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EXHIBIT 99.1
[SI FINANCIAL GROUP, INC. LETTERHEAD]
EARNINGS RELEASE
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(NASDAQ: SIFI)
SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2007
WILLIMANTIC, CONNECTICUT--OCTOBER 24, 2007. 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 $128,000,
or $0.01 basic and diluted earnings per common share, for the quarter ended
September 30, 2007 versus net income of $557,000, or $0.05 basic and diluted
earnings per common share, for the quarter ended September 30, 2006. Net income
for the nine months ended September 30, 2007 was $954,000, or $0.08 basic and
diluted earnings per common share, compared to $2.1 million, or $0.18 basic and
diluted earnings per common share, for the nine months ended September 30, 2006.
Lower net income for the three and nine months ended September 30, 2007 resulted
from an increase in noninterest expenses, a decline in net interest and dividend
income (for the nine-month period) and an increase in the provision for loan
losses, offset by an increase in noninterest income and a decrease in the
provision for income taxes. During the quarter ended September 30, 2007, the
Company provided $520,000 in the provision for loan losses to recognize the
general slow down in the construction and housing markets and recognized a
$215,000 loss on the sale of investment securities, in order to reinvest the
proceeds into longer-term and higher-yielding securities.
Net interest and dividend income remained unchanged at $5.5 million for the
three months ended September 30, 2007 and 2006 and decreased 6.0% to $16.1
million for the nine months ended September 30, 2007 from $17.2 million for the
nine months ended September 30, 2006. Lower net interest and dividend income for
the nine months ended September 30, 2007 resulted from a higher cost of funds
principally due to interest rates paid on deposit accounts and greater volume of
interest-bearing liabilities, offset by an increase in the average balance of
loans.
The provision for loan losses increased $379,000 and $194,000 for the three and
nine months ended September 30, 2007, respectively. The ratio of the allowance
for loan losses to total loans increased from 0.73% at September 30, 2006 to
0.84% at September 30, 2007. At September 30, 2007, nonperforming loans totaled
$3.4 million, consisting of $2.4 million in commercial construction loans and
$721,000 in commercial business loans, compared to $903,000 at September 30,
2006. For the three months ended September 30, 2007, net loan recoveries were
$1,000, compared to net loan charge-offs of $171,000 for the nine months ended
September 30, 2007. Net loan charge-offs were $29,000 and $30,000 for the three
and nine months ended September 30, 2006, respectively. While the Company has no
direct exposure to sub-prime mortgages, the current real estate environment has
negatively impacted the market for residential and condominium construction and
development lending. As a result, the Company has increased its provision for
loan losses on this portion of the loan portfolio during the third quarter of
2007.
Noninterest income was $2.2 million for the quarter ended September 30, 2007
compared to $2.0 million for the quarter ended September 30, 2006. Noninterest
income was $6.9 million for the first nine months of 2007 compared to $6.1
million for the same period in 2006. Contributing to the increase in noninterest
income for the three and nine months ended September 30, 2007, were increases in
wealth management fees of $104,000 and $326,000, respectively, and service fees
of $84,000 and $42,000, respectively. Wealth management fees were higher
principally due to growth in the market value of assets under administration.
Increases in service fees for the three and nine months ended September 30, 2007
relate to fees associated with a new deposit product and electronic banking
usage. The quarter ended September 30, 2007 included a net loss of $215,000 on
the sale of $17.2 million of government-sponsored enterprise securities, as a
result of a repositioning of the Company's investment portfolio to benefit from
the steeper yield curve. The proceeds were reinvested into longer-term and
higher-yielding mortgage-backed securities. For the nine months ended September
30, 2007, the increase of $390,000 on the sale of available for sale securities
included a gain of $321,000 from the sale of marketable equity securities during
the first quarter.
Noninterest expenses increased for both the three and nine months ended
September 30, 2007 compared to the same periods in 2006, primarily due to
increased operating costs associated with the expansion of branch offices and
other noninterest expenses. New branch offices resulted in higher
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occupancy and equipment expense relative to additional operating lease payments,
depreciation expense and other occupancy-related expenses. Compensation costs
were higher in 2007 due to increased staffing levels associated with new branch
offices, offset by a reduction in performance-based compensation which included
lower loan origination commissions resulting from a decline in new loan volume.
