savings institute

SI Financial Group, Inc. Reports Earnings for the Three and Six Months Ended June 30, 2015

Jul 22, 2015

Willimantic, Connecticut — July 22, 2015.  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 $1.0 million, or $0.08 diluted earnings per share, for the quarter ended June 30, 2015 versus $914,000, or $0.07 diluted earnings per share, for the quarter ended June 30, 2014.  The Company reported net income of $1.9 million, or $0.16 diluted earnings per share, for the six months ended June 30, 2015 compared to net income of $1.8 million, or $0.15 diluted earnings per share, for the six months ended June 30, 2014. 

Net interest income increased $42,000 to $9.6 million and decreased $522,000 to $19.1 million for the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014.  Lower net interest income for the six months ended June 30, 2015 was primarily due to lower rates on securities and loans versus the comparable period in 2014.

The provision for loan losses decreased $55,000 and $150,000 for the three and six months ended June 30, 2015, respectively, as a result of reductions in loan charge-offs and reserves for impaired loans compared to the same periods in 2014.  In addition, commercial loans outstanding increased as a result of a $52.3 million purchase of SBA guaranteed loans in April 2015 that do not require a valuation allowance as such loans are fully guaranteed by the U.S. government.  At June 30, 2015, nonperforming loans increased to $5.9 million, compared to $5.5 million at June 30, 2014, resulting from increases in nonperforming commercial business loans and multi-family and commercial loans of $390,000 and $261,000, respectively, offset by a decrease in nonperforming residential mortgage loans of $231,000.  Net loan charge-offs were $5,000 and $55,000 for the three and six months ended June 30, 2015, respectively, compared to $222,000 and $316,000 for the three and six months ended June 30, 2014, respectively.

Noninterest income increased $148,000 to $2.6 million for the three months ended June 30, 2015, and decreased $287,000 to $4.9 million for the six months ended June 30, 2015, versus the comparable periods in the prior year.  Other noninterest income increased $144,000 for the three months ended June 30, 2015, compared to the same period in 2014, primarily as a result of income from the debit card utilization incentive program and rental income from office space at the Newport branch location.   Other noninterest income decreased $145,000 for the six months ended June 30, 2015 compared to the same period in 2014.  Higher other noninterest income for the six months ended June 30, 2014 was primarily due to a reimbursement of $250,000 in legal fees and other foreclosure expenses.  Service fees decreased $93,000 and $163,000 for the three and six months ended June 30, 2015, respectively, compared to the same periods in the prior year, as a result of a reduction in overdraft privilege fees.  The increase in the net gains from the sale of available for sale securities of $103,000 and $68,000 for the three and six months ended June 30, 2015, respectively, compared to the three and six months ended June 30, 2014, partially offset decreases in service fees.

Noninterest expenses increased $69,000 for the three months ended June 30, 2015 and decreased $824,000 for the six months ended June 30, 2015, compared to the same periods in 2014.  Other noninterest expense declined $102,000 and $442,000 for the three and six months ended June 30, 2015, respectively.  Higher other noninterest expenses for the first half of 2014 included fraudulent debit card transactions of $245,000, impairment of small business investment companies totaling $175,000, and prepayment penalties totaling $75,000 for the early extinguishment of certain Federal Home Loan Bank borrowings.  Salaries and employee benefits increased $98,000 for the three months ended June 30, 2015, and decreased $158,000 for the six months ended June 30, 2015, compared to the same periods in 2014, resulting from a reduction in staffing levels year-over-year.  The Bank’s conversion to a state-chartered financial institution effective in December 2014 contributed to the decrease of $53,000 and $157,000 in the regulatory assessment for the three and six months ended June 30, 2015, respectively.  Decreased occupancy and equipment expense of $71,000 and $125,000 for the three and six months ended June 30, 2015, respectively, versus comparable periods in 2014, is a result of reconfiguring and optimizing telephone and data services.  Lower noninterest expenses were partially offset by increases of $145,000 and $90,000 in computer and electronic banking services for the three and six months ended June 30, 2015, respectively, resulting from the implementation of an enhanced mobile banking platform.

