating to being a public company.
Non-interest expense was $6.5 million for the year ended December 31, 2008
compared to $5.9 million for 2007. Non-interest expense includes salary and
employee benefits and other operating expenses which increased $198,000 for the
year ended December 31, 2008, for the Bank's newest branch which opened in
September 2007 in the Town of Newburgh. In addition salary and medical benefits
increased by $144,000 for all staff in 2008. Expense for the FDIC deposit
insurance premium increased $36,000 in 2008. Professional fees increased by
$181,000 for the year ended December 31, 2008, primarily due to expenses
relating to being a public company.
Total assets grew $17.7 million, or 13.3%, to $150.4 million at December
31, 2008 from $132.7 million at December 31, 2007, due primarily to loan growth
which was offset in part by a reduction in cash and cash equivalents and
securities. Loans net, increased $16.5 million, or 13.5%, from $121.5 million at
December 31, 2007 to $138.0 million at December 31, 2008. The primary reasons
for loan growth during 2008 were increases of $15.6 million in residential
mortgages, $2.9 million in commercial mortgage loans and $3.3 million in land
loans offset by a decrease of $2.7 million in commercial business loans. Cash
and cash equivalents decreased by $810,000, while securities decreased by
$266,000 in 2008.
Nonperforming loans totaled $5.0 million, or 3.6% of total loans at
December 31, 2008 compared to $1.8 million, or 1.4% of total loans at September
30, 2008 and $124,000, or 0.1% of total loans at December 31, 2007. The $5.0
million in nonperforming loans at year end were comprised of $2.4 million in one
to four family residential loans, (one of these loans totaling $533,000 was paid
off in January), $1.2 million of loans extended to the residential subdivision
previously mentioned, one loan to a builder for construction of an unsold home
of $663,000 and $391,000 of land loans, primarily for a residential subdivision.
Total deposits were $124.7 million at December 31, 2008 compared to $112.1
million at December 31, 2007, an increase of $12.7 million or 11.3%. The
increase was predominately in certificates of deposit which grew by $12.6
million, mostly due to certificates of deposit promotions to fund loan growth
and customer's preference for higher deposit rates, offset by decreases in
non-interest bearing demand accounts of $494,000.
Total borrowings were approximately $4.4 million at December 31, 2008
compared to no borrowings at December 31, 2007. The borrowings were advances
from the FHLB used to fund loan growth.
Total stockholders' equity increased $314,000 from $18.5 million at
December 31, 2007 to $18.8 million at December 31, 2008. Equity increased
primarily due to earnings of $565,000 for the year ended December 31, 2008,
partially offset by common stock repurchases of $284,000 during 2008.
Established in 1919, the Bank is a community-oriented financial institution
headquartered in Walden, New York. Through its six offices, the Bank offers a
full-range of financial services to individuals and businesses within its market
area. For more information on Hometown Bancorp, Inc. and Walden Federal Savings
and Loan Association go to our website www.waldenfederal.com.
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) 2008 2007
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Financial Condition Data:
Total assets $150,369 $132,690
Investment securities 2,511 2,777
Loans receivable, net 137,974 121,510
Deposits 124,739 112,061
Borrowings 4,375 -
Total stockholders' equity 18,794 18,480
Capital Ratios:
Average equity to average assets 13.49 % 10.67 %
Equity to total assets at the end of the period 12.50 13.93
Asset Quality Ratios:
Allowance for loan losses as a percent of total
loans 0.97 % 0.64 %
Allowance for loan losses as a percent of
nonperforming loans 27.10 634.68
Net charge-offs to average outstanding loans
during the period 0.01 0.02
Nonperforming loans as a percent of total loans 3.57 0.10
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Three Months Ended
December 31, Year Ended December 31,
(Dollars in thousands, except earnings per share
data) 2008 2007 2008 2007
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Operating Data:
Interest income $ 2,160 $ 2,316 $ 8,726 $ 8,915
Interest expense 629 771 2,499 3,112
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Net interest income 1,531 1,545 6,227 5,803
Provision for loan losses 345 25 579 185
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Net interest income after provision for loan
losses 1,186 1,520 5,648 5,618
Non-interest income 433 443 1,745 1,729
Non-interest expenses 1,621 1,557 6,492 5,917
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Income (loss) before taxes (2) 406 901 1,430
Income tax expense (benefit) (15) 189 336 580
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Net income $ 13 $ 217 $ 565 $ 850
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Earnings Per Common Share:
Basic and diluted $ 0.01 $ 0.09 $ 0.25 $ 0.47
Weighted average shares outstanding 2,269 2,291 2,286 1,812
Performance Ratios (1):
Return on average assets 0.04 % 0.67 % 0.40 % 0.67 %
Return on average equity 0.27 4.71 2.99 6.24
Interest rate spread (2) 3.90 4.10 4.09 4.02
Net interest margin (3) 4.39 4.94 4.66 4.75
Non-interest income to average assets 1.18 1.36 1.25 1.35
Non-interest expense to average assets 4.41 4.78 4.64 4.63
Efficiency ratio (4) 82.54 78.32 81.44 78.56
Average interest-earning assets to average
interest-bearing liabilities 127.10 134.20 130.47 128.79
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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.