Home Financial Bancorp Announces Second Quarter Results

Home Financial Bancorp ("Company”) (OTCBB: HWEN), an Indiana corporation which is the holding company for Owen Community Bank, s.b., ("Bank”) based in Spencer, Indiana, announces results for the second quarter and six months ended December 31, 2009.

Second Quarter Highlights:

• Net interest income grew 13%, or $83,000;
• Non-interest income rose 22%, or $39,000;
• Net income increased 63% to $101,000.

Six Month Highlights:

• Shareholders’ equity totaled $7.8 million, or 11% of total assets;
• Provisions for loan losses increased 42%, or $50,000;
• Net interest income expanded 8%, or $105,000;
• Net income improved 9% to $174,000.

For the quarter ended December 31, 2009, the Company reported net income of $101,000, or $.08 basic and diluted earnings per share. Net income was $62,000 or $.05 basic and diluted earnings per share for the quarter ended December 31, 2008. Second quarter 2010 net income improved, compared to a year earlier, due to growth in net interest income.

Interest expense fell $125,000 or 25%. Changing market interest rates eased overall funding costs compared to a year earlier. This change more than offset a $42,000 or 4% drop in interest income. Consequently, net interest income increased $83,000 or 13%, to $714,000.

Loan loss provisions rose to $90,000 for the quarter-ended December 31, 2009, compared to $60,000 for the same period a year earlier. A regular assessment of loan loss allowance adequacy indicated that these provisions were necessary to maintain an appropriate allowance level. Changes in volume, composition and quality of the loan portfolio, as well as actual loan loss experience, influences the need for future loan loss provisions.

Non-interest income increased $39,000 or 22% to $219,000 for the quarter. Most of this change came from gains on sale of investment securities totaling $33,000. No similar gains were recorded in the year-earlier period.

Total non-interest expense for second quarter 2010 was $693,000, compared to $692,000 for the same period a year ago. The largest decline was reported for repossessed property expense, which deceased $25,000 or 36%. Offsetting this, legal and professional fees increased $11,000, and deposit insurance expense increased $14,000.

For the six-month period ended December 31, 2009, the Company reported net income of $174,000, or $.13 basic and diluted earnings per share. Net income was $160,000, or $.12 basic and diluted earnings per share for the six months ended December 31, 2008. Growth in net interest income caused net income to improve, despite higher loan loss provisions and higher income tax expense.

Net interest income increased $105,000 or 8% compared to the same six-month period last year. Interest income declined $135,000 or 6%, but was more than offset by the $240,000 or 23% fall in interest expense.

Loan loss provisions were $170,000 for the six-month period ended December 31, 2009, compared to $120,000 for the same period a year earlier. Loan loss provisions reflect management’s assessment of various risk factors including, but not limited to, the level and trend of loan delinquencies and losses. Net loan losses for the six months ended December 31, 2009 were $101,000, compared to $110,000 for the six months ended December 31, 2008.

Non-interest income was $410,000 for the first half of fiscal 2010, compared to $421,000 for the year-earlier period. Non-interest expense decreased $47,000 or 3%. Repossessed property expense, including net loss on sale of foreclosed property, declined $19,000 or 20% to $76,000 for the six-month period ended December 31, 2009. Deposit insurance expense increased $26,000 or 146%, to $44,000.

Tax expense jumped to $93,000 on pre-tax earnings of $267,000 for the six-month period ended December 31, 2009. For the year-earlier period, tax expense was $16,000 on pre-tax earnings of $176,000. Aside from higher income before income taxes, this change in tax expense reflects the June 2009 expiration of investment tax credits totaling nearly $27,000 per quarter.

At December 31, 2009, total assets were $71.4 million, compared to $69.9 million at June 30, 2009. Cash and short-term deposits decreased $510,000 while investment securities available for sale increased to $3.6 million, from $1.4 million six months earlier. Loans were little changed and totaled $57.0 million at December 31, 2009.

Loans delinquent 90 days or more totaled $2.9 million or 5.1% of total loans at December 31, 2009, compared to $2.6 million or 4.6% of total loans at June 30, 2009. At December 31, 2009, non-performing assets were $3.7 million or 5.2% of total assets, compared to $3.4 million or 4.8% of assets at June 30, 2009. Non-performing assets included $829,000 in Real Estate Owned ("REO”) and other repossessed properties at December 31, 2009, compared to $733,000 six months earlier.

Loan loss allowances were $682,000 or 1.20% of total loans at December 31, 2009, compared to $613,000 or 1.07% of total loans at June 30, 2009. Management considered the level of loan loss allowances at December 31, 2009 to be adequate to cover estimated losses inherent in the loan portfolio at that date.

Deposits increased $980,000 or 2% to $44.2 million as of December 31, 2009, compared to six months earlier. Total borrowings increased 3% to $19.0 million. Borrowings were $18.5 million at June 30, 2009.

Shareholders’ equity was $7.8 million or 10.9% of total assets at December 31, 2009. Factors impacting shareholder equity during the first half of fiscal 2010 included net income, two quarterly cash dividends totaling $.06 per share, $20,000 net increase in unrealized gain on securities available for sale, and a $14,000 decrease in costs associated with a stock-based employee benefit plan. During the six months ended December 31, 2009, the Company repurchased 2,321 shares of its stock in open market transactions. At December 31, 2009, the Company’s book value per share was $5.79 based on 1,350,605 shares outstanding.

Home Financial Bancorp and Owen Community Bank, s.b., an FDIC-insured, federal stock savings bank, operate from headquarters in Spencer, Indiana, and a branch office in Cloverdale, Indiana. Additional information concerning Home Financial Bancorp and its subsidiaries is available at www.hfbancorp.com or www.owencom.com.

*Based on 1,350,605 shares at December 31, 2009 and 1,352,926 shares at June 30, 2009.