Profile: Hampden Bancorp Inc (HBNK.O)

Hampden Bancorp, Inc. serves as a bank holding company for Hampden Bank (the Bank). The Bank is a community-oriented financial institution offering products and services to individuals, families, and businesses through ten offices located in Hampden County in Massachusetts. Hampden Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC), as well as by the Depositors Insurance Fund of Massachusetts (DIF). Hampden Bank’s business consists primarily of making loans to its customers, including residential mortgages, commercial real estate loans, commercial loans and consumer loans, and investing in a variety of investment and mortgage-backed securities. Hampden Bank funds these lending and investment activities with deposits from the general public, funds generated from operations and select borrowings. Hampden Bank also provides access to insurance and investment products through its Financial Services Division, Hampden Financial.

Lending Activities

The Company's gross loan portfolio consisted of an aggregate of $408.7 million as of June 30, 2012. In its lending activities, the Company originates commercial real estate loans, residential real estate loans secured by one-to-four-family residences, residential and commercial construction loans, commercial loans, home equity lines-of-credit, fixed rate home equity loans and other personal consumer loans. While the Company makes loans throughout Massachusetts, most of its lending activities are concentrated in Hampden and Hampshire counties. Loans originated totaled $107.2 million during the fiscal year ended June 30, 2012 (fiscal 2012). As of June 30, 2012, the Company’s largest loan was $8.8 million. The Company originated $15.8 million of commercial real estate loans during fiscal 2012. Commercial real estate loans are secured by commercial properties, such as industrial properties, hotels, small office buildings, retail facilities, warehouses, multi-family income properties and owner-occupied properties used for business.

The Company offers fixed-rate and adjustable-rate residential mortgage loans. These loans have original maturities of up to 40 years and generally have maximum loan amounts of up to $1.0 million. In its residential mortgage loan originations, the Company lends up to a maximum loan-to-value ratio of 100% for first-time home buyers and immediately sells all of its 100% loan-to-value ratio loans. During fiscal year 2012, the Company originated 47 loans. As of June 30, 2012, the residential real estate mortgage loan portfolio totaled $112.3 million. The Company offers home equity lines-of-credit and home equity term loans. The Company originated $26.6 million of home equity lines-of-credit and loans during fiscal 2012. The Company originates secured and unsecured commercial loans to business customers in its market area for the purpose of financing equipment purchases, working capital, expansion and other general business purposes. The Company originated $16.0 million in commercial loans during fiscal 2012.

The Company offers residential and commercial construction loans. The Company originated $9.5 million of construction loans during fiscal 2012. The Company originates a variety of consumer and other loans, auto loans and loans secured by passbook savings or certificate accounts. It also purchases manufactured home loans and automobile loans from third parties. The Company originated $10.1 million of consumer and other loans, including purchases of manufactured home and automobile loans, during fiscal 2012. As of June 30, 2012, it had $28.3 million of consumer and other loans outstanding. Loan originations come from a variety of sources. The Company occasionally purchases participation interests in commercial real estate loans and commercial loans from banks located in Massachusetts and Connecticut. It underwrites these loans using its own underwriting criteria.

Investment Activities

As of June 30, 2012, the Company’s portfolio of corporate obligations totaled $6.1 million. As of June 30, 2012, the Company’s portfolio of residential mortgage-backed securities totaled $137.7 million, or 95.7% of the portfolio, and included pass-through securities totaling $88.0 million and collateralized mortgage obligations totaling $45.6 million directly insured or guaranteed by Freddie Mac, Fannie Mae or the Government National Mortgage Association (Ginnie Mae). ortgage obligations totaling $45.6 million directly insured or guaranteed by Freddie Mac, Fannie Mae or the Government National Mortgage Association (Ginnie Mae). The Company also invests in securities issued by non-agency or private mortgage originators. As of June 30, 2012, the Company’s portfolio of marketable equity securities totaled $54,000. As of June 30, 2012, the Company held $5.0 million of FHLB stock.

Sources of Funds

Deposits are the primary source of the Company’s funds for lending and other investment purposes. In addition to deposits, the Company obtains funds from the amortization and prepayment of loans and mortgage-backed securities, the sale or maturity of investment securities, advances from the FHLB, and cash flows generated by operations. Consumer and commercial deposits are gathered primarily from its primary market area through the offering of a selection of deposit products, including checking, regular savings, money market deposits and time deposits, including certificate of deposit accounts and individual retirement accounts.

Subsidiary Activities and Portfolio Management Services

Hampden Bancorp, Inc. conducts its principal business activities through its wholly owned subsidiary, Hampden Bank. Hampden Bank has three operating subsidiaries, Hampden Investment Corporation (HIC) and Hampden Investment Corporation II. HIC is an investment company that engages in buying, selling and holding securities on its own behalf. As of June 30, 2012, HIC had total assets of $107.0 million consisting primarily of mortgage backed securities. HIC II is an investment company that will engage in buying, selling and holding securities on its own behalf.

The Company competes with Bank of America Corporation, Sovereign Bancorp, Inc., Citizens Financial Group and TD Bank.