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Hampden Bancorp, Inc. Reports A 25% Increase In Six Month Net Income And Declares A 25% Increase In Cash Dividend

Hampden Bancorp, Inc. (the “Company”) (NASDAQ - HBNK), which is the holding company for Hampden Bank (the “Bank”), announced the results of operations for the three and six months ended December 31, 2012.

The Company had a $77,000 increase in net income for the three months ended December 31, 2012 to $771,000, or $0.14 per fully diluted share, as compared to $694,000, or $0.12 per fully diluted share, for the same period in 2011. The majority of the increase in net income is due to an increase in total non-interest income of $310,000. For the three months ended December 31, 2012, the Company had a $124,000, or 62.9%, increase in the gain on sales of loans to $321,000 compared to $197,000 for the same period in 2011. Due to interest rate risk, the Company has decided to sell the majority of its current originations of long-term fixed rate mortgages. The Company also had a $88,000, or 21.3%, increase in customer service fees; a $66,000, or 150%, increase in other non-interest income; and a $32,000, or 30.5%, increase in cash surrender value of bank-owned life insurance for the three months ended December 31, 2012 compared to the same period in 2011. The provision for loan losses increased $75,000 for the three month period ended December 31, 2012 compared to the same period in 2011 due to the increase in loan balances. The Company had a decrease in net interest income of $14,000 for the three months ended December 31, 2012 compared to the same period in 2011 due to a decrease in the net interest margin from 3.56% to 3.12%. For the three month period ended December 31, 2012, interest expense increased by $23,000, or 1.7%, compared to the three month period ended December 31, 2011. This increase in interest expense included an increase in borrowing interest expense of $122,000 due to an increase in balances partially offset by a decrease in deposit interest expense of $99,000 due to a decrease in rates. Non-interest expense increased $51,000, or 1.2%, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The Company had a $135,000 increase in data processing services, a $69,000 increase in salaries and employee benefits, and a $21,000 increase in FDIC insurance expenses for the three months ended December 31, 2012 compared to the same period in 2011. Partial offsets to these increases were decreases in advertising, and other general and administrative expenses for the three months ended December 31, 2012 compared to the same period in 2011. The Company also had a $50,000 net loss on other real estate owned in the three months ended December 31, 2011 compared to no loss in 2012. Our combined federal and state effective tax rate was 37.0% for the three months ended December 31, 2012 compared to 34.2% for the same period in 2011.

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