UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


____________





FORM
10-Q


(Mark
One)





ý
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended March 31, 2009





OR





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT





For the
transition period from ______________ to _____________




Commission
file number:  000-52674







HOMETOWN BANCORP,
INC.


(Exact
name of registrant as specified in its charter)





United States
                02-0783010(State
      or other jurisdiction of incorporation or organization)
                (I.R.S.
      Employer Identification
No.)





12 Main Street, Walden, New
York 12586


(Address
of principal executive offices)





(845)
778-2171


(Issuer’s
telephone number)





Not
Applicable


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes ý                       No
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes o                       No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
accelerated filer o    Accelerated
filer o     Non-accelerated
filer o  Smaller
reporting company ý





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o                       No
ý





As of May
15, 2009 there were 2,326,939 shares of the registrant’s common stock
outstanding.








HOMETOWN
BANCORP, INC.





FORM
10-Q





Index





Page
      No.PART
      I.  FINANCIAL INFORMATIONItem
      1.
              Financial
      StatementsConsolidated
      Balance Sheets at March 31, 2009 and December 31, 2008
      (Unaudited)
              2Consolidated
      Statements of Income for the three months ended March 31, 2009 and 2008
      (Unaudited)
              3Consolidated
      Statements of Stockholders’ Equity for the three months ended March 31,
      2009 and 2008 (Unaudited)
              4Consolidated
      Statements of Cash Flows for the three months ended March 31, 2009 and
      2008 (Unaudited)
              5Notes
      to Unaudited Consolidated Financial Statements
              6Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              12Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              18Item
      4.
              Controls
      and Procedures
              18PART
      II.  OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              19Item
      1A.
              Risk
      Factors
              19Item 2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              19Item 3.
              Defaults upon Senior Securities
              19Item 4.
              Submission of Matters to a Vote of Security
      Holders
              19Item 5.
              Other Information
              19Item 6.
              Exhibits
              19Signatures





i
 Index


PARTI. FINANCIAL INFORMATION





Item
1. Financial Statements


Hometown Bancorp, Inc.


Consolidated
Balance Sheets


(unaudited)




March
      31,
                
                
                December
      31,2009
                
                
                2008(Dollars
      in Thousands,
                  Except
       Share Data)AssetsCash
      and due from banks
                
                $
                2,483
                
                
                $
                2,915Interest
      earning demand deposits with banks
                
                
                576
                
                
                
                288Cash
      and cash equivalents
                
                
                3,059
                
                
                
                3,203Securities
      available for sale
                
                
                999
                
                
                
                1,002Securities
      held to maturity (fair value at March 31, 2009 $1,467; and at December 31,
      2008 $1,530)
                
                
                1,441
                
                
                
                1,509Loans
      held for sale
                
                
                1,366
                
                
                
                106Loans
      receivable, net of allowance for loan losses (at March 31,
      2009 $1,471; and at December 31, 2008 $1,347)
                
                
                137,990
                
                
                
                137,868Premises
      and equipment, net
                
                
                4,028
                
                
                
                4,087Federal
      Home Loan Bank stock, at cost
                
                
                373
                
                
                
                395Foreclosed
      real estate
                
                
                83
                
                
                
                -Accrued
      interest receivable and other assets
                
                
                2,362
                
                
                
                2,199Total
      Assets
                
                $
                151,701
                
                
                $
                150,369




Liabilities
and Stockholders’ Equity




LiabilitiesDeposits:Non-interest
    bearing
                
                $
                18,001
                
                
                $
                16,947Interest bearing
                
                
                109,972
                
                
                
                107,792Total
      Deposits
                
                
                127,973
                
                
                
                124,739Federal
      Home Loan Bank advances
                
                
                3,325
                
                
                
                4,375Advances
      from borrowers for taxes and insurance
                
                
                594
                
                
                
                708Accrued
      interest payable
                
                
                85
                
                
                
                143Other
      liabilities
                
                
                759
                
                
                
                1,610Total
      Liabilities
                
                
                132,736
                
                
                
                131,575Commitments
      and Contingencies
                
                
                -
                
                
                
                -Stockholders’
      EquityPreferred
      stock, $0.01 par value; 3,000,000 shares authorized and
      unissued
                
                
                -
                
                
                
                -Common
      stock, $0.01 par value; 7,000,000 shares authorized; 2,380,500 shares
      issued
                
                
                24
                
                
                
                24Paid-in
      capital
                
                
                10,105
                
                
                
                10,112Retained
      earnings
                
                
                9,980
                
                
                
                9,787Unearned
      ESOP shares, at cost
                
                
                (828
                )
                
                
                (840
                )Treasury
      stock, at cost, 53,561 shares at March 31, 2009 and 46,500 at December 31,
      2008
                
                
                (311
                )
                
                
                (284
                )Accumulated
      other comprehensive loss
                
                
                (5
                )
                
                
                (5
                )Total
      Stockholders’ Equity
                
                
                18,965
                
                
                
                18,794Total
      Liabilities and Stockholders’ Equity
                
                $
                151,701
                
                
                $
                150,369


See
notes to consolidated financial statements.
 2
 Index


Hometown
Bancorp, Inc.


Consolidated
Statements of Income


(Unaudited)




Three
      Months Ended March 31,2009
                      
                      
                      2008(In
      thousands, except per share data)Interest
      IncomeLoans
      receivable, including fees
                      
                      $
                      2,122
                      
                      
                      $
                      2,132Securities,
      taxable
                      
                      
                      21
                      
                      
                      
                      30Other
                      
                      
                      3
                      
                      
                      
                      20Total
      Interest Income
                      
                      
                      2,146
                      
                      
                      
                      2,182Interest
      ExpenseDeposits
                      
                      
                      563
                      
                      
                      
                      731Federal
      Home Loan Bank advances
                      
                      
                      18
                      
                      
                      
                      4Total
      Interest Expense
                      
                      
                      581
                      
                      
                      
                      735Net
      Interest Income
                      
                      
                      1,565
                      
                      
                      
                      1,447Provision
      for Loan Losses
                      
                      
                      160
                      
                      
                      
                      26Net
      Interest Income after Provision for Loan Losses
                      
                      
                      1,405
                      
                      
                      
                      1,421Non-interest
      IncomeBanking
      fees and service charges
                      
                      
                      240
                      
                      
                      
                      257Mortgage
      banking income, net
                      
                      
                      266
                      
                      
                      
                      93Investment
      brokerage fees
                      
                      
                      17
                      
                      
                      
                      17Other
                      
                      
                      28
                      
                      
                      
                      16Total
      Non-interest Income
                      
                      
                      551
                      
                      
                      
                      383Non-interest
      ExpensesSalaries
      and employee benefits
                      
                      
                      986
                      
                      
                      
                      922Occupancy
      and equipment
                      
                      
                      201
                      
                      
                      
                      180Professional
      fees
                      
                      
                      72
                      
                      
                      
                      63Advertising
      and marketing
                      
                      
                      25
                      
                      
                      
                      56Data
      processing
                      
                      
                      145
                      
                      
                      
                      128Telephone
      and postage
                      
                      
                      51
                      
                      
                      
                      40Other
                      
                      
                      161
                      
                      
                      
                      158Total
      Non-interest Expenses
                      
                      
                      1,641
                      
                      
                      
                      1,547Income
      before Income Taxes
                      
                      
                      315
                      
                      
                      
                      257Income
      Tax Expense
                      
                      
                      122
                      
                      
                      
                      100Net
      Income
                      
                      $
                      193
                      
                      
                      $
                      157Net
      Income per common share- basic
                      
                      $
                      0.09
                      
                      
                      $
                      0.07Weighted
      average number of common shares outstanding – basic
                      
                      
                      2,248
                      
                      
                      
                      2,292  See
notes to consolidated financial statements.
 3
 Index


Hometown
Bancorp, Inc.


