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[SI FINANCIAL GROUP, INC. LETTERHEAD] EARNINGS RELEASE
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SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2008
WILLIMANTIC, CONNECTICUT--JULY 23, 2008. 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 $463,000,
or $0.04 basic and diluted earnings per common share, for the quarter ended June
30, 2008 versus net income of $377,000, or $0.03 basic and diluted earnings per
common share, for the quarter ended June 30, 2007. Net income for the six months
ended June 30, 2008 was $918,000, or $0.08 basic and diluted earnings per common
share, compared to $826,000, or $0.07 basic and diluted earnings per common
share, for the six months ended June 30, 2007. Higher net income for 2008
resulted from increases in net interest income and noninterest income, offset by
increases in noninterest expenses, the provision for income taxes and the
provision for loan losses.
For the three and six months ended June 30, 2008, net interest income increased
11.7% to $6.0 million from $5.4 million and increased 9.3% to $11.6 million from
$10.6 million, respectively, compared to the same periods in 2007. The increase
in net interest income was due to a higher average balance of interest-earning
assets and higher yields on securities, offset by an increase in the cost of
funds related to an increase in the average balance of deposits and Federal Home
Loan Bank borrowings. Despite an increase in the cost of funds, the average
yield on deposits and borrowings declined for the three and six months ended
June 30, 2008 compared to the same periods in 2007.
The provision for loan losses increased $95,000 and $65,000 for the three and
six months ended June 30, 2008, respectively, primarily due to an increase in
nonperforming loans and loan growth, offset by a decrease in loan charge-offs.
At June 30, 2008, nonperforming loans totaled $7.9 million compared to $3.3
million at June 30, 2007. Specific reserves relating to nonperforming loans
increased to $1.2 million at June 30, 2008 from $660,000 at June 30, 2007. At
June 30, 2008, two commercial construction relationships accounted for $5.1
million of nonperforming loans and $1.0 million in specific reserves. Net loan
charge-offs were $21,000 and $103,000 for the three and six months ended June
30, 2008, respectively, compared to $110,000 and $172,000 for the three and six
months ended June 30, 2007. Higher loan charge-offs for 2007 related to the
write-down of a commercial real estate property subsequently transferred to
other real estate owned and charge-offs associated with the indirect automobile
loan portfolio, which was sold in June 2007.
Noninterest income was $2.6 million for the quarter ended June 30, 2008 compared
to $2.3 million for the quarter ended June 30, 2007. Noninterest income was $5.2
million for the first half of 2008 compared to $4.7 million for the same period
of 2007. Contributing to the increase in noninterest income for the three and
six months ended June 30, 2008, were increases in service fees of $172,000 and
$331,000, respectively, other noninterest income of $122,000 and $139,000,
respectively, and wealth management fees of $50,000 and $99,000, respectively.
Service fees rose during the first half of 2008 as a result of an increase in
overdraft charges on certain deposit products and higher electronic banking
usage. The increase in other noninterest income for 2008 represents the recovery
of administrative fees and expenses related to the Bank's acquisition of certain
assets and operations of the former Circle Trust Company, which were previously
deemed uncollectible. Wealth management fees were higher principally due to
growth in the assets under management. The increases in noninterest income in
2008 were offset by a decrease of $177,000 in the net gain on the sale of
available for sale securities for the first half of 2008 as a result of a gain
of $321,000 from the sale of marketable equity securities during the first half
of 2007.
Noninterest expenses increased $761,000 and $1.1 million for the three and six
months ended June 30, 2008, respectively, compared to the same periods in 2007.
Higher noninterest expenses were primarily attributable to increased operating
costs associated with three additional branch offices, which resulted in higher
compensation costs due to increased staffing levels and greater occupancy
expense related to facility leases and other occupancy-related expenses.
Computer and electronic banking services expense rose due to increased
telecommunication costs and transaction activity. During the first half of
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2008, an impairment charge of $63,000 was recorded to reduce the carrying value
of the Bank's investment in a small business investment company limited
partnership. The increase in noninterest expenses was offset by a decrease in
outside professional services in 2008 due to charges associated with the
termination of the agreement to purchase a mortgage company during the first
half of 2007.
Total assets increased $70.7 million, or 8.9%, to $860.9 million at June 30,
2008 from $790.2 million at December 31, 2007. Contributing to the increase in
assets were increases of $36.4 million in available for sale securities, $22.0
million in net loans receivable, $6.8 million in cash and cash equivalents and
$3.6 million in intangible assets, offset by a decrease of $913,000 in other
real estate owned. Available for sale securities increased as a result of the
purchases of predominately mortgage-backed securities with funds received from
the Bank's Colchester and New London, Connecticut branch acquisitions during the
first quarter of 2008. The increase in net loans receivable included increases
in commercial and residential mortgage loans and commercial business loans,
offset by decreases in construction loans and home equity lines of credit. Of
the $22.0 million increase in net loans receivable, $7.4 million represented
primarily commercial loans acquired in connection with the Colchester and New
London branch acquisitions. Loan originations increased $14.0 million for the
first half of 2008 compared to the same period of 2007. The increase in
intangible assets, consisting of goodwill and core deposit intangibles, resulted
from the Colchester and New London branch acquisitions. The decrease in other
real estate owned reflects the sale of a commercial real estate property and a
residential real estate property during the first half of 2008.
Total liabilities were $783.1 million at June 30, 2008 compared to $708.1
million at December 31, 2007. Deposits increased $72.9 million, or 13.3%, which
included an increase in certificate of deposit accounts of $36.8 million, NOW
and money market accounts of $32.0 million and demand deposits of $4.5 million.
