PRESS RELEASE
SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE QUARTER AND SIX MONTHS ENDED
JUNE 30, 2006
WILLIMANTIC, CONNECTICUT--JULY 26, 2006. SI Financial Group, Inc. (the
"Company") (NASDAQ Global Market: SIFI), the holding company of Savings
Institute Bank and Trust Company (the "Bank"), reported net income of $757,000,
or $0.06 basic and diluted earnings per common share, for the quarter ended June
30, 2006 versus net income of $845,000, or $0.07 basic and diluted earnings per
common share, for the quarter ended June 30, 2005. Net income for the six months
ended June 30, 2006 was $1.6 million, or $0.13 basic and diluted earnings per
common share, compared to $1.7 million, or $0.14 basic and diluted earnings per
common share, for the six months ended June 30, 2005. Lower net income in 2006
was the result of higher noninterest expenses, offset by increases in
noninterest income and net interest and dividend income.
For the three months and the six months ended June 30, 2006, net interest and
dividend income increased 12.1% to $6.0 million from $5.4 million and increased
9.2% to $11.7 million from $10.7 million, respectively, compared to the same
periods in 2005. Net interest and dividend income rose principally due to an
increase in the average balance of interest-earning assets and higher average
yields, offset by an increase in the cost of funds.
The provision for loan losses decreased $10,000 to $120,000 for the second
quarter of 2006, mainly due to lower commercial loan volume compared to the same
quarter in 2005. Commercial loans tend to carry a higher risk of default than
residential mortgage loans. The provision for loan losses increased $170,000 for
the first half of 2006 compared to the same period in the prior year. The higher
provision reflects greater loan volume, primarily attributable to commercial and
residential mortgage loans which increased 10.4% and 9.2%, respectively, and an
increase in the Bank's managed loans from the prior year-end. Additionally, the
purchase of $10.3 million of indirect automobile loans contributed to the
provision for loan losses due to the increased risk of loss associated with
consumer lending. The quality of the loan portfolio remains high, as evidenced
by the low volume of nonperforming loans and loan charge-offs. At June 30, 2006,
nonperforming loans totaled $204,000 compared to $950,000 at June 30, 2005. For
the six months ended June 30, 2006 and 2005, net recoveries from loan losses
totaled $1,000 and $75,000, respectively.
Noninterest income was $2.0 million for the quarter ended June 30, 2006 compared
to $1.6 million for the quarter ended June 30, 2005. Noninterest income was $4.1
million for the first half of 2006 compared to $3.0 million for the same period
of 2005. Contributing to the rise in noninterest income were increases in wealth
management fees and service fees. Wealth management fees increased as a result
of fee income associated with SI Trust Servicing, the Bank's third-party trust
outsourcing service that was acquired in November 2005. Branch expansion,
deposit-related products and electronic banking usage resulted in higher service
fees. For the first half of 2006, the net loss on the sale of securities of
$112,000 reflects the sale of government-sponsored enterprise securities in the
second quarter of 2006 compared to a net gain on the sale of securities of
$35,000 for the first half of 2005. The net gain on the sale of loans of $35,000
for 2006 resulted from the sale of $4.7 million of fixed-rate residential
mortgage loans versus a net gain of $147,000 on the sale of $31.6 million of
predominately fixed-rate residential mortgage loans in the first half of 2005.
The sale of loans reflects the Company's initiative to reduce its sensitivity to
increases in interest rates.
Noninterest expenses increased for both the three months and the six months
ended June 30, 2006 compared to the same periods in 2005, primarily due to
increased operating costs associated with the expansion of branch offices and
the acquisition of SI Trust Servicing. Compensation costs, occupancy and
equipment and computer and electronic banking services contributed the largest
increase in noninterest expenses, offset by a decrease in outside professional
services. Compensation costs were higher in 2006 due to increased staffing
levels and the amortization of share-based compensation arrangements.
Share-based compensation expense totaled $382,000 and $96,000 for the six months
ended June 30, 2006 and 2005, respectively. Occupancy and equipment expense
increased primarily due to additional operating lease payments, depreciation
expense and other occupancy-related expenses. To a lesser extent, marketing and
advertising costs rose in response to various promotional initiatives. Outside
professional services expense was lower in 2006 versus 2005 as a result of
reduced legal and auditing expenditures.