Consolidated
Statements of Stockholders’ Equity


Three
Months Ended March 31, 2009 and 2008


(In Thousands, except share data)(Unaudited)




Common
                        Stock
                      
                      
                      Paid-In
                        Capital
                      
                      
                      Retained
                        Earnings
                      
                      
                      Unearned
                        ESOP
                        Shares
                      
                      
                      Treasury
                        Stock
                      
                      
                      Accumulated
                        Other
                        Comprehensive
                        Loss
                      
                      
                      TotalBalance
      - December 31, 2007
                      
                      $
                      24
                      
                      
                      $
                      10,129
                      
                      
                      $
                      9,222
                      
                      
                      $
                      (886
                      )
                      
                      $
                      -
                      
                      
                      $
                      (9
                      )
                      
                      $
                      18,480Comprehensive
      income:Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      157
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      157Other
      comprehensive loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      8
                      
                      
                      
                      8Total
      Comprehensive Income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      165ESOP
      shares committed to be released (1,167 shares)
                      
                      
                      -
                      
                      
                      
                      (2
                      )
                      
                      
                      -
                      
                      
                      
                      12
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      10Balance
      - March 31, 2008
                      
                      $
                      24
                      
                      
                      $
                      10,127
                      
                      
                      $
                      9,379
                      
                      
                      $
                      (874
                      )
                      
                      $
                      -
                      
                      
                      $
                      (1
                      )
                      
                      $
                      18,655Balance
      - December 31, 2008
                      
                      $
                      24
                      
                      
                      $
                      10,112
                      
                      
                      $
                      9,787
                      
                      
                      $
                      (840
                      )
                      
                      $
                      (284
                      )
                      
                      $
                      (5
                      )
                      
                      $
                      18,794Comprehensive
      income:Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      193
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      193Other
      comprehensive income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
      Comprehensive Income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      193Treasury
      stock purchase (7,061 shares)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (27
                      )
                      
                      
                      -
                      
                      
                      
                      (27
                      )ESOP
      shares committed to be released (1,167 shares)
                      
                      
                      -
                      
                      
                      
                      (7
                      )
                      
                      
                      -
                      
                      
                      
                      12
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      24Balance
      - March 31, 2009
                      
                      $
                      24
                      
                      
                      $
                      10,105
                      
                      
                      $
                      9,980
                      
                      
                      $
                      (828
                      )
                      
                      $
                      (311
                      )
                      
                      $
                      (5
                      )
                      
                      $
                      18,965








See
notes to consolidated financial statements





4
 Index


Hometown Bancorp,
Inc.


Consolidated
Statements of Cash Flows


(Unaudited)





Three
      Months Ended March 31,2009
                    
                    
                    2008(In
      Thousands)Cash
      Flows from Operating ActivitiesNet
      income
                    
                    $
                    193
                    
                    
                    $
                    157Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation and amortization
      expense
                    
                    
                    62
                    
                    
                    
                    60Provision for loan
      losses
                    
                    
                    160
                    
                    
                    
                    26Amortization of mortgage
      servicing rights
                    
                    
                    48
                    
                    
                    
                    36Net accretion of securities
      premiums and discounts
                    
                    
                    (2
                    )
                    
                    
                    (1
                    )Net gain on sale of
      loans
                    
                    
                    (205
                    )
                    
                    
                    (34
                    )Loans originated for
      sale
                    
                    
                    (11,179
                    )
                    
                    
                    (3,405
                    )Proceeds from sale of
      loans
                    
                    
                    10,124
                    
                    
                    
                    3,717ESOP
      expense
                    
                    
                    5
                    
                    
                    
                    10Increase in accrued interest
      receivable and other assets
                    
                    
                    (211
                    )
                    
                    
                    (167
                    )Decrease in accrued interest
      payable and other liabilities
                    
                    
                    (907
                    )
                    
                    
                    (565
                    )Net
      Cash Used by Operating Activities
                    
                    
                    (1,912
                    )
                    
                    
                    (166
                    )Cash
      Flows from Investing ActivitiesActivity
      in held to maturity securities:Maturities, calls and principal
      repayments
                    
                    
                    71
                    
                    
                    
                    75Net
      increase in loans receivable
                    
                    
                    (365
                    )
                    
                    
                    (2,808
                    )Net
      (increase) decrease in Federal Home Loan Bank stock
                    
                    
                    22
                    
                    
                    
                    (51
                    )Purchases
      of bank premises and equipment
                    
                    
                    (3
                    )
                    
                    
                    (17
                    )Net
      Cash Used by Investing Activities
                    
                    
                    (275
                    )
                    
                    
                    (2,801
                    )Cash
      Flows from Financing ActivitiesNet
      increase in deposits
                    
                    
                    3,234
                    
                    
                    
                    1,309Net
      increase (decrease) in Federal Home Loan Bank advances
                    
                    
                    (1,050
                    )
                    
                    
                    1,075Decrease
      in advances from borrowers for taxes and insurance
                    
                    
                    (114
                    )
                    
                    
                    (110
                    )Treasury
      stock purchased
                    
                    
                    (27
                    )
                    
                    
                    -Net
      Cash Provided by Financing Activities
                    
                    
                    2,043
                    
                    
                    
                    2,274Net
      Decrease in Cash and Cash Equivalents
                    
                    
                    (144
                    )
                    
                    
                    (693
                    )Cash
      and Cash Equivalents - Beginning
                    
                    
                    3,203
                    
                    
                    
                    4,013





Cash
      and Cash Equivalents - Ending
                    
                    $
                    3,059
                    
                    
                    $
                    3,320





Supplementary
      Cash Flows Information




Interest
      paid
                
                $
                639
                
                
                $
                711Income
      taxes paid
                
                $
                236
                
                
                $
                219Supplemental
      Schedule of Noncash Investing ActivitiesLoans
      transferred to foreclosed real estate
                
                $
                83
                
                
                $
                -




See
notes to consolidated financial statements


5
 Index


Hometown
Bancorp, Inc.