 Total assets increased $58.8 million, or 4.4%, to $1.41 billion at June 30, 2015, principally due to increases of $55.9 million in net loans receivable and $3.6 million in Federal Reserve Bank stock, offset by a decrease of $2.2 million in available for sale securities.  The higher balance of net loans receivable reflects increases in SBA and USDA guaranteed loans of $41.8 million, construction loans of $6.0 million and multi-family and commercial real estate loans of $4.3 million.  Residential and commercial real estate loan originations increased $22.6 million and $9.8 million, respectively, during the first half of 2015 compared to the same period in 2014, offset by a decrease in consumer loan originations of $4.4 million. 

 Total liabilities increased $63.9 million, or 5.4%, to $1.26 billion at June 30, 2015 compared to $1.19 billion at December 31, 2014.  Deposits increased $19.4 million, or 1.9%, at June 30, 2015,  which included increases in NOW and money market accounts of $25.9 million, noninterest-bearing demand deposits of $4.9 million and certificates of deposit of $4.4 million, partially offset by a decrease in savings accounts of $15.9 million.  Deposit growth remained strong due to marketing and promotional initiatives and competitively-priced deposit products.  Borrowings increased $43.9 million from $156.5 million at December 31, 2014 to $200.4 million at June 30, 2015, resulting from the need to fund increased commercial lending for the $52.3 million purchase of SBA guaranteed loans in April 2015.

Total shareholders' equity decreased $5.1 million from $157.7 million at December 31, 2014 to $152.6 million at June 30, 2015.  The decrease in shareholders' equity was attributable to the repurchase of common shares totaling $10.2 million and dividends of $973,000, offset by the exercise of stock options of $3.3 million and net income of $1.9 million.  At June 30, 2015, the Bank’s regulatory capital exceeded the amounts required for it to be considered “well-capitalized” under applicable regulatory capital guidelines.

“We are pleased to announce improved earnings for the quarter.  We continue to focus on controlling costs and identifying areas of cost reduction that will positively impact future periods.  Additionally, growth in both loans and deposits reflects our ability to serve our customers in the markets we operate,” 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, Savings Institute Bank and Trust Company is a community-oriented financial institution headquartered in Willimantic, Connecticut.  Through its twenty-six branch locations, the Bank offers a full-range of financial services to individuals, businesses and municipalities within its market area. 

Forward-Looking Statements

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 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, including the section entitled “Risk Factors,” and subsequent Quarterly Reports on Form 10-Q filed 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.

SELECTED FINANCIAL CONDITION DATA:

 

 

June 30,

 

December 31,

(In Thousands / Unaudited)

 

2015

 

2014

 

 

 

 

 

ASSETS

 

 

 

 

Noninterest-bearing cash and due from banks

 

$

16,693

 

 

$

18,965

 

Interest-bearing cash and cash equivalents

 

22,892

 

 

20,286

 

Securities

 

185,386

 

 

183,373

 

Loans held for sale

 

1,240

 

 

747

 

Loans receivable, net

 

1,100,772

 

 

1,044,864

 

Bank-owned life insurance

 

21,609

 

 

21,306

 

Premises and equipment, net

 

22,130

 

 

21,711

 

Intangible assets

 

18,396

 

 

18,697

 

Deferred tax asset

 

7,861

 

 

8,048

 

Other real estate owned, net

 

1,420

 

 

1,271

 

Other assets

 

10,950

 

 

11,265

 

Total assets

 

$

1,409,349

 

 

$

1,350,533

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

June 30,

 

December 31,

Liabilities

 

2015

 

2014

 

 

 

 

 

Deposits

 

$

1,030,128

 

 

$

1,010,713

 

Borrowings

 

200,441

 

 

156,525

 

Other liabilities

 

26,159

 

 

25,556

 

Total liabilities

 

1,256,728

 

 

1,192,794

 

 

 

 

 

 

Shareholders' equity

 

152,621

 

 

157,739

 

Total liabilities and shareholders' equity

 

$

1,409,349

 

 

$

1,350,533

 

 

SELECTED OPERATING DATA:

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

(In Thousands / Unaudited)

 

2015

2014

 

2015

2014

 

 