An increase in the provision for credit losses for off-balance sheet commitments
contributed to the increase in other noninterest expenses for 2007. Outside
professional services expense was higher for the nine months ended September 30,
2007 due to the termination of the agreement to purchase a mortgage company
during the first quarter, resulting in a charge to operations for
purchase-related transaction costs associated with the termination, offset by a
reduction in auditing expenditures.
Total assets grew $8.4 million, or 1.1%, to $765.5 million at September 30, 2007
from $757.0 million at December 31, 2006. Contributing to the increase in assets
were increases of $10.4 million in net loans receivable, $6.9 million in
available for sale securities, $850,000 in other real estate owned and $825,000
in premises and equipment, offset by decreases of $10.2 million in cash and cash
equivalents, $603,000 in other assets and $374,000 in accrued interest
receivable. The increase in net loans receivable included an increase in
residential and commercial mortgage loans, offset by a decrease in consumer
loans resulting from the disposition of the indirect automobile loan portfolio
during the second quarter of 2007. Available for sale securities increased as a
result of purchases of predominately mortgage-backed securities with longer-term
maturities with proceeds from the sale of government-sponsored enterprise
securities. Other real estate owned represents a commercial real estate property
with a net realizable value of $850,000. The primary increase in premises and
equipment was attributable to fixed assets associated with the Bank's new branch
in East Hampton, Connecticut. The decrease in other assets resulted from the
write-off of purchase-related transaction costs associated with the termination
of the mortgage company purchase and the settlement of other receivables, offset
by an increase in prepaid expenses associated with bank insurance premiums.
Accrued interest receivable decreased as a result of commercial loan payments
and the reversal of interest related to nonperforming loans and the indirect
automobile loan portfolio.
Total liabilities were $683.1 million at September 30, 2007 compared to $674.7
million at December 31, 2006. Deposits increased $6.5 million, or 1.2%, which
included an increase in predominately NOW and money market and certificate of
deposit accounts of $10.6 million and $4.6 million, respectively, offset by a
decrease of $6.8 million in savings accounts and $1.9 million in demand deposits
during 2007. Deposits increased as a result of branch expansion and attractive
promotional rates. Borrowings increased from $127.4 million at December 31, 2006
to $131.0 million at September 30, 2007, resulting from an increase of $10.8
million in Federal Home Loan Bank advances, offset by the redemption of $7.2
million of debentures in April 2007 with a portion of the proceeds from the $8.0
million trust preferred securities offering in September 2006.
Total stockholders' equity remained at $82.4 million as of September 30, 2007,
reflecting earnings of $954,000, a decrease in net unrealized holding losses on
available for sale securities aggregating $663,000 (net of taxes) and the
amortization of equity awards of $585,000, offset by stock repurchases of
185,820 shares at a cost of $2.0 million and dividends of $558,000.
Earlier this month, the Company announced the purchase of an existing branch in
Colchester, Connecticut, which is expected to close by the end of 2007. "This
purchase will increase deposit levels by approximately $20.0 million. Combined
with the opening of our new branch office in East Hampton, Connecticut in August
2007, the Colchester branch will complement our existing offices in Hebron and
Lebanon, Connecticut and enable us to better serve our customers," commented
Rheo A. Brouillard, President and Chief Executive Officer.
As previously announced, the Company declared a cash dividend of $0.04 per
outstanding common share on September 19, 2007, which will be paid on October
26, 2007 to shareholders of record as of October 5, 2007. SI Bancorp, MHC, the
Company's mutual holding company parent, waived receipt of its dividend.
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 twenty offices, the Bank offers a full-range of
financial services to individuals, businesses and municipalities within its
market area.