Notes
to the Unaudited Consolidated Financial Statements





Note
1 - Basis of Presentation





The accompanying unaudited consolidated
financial statements of Hometown Bancorp, Inc. (the “Company”) and its
wholly-owned subsidiary, Walden Federal Savings and Loan Association (“Walden
Federal” or the “Bank”) have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the instructions for Form
10-Q.  Accordingly, they do not include all of the information and
footnotes necessary for a complete presentation of consolidated financial
position, results of operations, and cash flows in conformity with accounting
principles generally accepted in the United States of America.  In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for (i) a fair presentation and (ii) to make the financial
statements not misleading, have been included.  Operating results for
the three months ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009.





The
unaudited consolidated financial statements should be read in conjunction with
the Company’s audited consolidated financial statements for the years ended
December 31, 2008 and 2007, included in its annual report on Form
10-K.





The unaudited consolidated financial
statements at March 31, 2009 and for the three months ended March 31, 2009 and
2008 include the accounts of the Company, the Bank and the Bank’s wholly-owned
subsidiaries, Ever-Green Financial Services, Inc. and Valley Services, Inc. All
intercompany balances and transactions have been eliminated in
consolidation.





Note
2 – Minority Stock Issuance





On June 28, 2007, the Company completed
its minority stock offering of 45% of the aggregate total voting stock of the
Company.  In connection with the minority offering, 2,380,500 shares
of common stock were issued, of which 1,071,225 shares were sold to the Bank’s
eligible account holders and the employee stock ownership plan (the “ESOP”),
resulting in net proceeds of approximately $9.1 million after offering expenses
and ESOP.  At March 31, 2009, 56.3% of the Company’s outstanding
common stock, or 1,309,275 shares, were owned by Hometown Bancorp
MHC.  Costs of approximately $717,000 were incurred in connection with
the stock offering and were deducted from the gross offering
proceeds.





Note
3 – Directors’ Retirement Plan





Effective March 2007, the Bank adopted
an unfunded directors’ retirement plan for the benefit of non-employee
directors.  Under the plan, directors who have attained the normal
retirement age of 65 receive a retirement benefit based on their length of
service upon termination.  Net periodic pension expense for the three
months ended March 31, 2009 and 2008 is as follows (in thousands):




2009
                  
                  
                  2008Service
      cost
                  
                  $
                  12
                  
                  
                  $
                  11Interest
      cost
                  
                  
                  2
                  
                  
                  
                  1Amortization
      of past service liability
                  
                  
                  1
                  
                  
                  
                  1Net
      periodic pension expense
                  
                  $
                  15
                  
                  
                  $
                  13





Note
4 – Comprehensive Income





Accounting principles generally
accepted in the United States of America require that recognized revenue,
expenses, gains, and losses be included in net income.  Although
certain changes in assets and liabilities, such as unrealized gains and losses
on available for sale securities and gains and losses and past




6
 Index


service
liabilities for pension plans, are reported as a separate component of the
equity section of the consolidated balance sheet, such items, along with net
income, are components of comprehensive income.




The components of other comprehensive
income (loss) and related tax effects for the three months ended March 31, 2009
and 2008 are as follows:







Three
      Months Ended
                    March,
      312009
                  
                  
                  2008(In
      Thousands)Unrealized
      holding gains (losses) on securities available for sale
                  
                  $
                  (3
                  )
                  
                  $
                  12Reclassification
      adjustment for Directors’ retirement plan pension gains and past service
      liability recognized in pension expense
                  
                  
                  1
                  
                  
                  
                  1Other
      comprehensive income (loss) before tax
                  
                  
                  (2
                  )
                  
                  
                  13Income
      tax effect (benefit)
                  
                  
                  2
                  
                  
                  
                  (5
                  )Net
      of Tax Amount
                  
                  $
                  -
                  
                  
                  $
                  8





At March 31,
2009 and 2008, the components of accumulated other comprehensive loss are as
follows:





2009
              
              
              2008(In
      Thousands)Unrealized
      gain on securities available for sale (net of tax effect 2009 $0; 2008
      $6)
              
              $
              -
              
              
              $
              9Net
      losses and past service liability for the Directors’ retirement plan (net
      of tax effect 2009 ($2); 2008 ($6))
              
              
              (5
              )
              
              
              (10
              )$
              (5
              )
              
              $
              (1
              )





Note
5 – Employee Stock Ownership Plan (“ESOP”)





On June
28, 2008, the Bank established an ESOP which acquired 93,315 shares of the
Company’s common stock in the stock offering with funds provided by a loan from
the Company. The stock acquired by the ESOP is shown as a reduction of
stockholders’ equity in the accompanying consolidated balance sheets. The ESOP
loan will be repaid principally from the Bank’s contributions to the ESOP in
annual payments through 2027 at a fixed interest rate of 8.25%. Shares are
released to participants proportionately as the loan is repaid. The Bank will
recognize compensation benefit expense as shares are committed for release at
the current market price. The difference between the market price and the cost
of shares committed to be released is recorded as an adjustment to paid-in
capital. Dividends on allocated shares will be recorded as a reduction of
retained earnings and dividends on unallocated shares will be recorded as a
reduction of debt. The Company committed to release 1,167 shares to the ESOP
during the three months ended March 31, 2009 and 2008, respectively. The Company
recognized $5,000 and $10,000 of compensation expense related to this plan for
the three months ended March 31, 2009 and 2008, respectively. Unallocated ESOP
shares are not “outstanding” for purposes of earnings per share
calculations.








7
 Index


Note
6 – Earnings Per Share





Basic earnings per common share are
calculated by dividing net income by the weighted-average number of common
shares outstanding during the period. The Company has a simple capital structure
as it has not granted any restricted stock awards or stock options and, during
the three months ended March 31, 2009 and 2008, had no potentially dilutive
common stock equivalents. Unallocated shares held by the ESOP are not included
in the weighted-average number of common shares outstanding for purposes of
calculating earnings per common share until they are committed to be
released.





Note
7 – Estimates





The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period.  Actual results
could differ from those estimates.  Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses.





Note
8 – Fair Value Measurements





The Financial Accounting StandardsBoard (FASB) issued SFAS
No. 157, “Fair Value Measurements,” which establishes a fair value hierarchy
that prioritizes the inputs to valuation methods used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels
of fair value hierarchy under SFAS No. 157 are as follows:





Level
      1:
            Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or
  liabilities.





Level
      2:
            Quoted
      prices in markets that are not active, or inputs that are observable
      either directly or indirectly, for substantially the full term of the
      asset or liability.





Level
      3:
            Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (i.e. supported with little or
      no market activity).





An asset or liability’s level within
the fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement.