 

 

 

 

 

Interest and dividend income

 

$

11,790

 

$

11,683

 

 

$

23,260

 

$

23,754

 

Interest expense

 

2,145

 

2,080

 

 

4,192

 

4,164

 

Net interest income

 

9,645

 

9,603

 

 

19,068

 

19,590

 

 

 

 

 

 

 

 

Provision for loan losses

 

360

 

415

 

 

695

 

845

 

Net interest income after provision for loan losses

 

9,285

 

9,188

 

 

18,373

 

18,745

 

 

 

 

 

 

 

 

Noninterest income

 

2,610

 

2,462

 

 

4,947

 

5,234

 

Noninterest expenses

 

10,406

 

10,337

 

 

20,467

 

21,291

 

Income before income taxes

 

1,489

 

1,313

 

 

2,853

 

2,688

 

 

 

 

 

 

 

 

Income tax provision

 

484

 

399

 

 

927

 

868

 

Net income

 

$

1,005

 

$

914

 

 

$

1,926

 

$

1,820

 

 

SELECTED OPERATING DATA - Concluded:

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(Unaudited)

2015

2014

 

2015

2014

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

$

0.08

 

$

0.07

 

 

$

0.16

 

$

0.15

 

Diluted

$

0.08

 

$

0.07

 

 

$

0.16

 

$

0.15

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

12,006,510

 

12,341,727

 

 

12,160,268

 

12,318,604

 

Diluted

12,031,613

 

12,387,433

 

 

12,192,140

 

12,365,583

 

 

SELECTED FINANCIAL RATIOS:

 

At or For the

 

 

At or For the

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(Dollars in Thousands, Except per Share Data / Unaudited)

2015

 

2014

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios:

 

 

 

 

 

 

 

 

 

Return on average assets (1)

0.29

 

%

0.27

 

%

 

0.28

 

%

0.27

 

%

Return on average equity (1)

2.60

 

 

2.35

 

 

 

2.48

 

 

2.36

 

 

Interest rate spread

2.84

 

 

2.90

 

 

 

2.87

 

 

2.99

 

 

Net interest margin

2.98

 

 

3.04

 

 

 

3.00

 

 

3.13

 

 

Efficiency ratio (2)

85.84

 

 

85.88

 

 

 

85.70

 

 

85.99

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

 

 

 

$

8,437

 

 

$

7,445

 

 

Allowance for loan losses as a percent of total loans (3)

 

 

 

 

 

0.76

 

%

0.71

 

%

Allowance for loan losses as a percent of nonperforming loans

 

 

 

 

 

143.07

 

 

135.88

 

 

Nonperforming loans

 

 

 

 

 

$

5,897

 

 

$

5,479

 

 

Nonperforming loans as a percent of total loans (3)

 

 

 

 

 

0.53

 

%

0.52

 

%

Nonperforming assets (4)

 

 

 

 

 

$

7,317

 

 

$

7,143

 

 

Nonperforming assets as a percent of total assets

 

 

 

 

 

0.52

 

%

0.53

 

%

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

Book value per share

 

 

 

 

 

$

12.48

 

 

$

12.15

 

 

Less: Intangible assets per share(5)

 

 

 

 

 

(1.50

)

 

(1.48

)

 

Tangible book value per share (5)

 

 

 

 

 

10.98

 

 

10.67

 

 

Dividends declared per share

 

 

 

 

 

$

0.08

 

 

$

0.06

 

 

 

 

 

(1) Ratios for the three and six months have been annualized.

(2) Represents noninterest expenses divided by the sum of net interest and noninterest income, less any realized gains or losses on the sale of securities and other-than-temporary impairment on securities.

(3) Total loans exclude deferred fees and costs.

(4) Nonperforming assets consist of nonperforming loans and other real estate owned.

(5) Tangible book value per share equals book value per share less the effect of intangible assets, which consisted of goodwill and other intangibles of $18.4 million and $19.0 million at June 30, 2015 and 2014, respectively.

 

CONTACT:

Catherine Pomerleau, Executive Assistant/Investor Relations Administrator

Email:  investorrelations@banksi.com

(860) 456-6514