Total assets grew $39.6 million, or 5.7%, to $731.4 million at June 30, 2006
from $691.9 million at December 31, 2005. Contributing to the increase in assets
were increases of $38.6 million in net loans receivable, available for sale
securities of $6.3 million, other assets of $586,000 and Federal Home Loan Bank
stock of $569,000, offset by a decrease in cash and cash equivalents of $7.1
million and the sale of other real estate owned of $325,000. The increase in net
loans receivable reflects strong loan originations, representing an increase of
8.7% over the same period of the prior year, with residential mortgage loans
contributing the largest increase. Additionally, the Bank's purchase of $10.3
million of indirect automobile loans increased the consumer loan portfolio.
Available for sale securities increased as a result of purchases of
government-sponsored enterprises and mortgage-backed securities with maturities
of five to ten years, offset by higher unrealized holding losses. Increases in
other assets were primarily due to other investments and receivables. Federal
Home Loan Bank stock rose in response to an increase in Federal Home Loan Bank
borrowings.
Total liabilities were $651.7 million at June 30, 2006 compared to $611.8
million at December 31, 2005. Deposits increased $33.1 million, or 6.5%,
primarily related to a rise in short-term certificates of deposit as a result of
attractive promotional rates. Borrowings increased from $95.1 million at
December 31, 2005 to $101.9 million at June 30, 2006, resulting from an increase
in FHLB advances utilized to fund loan growth.
Total stockholders' equity decreased $341,000 from $80.0 million at December 31,
2005 to $79.7 million at June 30, 2006. The decrease in equity related to stock
repurchases of 129,266 shares at a cost of $1.4 million, an increase in net
unrealized holding losses on available for sale securities aggregating $665,000
(net of taxes) and dividends declared of $363,000, offset by earnings of $1.6
million. The Company's investment securities portfolio, which includes primarily
government-sponsored enterprises and mortgage-backed securities, was unfavorably
affected by market rates and reported higher unrealized losses on available for
sale securities for the period. As previously announced, the Company declared a
cash dividend of $0.04 per outstanding common share on June 21, 2006 to be paid
on July 28, 2006 to shareholders of record as of July 7, 2006. SI Bancorp, MHC,
the Company's mutual holding company parent, intends to waive receipt of its
dividend.
"We continue to successfully implement our current strategic plan with the
opening of new branches," said President and Chief Executive Officer, Rheo A.
Brouillard. "In our effort to reach new customers and broaden our value to
existing customers, we have successfully opened three new branch offices in
fourteen months. We anticipate the opening of our 19th office in Gales Ferry,
Connecticut in August."
SI Financial Group, Inc. is the holding company for Savings Institute Bank and
Trust Company. Established in 1842, the Savings Institute Bank and Trust Company
is a community-oriented financial institution headquartered in Willimantic,
Connecticut. Through its eighteen offices, the Bank offers a full-range of
financial services to individuals, businesses and municipalities within its
market area.
THIS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS" THAT ARE BASED ON ASSUMPTIONS
AND MAY DESCRIBE FUTURE PLANS, STRATEGIES AND EXPECTATIONS OF THE COMPANY. THESE
FORWARD-LOOKING STATEMENTS ARE GENERALLY IDENTIFIED BY THE USE OF THE WORDS
"BELIEVE," "EXPECT," "INTEND," "ANTICIPATE," "ESTIMATE," "PROJECT" OR SIMILAR
EXPRESSIONS. THE COMPANY'S ABILITY TO PREDICT RESULTS OR THE ACTUAL EFFECT OF
FUTURE PLANS OR STRATEGIES IS INHERENTLY UNCERTAIN. FACTORS THAT COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES
INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN MARKET INTEREST RATES, REGIONAL AND
NATIONAL ECONOMIC CONDITIONS, LEGISLATIVE AND REGULATORY CHANGES, MONETARY AND
FISCAL POLICIES OF THE UNITED STATES GOVERNMENT, INCLUDING POLICIES OF THE
UNITED STATES TREASURY AND THE FEDERAL RESERVE BOARD, THE QUALITY AND
COMPOSITION OF THE LOAN OR INVESTMENT PORTFOLIOS, DEMAND FOR LOAN PRODUCTS,
DEPOSIT FLOWS, COMPETITION, DEMAND FOR FINANCIAL SERVICES IN THE COMPANY'S
MARKET AREA, CHANGES IN THE REAL ESTATE MARKET VALUES IN THE COMPANY'S MARKET
AREA, ABILITY TO OPERATE NEW BRANCH OFFICES PROFITABLY, ABILITY TO EFFECTIVELY
AND EFFICIENTLY INTEGRATE ACQUISITIONS AND CHANGES IN RELEVANT ACCOUNTING
PRINCIPLES AND GUIDELINES. THESE RISKS AND UNCERTAINTIES SHOULD BE CONSIDERED IN
EVALUATING ANY FORWARD-LOOKING STATEMENTS AND UNDUE RELIANCE SHOULD NOT BE
PLACED ON SUCH STATEMENTS. EXCEPT AS REQUIRED BY APPLICABLE LAW OR REGULATION,
THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS 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.