For financial assets measured at fair
value on a recurring basis, the fair value measurement by level within the fair
value hierarchy used at March 31, 2009 are as follows:





Description
              
              Carrying
                  Value
              
              
              (Level
      1)
                  Quoted
      Prices
                  in
      Active
                  Markets
      for
                  Identical
                  Assets
              
              
              (Level
      2)
                  Significant
                  Other
                  Observable
                  Inputs
              
              
              (Level
      3)
                  Significant
                  Unobservable
                  Inputs(In
      Thousands)Securities
      available for sale
              
              $
              999
              
              
              $
              -
              
              
              $
              999
              
              
              $
              -Forward
      sales contract
              
              $
              78
              
              
              $
              -
              
              
              $
              78
              
              
              $
              -








8
 Index


For
financial assets measured at fair value on a recurring basis, the fair value
measurements by level within the fair value hierarchy used at December 31, 2008
are as follows:


Description
              
              Carrying
                  Value
              
              
              (Level
      1)
                  Quoted
      Prices
                  in
      Active
                  Markets
      for
                  Identical
                  Assets
              
              
              (Level
      2)
                  Significant
                  Other
                  Observable
                  Inputs
              
              
              (Level
      3)
                  Significant
                  Unobservable
                  Inputs(In
      Thousands)Securities
      available for sale
              
              $
              1,002
              
              
              $
              -
              
              
              $
              1,002
              
              
              $
              -








Fair
values of available for sale securities are based on quoted market prices of
comparable instruments. When necessary, the Company utilizes matrix pricing from
a third party pricing vendor to determine fair value pricing. Matrix prices are
based on quoted prices for securities with similar coupons, ratings, and
maturities, rather than on specific bids and offers for the designated
security.





The
Company enters into forward sales contracts to sell certain residential real
estate loans. Such commitments are considered to be derivative financial
instruments and, therefore, are carried at estimated fair value in the other
assets or other liability section of the consolidated balance sheet. The fair
value of these forward sales contracts is primarily measured by obtaining
pricing from certain government-sponsored entities. The pricing is derived from
market observable inputs that can generally be verified and do not typically
involve significant judgment by the Company and therefore, are classified as
Level 2 in the fair value hierarchy.





For
financial assets measured at fair value on a nonrecurring basis, the fair value
measurements by level within the fair value hierarchy used at March 31, 2009 are
as follows:




Description
              
              Carry
      Value
              
              
              (Level
      1)
                  Quoted
      Prices
                  in
      Active
                  Markets
      for
                  Identical
                  Assets
              
              
              (Level
      2)
                  Significant
                  Other
                  Observable
                  Inputs
              
              
              (Level
      3)
                  Significant
                  Unobservable
                  Inputs(In
      Thousands)Impaired
      loans
              
              $
              1,057
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,057Foreclosed
      real estate
              
              $
              83
              
              
              $
              -
              
              
              $
              -
              
              
              $
              83







For
financial assets measured at fair value on a nonrecurring basis, the fair value
measurements by level within the fair value hierarchy used at December 31, 2008
are as follows:




Description
              
              Carry
      Value
              
              
              (Level
      1)
                  Quoted
      Prices
                  in
      Active
                  Markets
      for
                  Identical
                  Assets
              
              
              (Level
      2)
                  Significant
                  Other
                  Observable
                  Inputs
              
              
              (Level
      3)
                  Significant
                  Unobservable
                  Inputs(In
      Thousands)Impaired
      loans
              
              $
              1,067
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,067










9
 Index


Fair
value of impaired loans is generally determined based upon independent third
party appraisals of the properties or other indications of value based on recent
comparable sales of similar properties, or discounted cash flows based upon
expected proceeds. These assets are included in Level 3 fair values, based upon
the lowest level of input that is significant to the fair value measurements.
The fair value consists of loan balances less their valuation allowances as
determined under SFAS No. 114. At March 31, 2009, impaired loans, which are
measured for impairment using the fair value of the collateral for collateral
dependent loans, had a carrying amount of $1.1 million, net of a valuation
allowance of $422,000. At December 31, 2008, impaired loans, which are measured
for impairment using the fair value of the collateral for collateral dependent
loans, had a carrying amount of $1.1 million, net of a valuation allowance of
$432,000.




Assets
taken in foreclosure of defaulted loans are primarily comprised of residential
real property and are generally measured at the lower of cost or fair value less
cost to sell. The fair value of the real property is generally determined using
appraisals or other indications of value based on recent comparable sales of
similar properties or assumptions generally observable in the marketplace, and
the related nonrecurring fair value measurement adjustments have generally been
classified as Level 3. Assets taken in foreclosure of defaulted loans subject to
nonrecurring fair value measurements during the three months ended March 31,
2009 that were still held by the Company as of that date were
$83,000.







Note
9 - Recent Accounting Pronouncements





FSP
FAS 157-4





In April
2009, FASB issued FASB Staff Position (FSP) No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly(FSP FAS
157-4).  FASB Statement 157, Fair Value Measurements,
defines fair value as the price that would be received to sell the asset or
transfer the liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions. FSP FAS 157-4 provides additional guidance
on determining when the volume and level of activity for the asset or liability
has significantly decreased. The FSP also includes guidance on identifying
circumstances when a transaction may not be considered orderly.





FSP FAS
157-4 provides a list of factors that a reporting entity should evaluate to
determine whether there has been a significant decrease in the volume and level
of activity for the asset or liability in relation to normal market activity for
the asset or liability. When the reporting entity concludes there has been a
significant decrease in the volume and level of activity for the asset or
liability, further analysis of the information from that market is needed and
significant adjustments to the related prices may be necessary to estimate fair
value in accordance with Statement 157.





This FSP
clarifies that when there has been a significant decrease in the volume and
level of activity for the asset or liability, some transactions may not be
orderly. In those situations, the entity must evaluate the weight of the
evidence to determine whether the transaction is orderly. The FSP provides a
list of circumstances that may indicate that a transaction is not orderly. A
transaction price that is not associated with an orderly transaction is given
little, if any, weight when estimating fair value.





This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company is currently reviewing the effect this new pronouncement will
have on its consolidated financial statements.





FSP
FAS 115-2 and FAS 124-2





In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments(FSP FAS 115-2 and FAS
124-2).   FSP FAS 115-2 and FAS 124-2 clarifies the interaction
of the factors that should be considered when determining whether a debt
security is other-than-temporarily impaired. For debt securities, management
must assess whether (a) it has the intent to


10
 Index


sell the
security and (b) it is more likely than not that it will be required to
sell the security prior to its anticipated recovery. These steps are done before
assessing whether the entity will recover the cost basis of the investment.
Previously, this assessment required management to assert it has both the intent
and the ability to hold a security for a period of time sufficient to allow for
an anticipated recovery in fair value to avoid recognizing an
other-than-temporary impairment. This change does not affect the need to
forecast recovery of the value of the security through either cash flows or
market price.





In
instances when a determination is made that an other-than-temporary impairment
exists but the investor does not intend to sell the debt security and it is not
more likely than not that it will be required to sell the debt security prior to
its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation
and amount of the other-than-temporary impairment recognized in the income
statement. The other-than-temporary impairment is separated into (a) the
amount of the total other-than-temporary impairment related to a decrease in
cash flows expected to be collected from the debt security (the credit loss) and
(b) the amount of the total other-than-temporary impairment related to all
other factors. The amount of the total other-than-temporary impairment related
to the credit loss is recognized in earnings. The amount of the total
other-than-temporary impairment related to all other factors is recognized in
other comprehensive income.





This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company is currently reviewing the effect this new pronouncement will
have on its consolidated financial statements.