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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, THE ABILITY TO OPERATE NEW BRANCH OFFICES PROFITABLY, THE ABILITY TO
EFFECTIVELY AND EFFICIENTLY INTEGRATE ACQUISITIONS AND CHANGES IN RELEVANT
ACCOUNTING PRINCIPLES AND GUIDELINES. FOR DISCUSSION OF THESE AND OTHER RISKS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER FROM EXPECTATIONS, REFER TO OUR ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2006, INCLUDING THE SECTION
ENTITLED "RISK FACTORS," AND QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS
ENDED SEPTEMBER 30, 2006, MARCH 31, 2007 AND JUNE 30, 2007 ON FILE WITH THE SEC,
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.
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SELECTED FINANCIAL CONDITION DATA:
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(DOLLARS IN THOUSANDS / UNAUDITED) September 30, December 31,
2007 2006
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ASSETS
Noninterest-bearing cash and due from banks $ 12,912 $ 14,984
Interest-bearing cash and cash equivalents 3,031 11,124
Investment securities 133,454 126,168
Loans held for sale 524 135
Loans receivable, net 584,537 574,111
Cash surrender value of life insurance 8,335 8,116
Other assets 22,675 22,399
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Total assets $ 765,468 $ 757,037
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 545,144 $ 538,676
Borrowings 130,958 127,421
Other liabilities 6,985 8,554
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Total liabilities 683,087 674,651
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Stockholders' equity 82,381 82,386
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Total liabilities and stockholders' equity $ 765,468 $ 757,037
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SELECTED OPERATING DATA:
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(DOLLARS IN THOUSANDS / UNAUDITED) Three Months Ended Nine Months Ended
September 30, September 30,
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2007 2006 2007 2006
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Interest and dividend income $ 10,992 $ 10,308 $ 32,190 $ 30,227
Interest expense 5,480 4,796 16,053 13,065
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Net interest and dividend income 5,512 5,512 16,137 17,162
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Provision for loan losses 520 141 740 546
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Net interest and dividend income
after provision for loan losses 4,992 5,371 15,397 16,616
Noninterest income 2,199 1,972 6,935 6,101
Noninterest expenses 7,037 6,557 21,028 19,616
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Income before provision for income taxes 154 786 1,304 3,101
Provision for income taxes 26 229 350 992
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Net income $ 128 $ 557 $ 954 $ 2,109
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SELECTED OPERATING DATA - CONTINUED:
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Three Months Ended Nine Months Ended
(UNAUDITED) September 30, September 30,
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2007 2006 2007 2006
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Earnings per common share:
Basic $ 0.01 $ 0.05 $ 0.08 $ 0.18
Diluted $ 0.01 $ 0.05 $ 0.08 $ 0.18
Weighted-average common shares outstanding:
Basic 11,760,714 11,789,022 11,798,489 11,799,255
Diluted 11,782,089 11,820,206 11,850,243 11,840,744
SELECTED FINANCIAL RATIOS:
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At or For the At or For the
(DOLLARS IN THOUSAND / UNAUDITED) Three Months Ended Nine Months Ended
September 30, September 30,
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2007 2006 2007 2006
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SELECTED PERFORMANCE RATIOS: (1)
Return on average assets 0.07 % 0.30 % 0.17 % 0.39 %
Return on average equity 0.61 2.74 1.54 3.51
Interest rate spread 2.51 2.66 2.49 2.92
Net interest margin 3.03 3.13 3.00 3.35
Efficiency ratio (2) 88.78 85.65 91.56 83.31
ASSET QUALITY RATIOS:
Allowance for loan losses $ 4,934 $ 4,187
Allowance for loan losses as a percent of total loans 0.84 % 0.73 %
Allowance for loan losses as a percent of
nonperforming loans 143.39 463.68
Nonperforming loans $ 3,441 $ 903
Nonperforming loans as a percent of total loans 0.58 % 0.16 %
Nonperforming assets (3) $ 4,291 $ 903
Nonperforming assets as a percent of total assets 0.56 % 0.12 %
(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 real estate owned.
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CONTACT:
Sandra Mitchell
Vice President / Director of Corporate Communications
Email: investorrelations@banksi.com
(860) 456-6509