Contributing to the increase in deposits was $27.7 million in deposits that were
assumed in the purchase of the Colchester and New London, Connecticut branch
offices and competitively priced deposit products. Borrowings decreased $2.0
million from $149.9 million at December 31, 2007 to $147.9 million at June 30,
2008, resulting from a reduction in Federal Home Loan Bank advances.
Total stockholders' equity decreased $4.3 million from $82.1 million at December
31, 2007 to $77.7 million at June 30, 2008. The decrease in equity related to
stock repurchases of 257,655 shares at a cost of $2.5
million, an increase in net unrealized holding losses on available for sale
securities aggregating $2.4 million (net of taxes), cumulative effect adjustment
for a change in accounting principle of $547,000, resulting from the application
of Financial Accounting Standards Board's Emerging Issues Task Force Issue No.
06-4, "ACCOUNTING FOR DEFERRED COMPENSATION AND POSTRETIREMENT BENEFIT ASPECTS
OF ENDORSEMENT SPLIT-DOLLAR LIFE INSURANCE ARRANGEMENTS" and dividends of $0.08
per share aggregating $333,000, offset by earnings of $918,000.
"We are pleased with the progress we have made with the expansion and
improvements in our branch network. The Colchester and New London, Connecticut
acquisitions, along with the relocation of our Norwich and Brooklyn, Connecticut
branch offices, have been enthusiastically greeted by the communities they
serve. On the national level, we have witnessed bank failures and continued
deterioration of the housing market. While Connecticut has experienced an
increase in foreclosure activity, the extent of foreclosure in Connecticut is
lower than other areas of the country. Savings Institute remains financially
strong and maintains its commitment to serving the financial needs of our
communities. We remain well-capitalized and retain healthy liquidity levels,
which are derived from our core deposit base of Eastern Connecticut," commented
Rheo A. Brouillard, President and Chief Executive Officer.
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-two branch locations, 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, 2007, INCLUDING THE SECTION
ENTITLED "RISK FACTORS," AND QUARTERLY REPORTS ON FORM 10-Q 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) June 30, December 31,
2008 2007
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ASSETS
Noninterest-bearing cash and due from banks $ 14,678 $ 14,543
Interest-bearing cash and cash equivalents 12,805 6,126
Securities 186,602 149,716
Loans held for sale - 410
Loans receivable, net 609,550 587,538
Bank-owned life insurance 8,562 8,410
Other assets 28,664 23,455
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Total assets $ 860,861 $ 790,198
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 621,273 $ 548,335
Borrowings 147,884 149,867
Other liabilities 13,956 9,909
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Total liabilities 783,113 708,111
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Stockholders' equity 77,748 82,087
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Total liabilities and stockholders' equity $ 860,861 $ 790,198
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SELECTED OPERATING DATA:
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(DOLLARS IN THOUSANDS / UNAUDITED) Three Months Ended Six Months Ended
June 30, June 30,
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2008 2007 2008 2007
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Interest and dividend income $ 11,707 $ 10,724 $ 23,146 $ 21,198
Interest expense 5,707 5,351 11,536 10,573
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Net interest income 6,000 5,373 11,610 10,625
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Provision for loan losses 150 55 285 220
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Net interest income after provision for 11,325 10,405
loan losses 5,850 5,318
Noninterest income 2,623 2,253 5,151 4,736
Noninterest expenses 7,806 7,045 15,140 13,991
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Income before provision for income taxes 667 526 1,336 1,150
Provision for income taxes 204 149 418 324
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Net income $ 463 $ 377 $ 918 $ 826
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SELECTED OPERATING DATA - CONTINUED:
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(UNAUDITED) Three Months Ended Six Months Ended
June 30, June 30,
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2008 2007 2008 2007
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Earnings per common share:
Basic $ 0.04 $ 0.03 $ 0.08 $ 0.07
Diluted $ 0.04 $ 0.03 $ 0.08 $ 0.07
Weighted-average common shares outstanding:
Basic 11,333,100 11,830,072 11,382,278 11,817,690
Diluted 11,355,066 11,886,173 11,409,562 11,886,931
SELECTED FINANCIAL RATIOS:
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At or For the At or For the
(DOLLARS IN THOUSAND / UNAUDITED) Three Months Ended Six Months Ended
June 30, June 30,
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2008 2007 2008 2007
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SELECTED PERFORMANCE RATIOS: (1)
Return on average assets 0.22 % 0.20 % 0.22 % 0.22 %
Return on average equity 2.37 1.81 2.30 2.00
Interest rate spread 2.59 2.49 2.52 2.49
Net interest margin 2.98 3.00 2.95 2.99
Efficiency ratio (2) 90.88 92.38 91.11 93.03
ASSET QUALITY RATIOS:
Allowance for loan losses $ 5,427 $ 4,413
Allowance for loan losses as a percent of total loans 0.88 % 0.76 %
Allowance for loan losses as a percent of
nonperforming loans 68.58 134.58
Nonperforming loans $ 7,913 $ 3,279
Nonperforming loans as a percent of total loans 1.29 % 0.57 %
Nonperforming assets (3) $ 7,913 $ 4,232
Nonperforming assets as a percent of total assets 0.92 % 0.56 %
(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.
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CONTACT:
Sandra Mitchell
Vice President / Director of Corporate Communications
Email: investorrelations@banksi.com
(860) 456-6509