FSP
FAS 107-1 and APB 28-1





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments(FSP FAS 107-1 and APB 28-1).  FSP FAS
107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion
No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods.





This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company is currently reviewing the effect this new pronouncement will
have on its consolidated financial statements.





International
Financial Reporting Standards





In
November 2008, the SEC released a proposed roadmap regarding the potential use
by U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (IFRS). IFRS is a comprehensive
series of accounting standards published by the International Accounting
Standards Board (“IASB”). Under the proposed roadmap, the Company may be
required to prepare financial statements in accordance with IFRS as early as
2014. The SEC will make a determination in 2011 regarding the mandatory adoption
of IFRS. The Company is currently assessing the impact that this potential
change would have on its consolidated financial statements, and it will continue
to monitor the development of the potential implementation of IFRS.








Note
10 – Subsequent Event





On April 20, 2009, the Board of
Directors declared its first quarterly cash dividend of $0.02 per share of
Hometown Bancorp, Inc. common stock. The dividend will be payable to
stockholders of record as of May 1, 2009, and will be paid on or about May 15,
2009.











11
 Index


Item
2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations





Management’s discussion and analysis of
the financial condition and results of operations is intended to assist in
understanding our financial condition and results of operations.  The
information contained in this section should be read in conjunction with the
unaudited consolidated financial statements and the notes thereto, appearing in
Part I, Item 1 of this report.





Forward-Looking
Statements





This quarterly report contains
forward-looking statements that are based on assumptions and may describe our
future plans, strategies and expectations.  These forward-looking
statements are generally identified by use of the words “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “project” or similar
expressions.





Our
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse
effect on our operations include, but are not limited to, changes in interest
rates, national and regional economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the U.S. government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality and composition
of our loan and investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in our market area, changes in real
estate market values in our area, and changes in relevant accounting principles
and guidelines.





These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such
statements.  Except as required by applicable law or regulation, we do
not undertake, and specifically disclaim any obligation, to release publicly the
result of any revisions that may be made to any forward-looking statements to
reflect events or circumstances after the date of the statements or to reflect
the occurrence of anticipated or unanticipated events.





Critical
Accounting Policies




We consider accounting policies
involving significant judgments and assumptions by management that have, or
could have, a material impact on the carrying value of certain assets,
liabilities or on income to be critical accounting policies.  We have
identified the allowance for loan losses as our critical accounting
policy.





Allowance for
Loan Losses.  The allowance for loan losses is established
through provisions for loan losses charged against income.  Loans
deemed to be uncollectible are charged against the allowance for loan losses,
and subsequent recoveries, if any, are credited to the allowance.




The allowance for loan losses is
maintained at a level considered adequate to provide for losses that can be
reasonably anticipated.  Management’s periodic evaluation of the
adequacy of the allowance is based on the Bank’s past loan loss experience,
known and inherent credit risks in the portfolio, adverse situations that may
affect the borrower’s ability to repay, the estimated value of any underlying
collateral, composition of the loan portfolio, current economic conditions, and
other relevant factors.  This evaluation is inherently subjective as
it requires material estimates that may be susceptible to significant revision
as more information becomes available.




The allowance consists of specific and
general components.  The specific component relates to loans that are
classified as either doubtful, substandard, or special mention.  For
such loans that are also classified as impaired, a specific allowance is
established when the discounted cash flows (or collateral value or observable
market price) of the impaired loan is lower than the carrying amount of that
loan.  The general component covers non-classified loans and is based
on historical loss experience adjusted for qualitative factors.




A loan is considered impaired when,
based on current information and events, it is probable that the Bank will be
unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement.  Factors
considered by management in determining impairment




12
 Index


include
payment status, collateral value and the probability of collecting scheduled
principal and interest payments when due.  Loans that experience
insignificant payment delays and payment shortfalls generally are not classified
as impaired.  Management determines the significance of payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all of
the circumstances surrounding the loan and the borrower, including the length of
the delay, the reasons for the delay, the borrower’s prior payment record, and
the amount of the shortfall in relation to the principal and interest
owed.  Impairment is measured on a loan by loan basis for commercial,
commercial real estate, construction and land loans by either the present value
of expected future cash flows discounted at the loan’s effective interest rate,
the loan’s obtainable market price, or the fair value of the collateral if the
loan is collateral dependent.




Large groups of smaller balance
homogeneous loans are collectively evaluated for
impairment.  Accordingly, the Bank does not separately identify
individual consumer and residential loans for impairment disclosures, unless
such loans are the subject of a restructuring agreement or are
non-performing.







General





Walden Federal operates from six
offices in Orange County, New York. As part of the Bank’s growth strategy to
expand its presence in other selected markets in Orange County, the Bank opened
its sixth office in the Town of Newburgh in 2007. Walden Federal is primarily
engaged in the business of attracting deposits from the general public and using
those funds to originate one- to four-family real estate, multi-family and
commercial real estate loans and construction, land, commercial and consumer
loans, which, with the exception of long-term (more than 10 year term)
fixed-rate one- to four-family real estate loans, we primarily hold for
investment.  In addition, a segment of our lending business involves
the purchase and sale of loan participation interests.  We also offer
insurance and investment services through Walden Federal.





Balance
Sheet Analysis





Overview.Total assets
increased $1.3 million, or 0.9%, to $151.7 million at March 31, 2009,
reflecting the results of our branch expansion and the growth of our loan
portfolio.  In the three months ended March 31, 2009, the loan
portfolio grew $1.4 million, or 1.0%, which includes loans held for sale, with
the growth concentrated primarily in the land and non-residential mortgage loan
portfolios.





Asset growth during the three months
ended March 31, 2009 was primarily funded through an increase in
deposits.  During the three months ended March 31, 2009, deposits grew
$3.2 million or 2.6% to $128.0 million at March 31, 2009. The increase in
deposits was primarily due to our branch expansion.  We had borrowings
at March 31, 2009, of $3.3 million, consisting of FHLB advances, as compared to
$4.4 million at December 31, 2008. Cash and cash equivalents decreased by
$144,000 to $3.1 million at March 31, 2009.





Total stockholders’ equity increased
$171,000 during the three months ended March 31, 2009 to $19.0 million due
primarily to net income of $193,000, partially offset by common stock
repurchases of approximately $27,000.





Comparison
of Financial Condition at March 31, 2009 and December 31,
2008





Loans.  At
March 31, 2009, total loans, net, were $139.4 million, or 91.9% of total assets
as compared with $138.0 million or 91.8% of total assets at December 31,
2008.  In the three months ended March 31, 2009, the loan portfolio
grew $1.4 million, or 1.0%, primarily comprised of increases in land loans which
increased by $1.3 million, commercial mortgage loans which increased by
$804,000, and commercial business loans which  increased by $230,000,
offset by a decrease in one-to four-family residential real estate loans which
decreased by $810,000.  The decline in the one-to four-family
residential real estate loans was primarily due to refinancing of portfolio
loans into the secondary market. The Bank does not make or hold any subprime
loans.


13
 Index


Nonperforming
Assets.  The following table provides information with respect
to our non-performing assets at the dates indicated.  There were no
accruing loans past due 90 days or more as of March 31, 2009 or December 31,
2008.