SELECTED FINANCIAL CONDITION DATA:
- ---------------------------------------------------------------------------------------------------------------
June 30, December 31,
(DOLLARS IN THOUSANDS) 2006 2005
- ---------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Noninterest-bearing cash and due from banks $ 16,153 $ 16,317
Interest-bearing cash and cash equivalents 2,723 9,629
Investment securities 132,488 125,657
Loans held for sale - 107
Loans receivable, net 552,364 513,775
Cash surrender value of life insurance 7,974 7,837
Other assets 19,742 18,546
--------------------------------------------
Total assets $ 731,444 $ 691,868
============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 542,432 $ 509,297
Borrowings 101,882 95,146
Other liabilities 7,428 7,382
--------------------------------------------
Total liabilities 651,742 611,825
--------------------------------------------
Stockholders' equity 79,702 80,043
--------------------------------------------
Total liabilities and stockholders' equity $ 731,444 $ 691,868
============================================
SELECTED OPERATING DATA:
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(DOLLARS IN THOUSANDS / UNAUDITED) 2006 2005 2006 2005
- ---------------------------------------------------------------------------------------------------------------
Interest and dividend income $ 10,389 $ 8,192 $ 19,919 $ 16,084
Interest expense 4,373 2,824 8,269 5,416
---------------------------------------------------------------
Net interest and dividend income 6,016 5,368 11,650 10,668
---------------------------------------------------------------
Provision for loan losses 120 130 405 235
---------------------------------------------------------------
Net interest and dividend income after
provision for loan losses 5,896 5,238 11,245 10,433
Noninterest income 2,005 1,629 4,129 2,956
Noninterest expenses 6,779 5,611 13,059 10,805
---------------------------------------------------------------
Income before provision for income taxes 1,122 1,256 2,315 2,584
Provision for income taxes 365 411 763 837
---------------------------------------------------------------
Net income $ 757 $ 845 $ 1,552 $ 1,747
===============================================================
SELECTED OPERATING DATA - CONCLUDED:
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(UNAUDITED) 2006 2005 2006 2005
- ---------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic $ 0.06 $ 0.07 $ 0.13 $ 0.14
Diluted 0.06 0.07 0.13 0.14
Weighted-average common shares outstanding:
Basic 11,787,126 12,087,104 11,804,457 12,083,278
Diluted 11,825,839 12,095,709 11,851,001 12,093,218
SELECTED FINANCIAL RATIOS:
- ---------------------------------------------------------------------------------------------------------------
At or For the Three At or For the Six
Months Ended Months Ended
(DOLLARS IN THOUSANDS) June 30, June 30,
-------- --------
2006 2005 2006 2005
- ---------------------------------------------------------------------------------------------------------------
SELECTED PERFORMANCE RATIOS: (1)
Return on average assets 0.42% 0.53% 0.44% 0.56%
Return on average equity 3.79 4.16 3.91 4.33
Interest rate spread 3.06 3.26 3.05 3.30
Net interest margin 3.50 3.61 3.47 3.64
Efficiency ratio (2) 83.35 80.36 82.18 79.51
ASSET QUALITY RATIOS:
Allowance for loan losses $ 4,075 $ 3,510
Allowance for loan losses as a percent of total
loans 0.73% 0.74%
Allowance for loan losses as a percent of
nonperforming loans 1997.55% 369.47%
Nonperforming loans $ 204 $ 950
Nonperforming loans as a percent of total
loans 0.04% 0.20%
Nonperforming assets (3) $ 204 $ 950
Nonperforming assets as a percent of total
assets 0.03% 0.14%
(1) Quarterly ratios have been annualized.
(2) Represents noninterest expenses divided by the sum of net interest and
dividend income and noninterest income, less any realized gains or losses
on the sale of securities.
(3) Nonperforming assets consist of nonperforming loans and other real estate
owned.
CONTACT:
SI Financial Group, Inc.
Sandra Mitchell, (860) 456-6509
Vice President / Director of Corporate Communications
investorrelations@banksi.com
- ----------------------------