(Dollars
      in thousands)
                              
                              March
      31,
                                2009
                              
                              
                              December
      31,
                                2008Nonaccrual
      loans:One-
      to four-family residential real
      estate
                              
                              $
                              1,742
                              
                              
                              $
                              2,384Construction
                              
                              
                              1,394
                              
                              
                              
                              959Multi-family
      and commercial real
      estate
                              
                              
                              880
                              
                              
                              
                              360Land
                              
                              
                              935
                              
                              
                              
                              935Commercial
                              
                              
                              318
                              
                              
                              
                              318Consumer
                              
                              
                              —
                              
                              
                              
                              18Total
                              
                              
                              5,269
                              
                              
                              
                              4,974Foreclosed
      real
      estate
                              
                              
                              83
                              
                              
                              
                              —Other
      nonperforming
      assets
                              
                              
                              —
                              
                              
                              
                              —Total
      nonperforming
      assets
                              
                              
                              5,352
                              
                              
                              
                              4,974Troubled
      debt
      restructurings
                              
                              
                              285
                              
                              
                              
                              285Troubled
      debt restructurings andtotal
      nonperforming
      assets
                              
                              $
                              5,637
                              
                              
                              $
                              5,259Total
      nonperforming loans to total
      loans
                              
                              
                              3.74
                              %
                              
                              
                              3.57
                              %Total
      nonperforming loans to total
      assets
                              
                              
                              3.47
                              
                              
                              
                              3.31Total
      nonperforming assets and troubleddebt
      restructurings to total
      assets
                              
                              
                              3.72
                              
                              
                              
                              3.50





The $5.3 million in nonperforming loans
at quarter end were comprised of $1.7 million in one-to four-family residential
real estate loans, $1.2 million of loans extended to a residential subdivision
which are divided in the land, construction and commercial categories, three
loans to builders for construction of unsold homes totaling $1.1 million,
$391,000 of land loans, primarily for a residential subdivision and $880,000 of
commercial real estate loans.





Securities.The
investment securities portfolio was $2.4 million, or 1.6% of total assets, at
March 31, 2009 compared to $2.5 million or 1.7% of total assets, at December 31,
2008.  Our investment portfolio consists primarily of U.S. Government
and agency securities and GNMA and FHLMC mortgage-backed securities. The
decrease of $71,000 in investment securities was primarily due to principal
repayments on the mortgage-backed securities.





Deposits.  Our
primary source of funds is retail deposit accounts, which are comprised of
noninterest-bearing demand accounts, interest-bearing demand accounts, money
market accounts, savings accounts and certificates of deposit.  During
the three months ended March 31, 2009, deposits grew $3.2 million or 2.6% to
$128.0 million at March 31, 2009. The increase in deposits was primarily in
savings accounts which increased by $1.8 million, certificates of deposit which
increased by $1.1 million and non-interest checking which increased by $1.1
million, offset by a decrease in money market accounts of approximately
$672,000.





Borrowings.We
utilize borrowings from the Federal Home Loan Bank of New York to supplement our
supply of funds for loans and investments.  We are able to utilize
borrowings when necessary or advantageous as an alternative to deposits when a
pricing advantage exists, as a temporary source of funds to meet liquidity needs
or to manage our asset and liability position.  The Bank had $6.0
million in average balances in borrowings during the three month period ended
March 31, 2009. We had borrowings at March 31, 2009 of $3.3 million compared
with $4.4 million at December 31, 2008.





Stockholders’
Equity.Total stockholders’ equity increased $171,000 from
$18.8 million at December 31, 2008 to $19.0 million at March 31, 2009. Equity
increased primarily due to earnings of $193,000 for the three months ended March
31, 2009, partially offset by common stock repurchases of approximately
$27,000.


14
 Index


Results
of Operations for the Three Months Ended March 31, 2009 and 2008





Financial
Highlights.Net income increased $36,000, or 22.9%, to $193,000 for the
three months ended March 31, 2009 compared to $157,000 for the same period in
the prior year.  The increase reflected an increase in the mortgage
banking income as a result of increased originations of residential mortgage
loans sold into the secondary market and an increase in net interest income,
partially offset by an increase to the provision for loan losses and
non-interest income.





Net Interest
Income.Net interest income increased by $118,000, or 8.2%, to
$1.6 million for the three months ended March 31, 2009 compared to $1.4 million
for the prior year period, primarily as a result of a reduction in interest
expense partially offset by a decrease in interest income on loans, securities
and other interest income.





Interest
income on loans decreased $10,000, or 0.5%, to $2.1 million during the three
months ended March 31, 2009 as the average yield on the loan portfolio decreased
89 basis points to 6.10% for the three months ended March 31, 2009, offset by
the  average balance of the loan portfolio which grew $17.1 million,
or 14.1%, to $139.1 million. Loan growth was driven primarily by an increase in
land and commercial mortgage loans, offset by a decrease in one- to four-family
residential real estate loans. The decrease in the average yield on loans was
mostly the result of the decreases in market interest rates, as the prime rate
decreased from 5.25% at March 31, 2008 to 3.25% at March 31, 2009.





Interest income on investment
securities decreased $9,000 for the three months ended March 31, 2009 to $21,000
compared to the prior year period, as the average balance of the securities
portfolio decreased during the three months ended March 31, 2009 to $2.5 million
compared to $2.8 million in the prior year period. The average yield on
investment securities decreased 97 basis points to 3.39% for the three months
ended March 31, 2009.





The average yield of total
interest-earning assets decreased 92 basis points to 5.98% for the three months
ended March 31, 2009, offset by the average balance of total interest-earning
assets which grew $16.9 million, or 13.4%, to $143.5 million.





Interest expense decreased from
$735,000 for the three months ended March 31, 2008, to $581,000 for the three
months ended March 31, 2009, a decrease of $154,000, or 21.0%. The primary
reason for the decrease was maturing certificates of deposit repricing to lower
interest rates. Decreases in market interest rates since 2007, combined with the
shift in the deposit mix, decreased the average cost of deposits to 2.09%, for
the three months ended March 31, 2009, compared to 3.07% for the three months
ended March 31, 2008. The decrease in yields on deposits was offset by an
increase in the average balance of interest-bearing deposits during the three
months ended March 31, 2009 of $12.2 million, or 12.8% to $107.5 million,
compared with $95.3 million in the prior year period, due primarily to an
increase in average balances of certificates of deposit of $10.4 million, money
market accounts of $615,000 and savings and interest-bearing demand deposit
accounts of $1.2 million.





Interest expense on borrowings
increased to $18,000 for the three months ended March 31, 2009 compared to
$4,000 for the prior year period. The average balance of borrowings during the
three months ended March 31, 2009 increased $5.4 million, to $6.0 million,
compared with $568,000 in the prior year period. The average cost of borrowings
decreased 161 basis points to 1.21%, for the three months ended March 31, 2009,
compared to 2.82% for the three months ended March 31, 2008.





For the three months ended March 31,
2009, our net interest margin decreased 21 basis points to 4.36% from 4.57% for
the prior year period. The interest rate spread increased by 10 basis points to
3.93% for the three months ended March 31, 2009 from 3.83% for the prior year
period.  The increase in our net interest rate spread for the quarter
was primarily due to the recent decline in short-term interest rates implemented
by the Federal Open Market Committee, resulting in the downward repricing of
many of the Company’s interest-earning assets and interest-bearing
liabilities.


15
 Index


The
following table summarizes average balances and average yields and costs of
interest-earning assets and interest-bearing liabilities for the three months
ended March 31, 2009 and 2008.





Three Months Ended March
  31,2009
                        
                        
                        2008(Dollars
      in thousands)
                        
                        Average
                          Balance
                        
                        
                        Interest
                          and
                          Dividends
                        
                        
                        Yield/
                          Cost
                        
                        
                        Average
                          Balance
                        
                        
                        Interest
                          and
                          Dividends
                        
                        
                        Yield/
                          CostAssets:Interest-earning
      assets:Loans
                        
                        $
                        139,090
                        
                        
                        $
                        2,122
                        
                        
                        
                        6.10
                        %
                        
                        $
                        121,946
                        
                        
                        $
                        2,132
                        
                        
                        
                        6.99
                        %Investment
      securities
                        
                        
                        2,477
                        
                        
                        
                        21
                        
                        
                        
                        3.39
                        
                        
                        
                        2,751
                        
                        
                        
                        30
                        
                        
                        
                        4.36Other
      interest-earning
      assets
                        
                        
                        1,904
                        
                        
                        
                        3
                        
                        
                        
                        0.63
                        
                        
                        
                        1,854
                        
                        
                        
                        20
                        
                        
                        
                        4.31Total
      interest-earning assets
                        
                        
                        143,471
                        
                        
                        
                        2,146
                        
                        
                        
                        5.98
                        
                        
                        
                        126,551
                        
                        
                        
                        2,182
                        
                        
                        
                        6.90Non-interest-earning
      assets
                        
                        
                        6,880
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,968Total
      assets
                        
                        $
                        150,351
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        132,519Liabilities
      and stockholders’ equity:Interest-bearing
      liabilities:Interest-bearing
      demand deposits
                        
                        $
                        6,587
                        
                        
                        
                        4
                        
                        
                        
                        0.24
                        
                        
                        $
                        5,979
                        
                        
                        
                        4
                        
                        
                        
                        0.27Money
      market
      accounts
                        
                        
                        11,550
                        
                        
                        
                        32
                        
                        
                        
                        1.11
                        
                        
                        
                        10,935
                        
                        
                        
                        55
                        
                        
                        
                        2.01Savings
      accounts
                        
                        
                        14,290
                        
                        
                        
                        20
                        
                        
                        
                        0.56
                        
                        
                        
                        13,701
                        
                        
                        
                        21
                        
                        
                        
                        0.61Certificates
      of deposit
                        
                        
                        75,122
                        
                        
                        
                        507
                        
                        
                        
                        2.70
                        
                        
                        
                        64,692
                        
                        
                        
                        651
                        
                        
                        
                        4.03Borrowings
                        
                        
                        5,951
                        
                        
                        
                        18
                        
                        
                        
                        1.21
                        
                        
                        
                        568
                        
                        
                        
                        4
                        
                        
                        
                        2.82Total
      interest-bearing liabilities
                        
                        
                        113,500
                        
                        
                        
                        581
                        
                        
                        
                        2.05
                        
                        
                        
                        95,875
                        
                        
                        
                        735
                        
                        
                        
                        3.07Non-interest-bearing
      demand deposits
                        
                        
                        16,006
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        16,123Other
      non-interest-bearing liabilities
                        
                        
                        1,975
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,878Total
      liabilities
                        
                        
                        131,481
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        113,876Stockholders’
      equity
                        
                        
                        18,870
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        18,643Total
      liabilities and stockholders’ equity
                        
                        $
                        150,351
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        132,519Net
      interest
      income
                        
                        
                        
                        
                        
                        $
                        1,565
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        1,447Interest
      rate
      spread
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3.93
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3.83Net
      interest
      margin
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4.36
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4.57Average
      interest-earning assets to
                          average
      interest-bearing liabilities
                        
                        
                        126.41
                        %
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        132.00
                        %





Provision for
Loan Losses.  The provision for loan losses was $160,000 for
the three months ended March 31, 2009 compared to $26,000 for the three months
ended March 31, 2008.  The increase in the provision 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 3.57% at December 31, 2008, to 3.74% as of March 31, 2009, primarily
because of an increase of $295,000 in nonperforming loans to $5.3 million as of
March 31, 2009. There were net charge-offs of $37,000 for the current quarter
compared to $1,000 in the prior year period.





Non-Interest
Income.  Non-interest income increased $168,000, or 43.9%, to
$551,000 for the three months ended March 31, 2009 as compared to the prior year
period.  The primary reason for the increase in non-interest income
for the three months ended March 31, 2009, was an increase in mortgage banking
income, net, of $173,000 for the three months ended March 31, 2009 as compared
to the same period in 2008. This was a result of realized and unrealized gains
on the sale of mortgage loans due to increased volume of loans sold and unfunded
loans committed to be sold, as refinance activity grew in the current low
mortgage interest rate environment. This was offset by decreases in banking fees
and service charges of $17,000 as a result of customer preference for service
charge free accounts and the competitive banking environment for core
deposits.




Non-Interest
Expenses.  Non-interest expenses increased $94,000, or 6.1%, to
$1.6 million, for the three months ended March 31, 2009 as compared to the prior
year period. The primary reason for the increase in


16
 Index


non-interest
expenses during the comparable periods was primarily due to salary and medical
premium increases of approximately $64,000. In addition, occupancy and equipment
expense increased by $21,000 and advertising and marketing expense decreased by
$25,000. The FDIC deposit insurance premiums increased by $21,000 in the first
quarter of 2009 compared to the first quarter of 2008. Additionally, the Federal
Deposit Insurance Corporation issued an interim rule that would impose a special
assessment on June 30, 2009, which would be collected on September 30, 2009. The
impact of this special 20 basis point assessment based on deposits at March 31,
2009 would be approximately $263,000. Future special assessments could also be
assessed.





Income Tax
Expense.The
income tax expense was $122,000 for the three months ended March 31, 2009 as
compared to $100,000 for the three months ended March 31, 2008. Higher levels of
pre-tax income have resulted in an increase in income tax expense. The effective
tax rate was 38.7% for the three months ended March 31, 2009 and 38.9% for the
three months ended March 31, 2008.




Liquidity
and Capital Management





Liquidity
Management.  Liquidity is the ability to meet current and
future financial obligations of a short-term nature. Our primary sources of
funds consist of deposit inflows, loan repayments, maturities of and payments on
investment securities and borrowings from the Federal Home Loan Bank of New
York.  While maturities and scheduled amortization of loans and
securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.





We regularly adjust our investments in
liquid assets based upon our assessment of (1) expected loan demand,
(2) expected deposit flows, (3) yields available on interest-earning
deposits and securities and (4) the objectives of our asset/liability management
policy.





Our most liquid assets are cash and
cash equivalents.  The levels of these assets depend on our operating,
financing, lending and investing activities during any given
period.  At March 31, 2009, cash and cash equivalents totaled $3.1
million.  In addition, at March 31, 2009, we had arrangements to
borrow up to $26.9 million from the Federal Home Loan Bank of New
York.  On March 31, 2009, we had short-term advances outstanding of
$3.3 million.





A significant use of our liquidity is
the funding of loan originations.  At March 31, 2009, we had $20.1
million in loan commitments outstanding, which primarily consisted of $3.3
million in unadvanced portions of construction loans, $3.4 million in net
commitments to fund one- to four-family residential real estate loans, $845,000
in commercial real estate and business loans, $2.5 million in unused home
equity lines of credit and $8.7 million in unused commercial lines of
credit.  Historically, many of the commitments expire without being
fully drawn; therefore, the total amount of commitments does not necessarily
represent future cash requirements.  Another significant use of our
liquidity is the funding of deposit withdrawals.  Certificates of
deposit due within one year of March 31, 2009 totaled $75.8 million, or
98.4% of certificates of deposit.  The large percentage of
certificates of deposit that mature within one year reflects customers’
hesitancy to invest their funds for long periods in the recent low interest rate
environment.  If these maturing deposits do not remain with us, we
will be required to seek other sources of funds, including other certificates of
deposit and borrowings.  Depending on market conditions, we may be
required to pay higher than market rates on such deposits or other borrowings
than we currently pay on the certificates of deposit due on or before March 31,
2009.  We believe, however, based on past experience that a
significant portion of our certificates of deposit will remain with
us.  We have the ability to attract and retain deposits by adjusting
the interest rates offered.





Capital
Management.We are subject to various regulatory capital
requirements administered by the Office of Thrift Supervision, including a
risk-based capital measure.  The risk-based capital guidelines include
both a definition of capital and a framework for calculating risk-weighted
assets by assigning balance sheet assets and off-balance sheet items to broad
risk categories.  At March 31, 2009, the Bank exceeded all of our
regulatory capital requirements and is considered “well capitalized” under
regulatory guidelines.


17
 Index





On July
28, 2008, the Company announced that it approved a stock repurchase program to
purchase up to 5% of its outstanding shares (excluding shares held by Hometown
Bancorp, MHC, the Company’s mutual holding company), or up to 53,561 shares for
a period of up to 12 months. On March 10, 2009, we announced that we completed
the stock repurchase of all 53,561 shares. Details of repurchases made in the
first quarter of 2009 are included in Part II. Other Information, Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.





Off-Balance
Sheet Arrangements





In the normal course of operations, we
engage in a variety of financial transactions that, in accordance with
accounting principles generally accepted in the United States of America, are
not recorded in our financial statements.  These transactions involve,
to varying degrees, elements of credit, interest rate and liquidity risk. Such
transactions are used primarily to manage customers’ requests for funding and
take the form of loan commitments and lines and letters of credit.





For the three months ended March 31,
2009, we did not engage in any off-balance sheet transactions reasonably likely
to have a material effect on our financial condition, results of operations or
cash flows.





Item
3.  Quantitative and Qualitative Disclosures About
Market Risk





Not applicable because the Company is a
smaller reporting company.





Item
4.  Controls and Procedures





The
Company’s management, including the Company’s principal executive officer and
principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  Based upon their evaluation, the principal executive officer
and principal financial officer concluded that, as of the end of the period
covered by this report, the Company’s disclosure controls and procedures were
effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms and (2) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure.





There
have been no changes in the Company’s internal control over financial reporting
identified in connection with the evaluation required by Rule 13(a)-15(e) that
occurred during the Company’s last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.


18
 Index





PART
II.  OTHER INFORMATION





Item 1
            Legal
      Proceedings





Hometown
Bancorp is not involved in any pending legal proceedings.  Walden
Federal is not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business.  Such
routine legal proceedings, in the aggregate, are believed by management to be
immaterial to its financial condition and results of operations.





Item 1A.
            Risk
      Factors





Not applicable because the Company is a
smaller reporting company.





Item 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds





On July
28, 2008, the Board of Directors of the Company announced a stock repurchase
program pursuant to which the Company intended to purchase up to 5% of its
outstanding shares (excluding shares held by Hometown Bancorp, MHC, the
Company’s mutual holding company), or up to 53,561 shares for a period up to 12
months. On March 10, 2009, we completed the stock repurchase of all 53,561
shares.





The table
below sets forth the information with respect to purchases made by or on behalf
of Hometown Bancorp, Inc. or any ‘affiliated purchaser’ (as defined in Rule
240.10b-18(a)(3)) under Regulation S-K, of common stock during the quarter ended
March 31, 2009:





Total
      Number
                  of
      Shares
                  Purchased
                
                
                Average
      Price
                  Paid
      Per
                  Share
                
                
                Total
      Number
                  of
      Shares
                  Purchased
      as
                  Part
      of
                  Publicly
                  Announced
                  Plans
      or
                  Programs
                
                
                Maximum
                  Number
      of
                  Shares
      That
                  May
      Yet Be
                  Purchased
                  Under
      the
                  Plans
      or
                  ProgramsJanuary
      1 through January 31
                
                
                -
                
                
                $
                -
                
                
                
                46,500
                
                
                
                7,061February
      1 through February 28
                
                
                -
                
                
                $
                -
                
                
                
                46,500
                
                
                
                7,061March
      1 through March 31
                
                
                7,061
                
                
                $
                3.79
                
                
                
                53,561
                
                
                
                -





Item 3.
            Defaults
      upon Senior Securities





Not Applicable.





Item 4.
            Submission
      of Matters to a Vote of Security
Holders





Not Applicable





Item 5.
            Other
      Information





None.





Item 6.
            Exhibits




3.1
            Charter
      of Hometown Bancorp, Inc. (1)




3.2
            Bylaws
      of Hometown Bancorp, Inc. (2)




19
 Index


4.0
            Stock
      Certificate of Hometown Bancorp, Inc.
(1)




31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer




31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer




32.0
            Section
      1350 Certification








(1)
              Incorporated
      by reference into this document from the Exhibits filed with the
      Securities and Exchange Commission on the Registration Statement on Form
      SB-2, and any amendments thereto, Registration No.
    333-141351.




(2)
              Incorporated
      by reference into this document from Exhibit 3.2 of the Form 8-K filed
      with the Securities and Exchange Commission on July 25, 2008 (File No.
      000-52674).









20
 Index


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








HOMETOWN
      BANCORP, INC.Dated:
      May 15, 2009
                    By:
                    /s/ Thomas F. GibneyThomas F. GibneyPresident
      and Chief Executive Officer(principal executive officer)Dated:
      May 15, 2009
                    By:
                    /s/ Stephen W. DederickStephen W. DederickVice President andChief Financial Officer(principal financial and accounting officer)






21