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| 8-K - SI FINANCIAL GROUP 8-K 7-27-2011 - SI Financial Group, Inc. | form8k.htm |
Exhibit 99.1
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EARNINGS RELEASE
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SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2011
Willimantic, Connecticut — July 27, 2011. 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 $707,000, or $0.07 basic and diluted net income per share, for the quarter ended June 30, 2011 versus net income of $713,000, or $0.07 basic and diluted net income per share, for the quarter ended June 30, 2010. The Company reported net income for the six months ended June 30, 2011 of $916,000, or $0.09 basic and diluted net income per share, compared to $1.2 million, or $0.12 basic and diluted net income per share, for the six months ended June 30, 2010. Lower net income for 2011 was primarily the result of a shareholder approved charitable contribution of $500,000 ($335,000 after tax) to SI Financial Group Foundation during the first quarter.
Net interest income increased $124,000, to $6.7 million, and $222,000, to $13.2 million, for the three and six months ended June 30, 2011, respectively, compared to the same periods in 2010. The increase in net interest income was due to a lower cost of funds and an increase in the average balance of interest-earning assets, offset by a decrease in the average rate earned on interest-earning assets.
The provision for loan losses decreased $62,000 and $22,000 for the three and six months ended June 30, 2011, respectively. Net loan recoveries totaled $8,000 for the second quarter of 2011 compared to net loan charge-offs of $438,000 for the first half of 2011. Net loan charge-offs were $167,000 and $435,000 for the three and six months ended June 30, 2010, respectively. At June 30, 2011, nonperforming loans totaled $9.6 million, compared to $4.3 million at June 30, 2010. An increase in nonperforming residential and commercial real estate loans of $2.8 million and $1.2 million, respectively, contributed to the higher balance of nonperforming loans at June 30, 2011. Additionally, nonperforming loans at June 30, 2011 included $1.4 million in USDA and SBA loans that were more than ninety days delinquent at June 30, 2011. These loans are fully guaranteed by the U.S. government. Specific loan loss allowances relating to nonperforming loans decreased to $446,000 at June 30, 2011, compared to $516,000 at June 30, 2010.
Noninterest income was $2.9 million for both the quarters ended June 30, 2011 and 2010 and $5.5 million and $5.6 million for the six months ended June 30, 2011 and 2010, respectively. For the three and six months ended June 30, 2011, the Company recognized gains of $161,000 and $182,000, respectively, resulting from an increase in the fair value of two trading securities. Wealth management fees rose in 2011, principally due to an increase in trust service fees and the Bank’s new retirement product introduced during 2011. The Company realized lower net gains on the sale of securities of $231,000 and $463,000 for the second quarter and the first half of 2011, respectively, compared to the same periods in 2010. Service fees decreased $107,000 and $186,000 for the quarter and first half of 2011, respectively, as a result of a reduction in overdraft privilege fees, offset by an increase in fees associated with higher electronic banking usage. Despite an increase in the volume of fixed-rate residential loan sales, mortgage banking fees declined for both the three and six months ended June 30, 2011 as a result of a reduction in proceeds received on the sales. Other noninterest income included a net gain of $122,000 related to death benefit proceeds from a bank-owned life insurance policy received during the first quarter of 2011. Other noninterest income for the first half of 2011 was offset by impairment charges of $72,000 to reduce the carrying value in the Bank’s small business investment company limited partnership, compared to impairment charges of $12,000 for the same period in 2010.
Noninterest expenses increased $145,000 and $721,000 for the three and six months ended June 30, 2011, respectively, compared to the same periods in 2010, predominately due to a $500,000 cash contribution to SI Financial Group Foundation in connection with the public stock offering and concurrent second-step conversion completed during the first quarter of 2011. SI Financial Group Foundation is a charitable foundation dedicated to providing assistance to charitable causes within the communities we serve. Additional costs associated with salaries and benefits and occupancy and equipment contributed to the increase in noninterest expenses for 2011. Higher salaries and benefits were attributable to the addition of lending staff hired to build commercial loan relationships. The increase in occupancy and equipment expenses primarily related to equipment maintenance contracts and greater snow removal and utility costs associated with the poor weather conditions in the region during the first quarter of 2011. Costs related to other real estate owned decreased due to a reduction in other real estate owned during 2011. A reduction in the FDIC deposit insurance assessment for 2011 was due to a lower assessment rate stemming from a new calculation methodology.
Total assets increased $22.8 million, or 2.5%, to $949.2 million at June 30, 2011 from $926.4 million at December 31, 2010, principally due to increases of $55.4 million in available for sale securities and $17.5 million in net loans receivable, offset by decreases of $40.9 million in cash and cash equivalents, $6.0 million in loans held for sale and $1.9 million in other assets. Cash and cash equivalents decreased as subscription funds received from the stock offering and funds received from deposit growth were deployed for the purchase of primarily U.S. government and agency obligations, government-sponsored enterprise and mortgage-backed securities and USDA and SBA loans that are fully guaranteed by the U.S. government. Total loan originations increased $11.6 million during the first half of 2011 compared to the same period in 2010, offset by an increase of $6.2 million in sales of fixed-rate residential mortgage loans. The increase in loan originations for the first half of 2011 was mainly due to higher commercial mortgage, commercial business and residential mortgage loan originations of $9.5 million, $1.9 million and $1.2 million, respectively. The decrease in other assets was due to a reduction in prepaid expenses.
Total liabilities were $819.3 million at June 30, 2011 compared to $845.3 million at December 31, 2010. Subscription funds received in escrow at year-end 2010 totaling $48.3 million were transferred to stockholders’ equity upon completion of the stock offering on January 12, 2011. Deposits increased $28.6 million, or 4.3%, which included increases in NOW and money market accounts of $41.4 million and noninterest-bearing deposits of $5.9 million, offset by decreases in certificates of deposit of $10.3 million and savings accounts of $8.4 million. Deposit growth remained strong due to marketing and promotional initiatives and competitively-priced deposit products. Borrowings decreased $5.0 million from $122.4 million at December 31, 2010 to $117.4 million at June 30, 2011, resulting from net repayments of Federal Home Loan Bank advances.
Total shareholders’ equity increased $48.9 million from $81.1 million at December 31, 2010 to $130.0 million at June 30, 2011. The increase in shareholders’ equity was attributable to net stock offering proceeds of $50.3 million, an increase in net unrealized gains on securities aggregating $1.2 million (net of taxes) and earnings of $916,000, offset by the funding of the employee stock ownership plan of $3.1 million, dividends of $596,000 and an increase in net unrealized losses on an interest rate swap derivative of $77,000. At June 30, 2011, the Bank’s regulatory capital exceeded the amounts required for it to be considered “well-capitalized” under applicable regulatory capital guidelines.
Effective January 12, 2011, the Company completed its public stock offering and the concurrent second-step conversion of the Bank’s former mutual holding company from the mutual holding company form of organization to the stock form of organization. A total of 6,544,493 shares of common stock were sold in the subscription and community offerings at $8.00 per share, including 392,670 shares purchased by the Savings Institute Bank & Trust Company Employee Stock Ownership Plan. Additional shares totaling 4,032,356 were issued in exchange for shares of the former SI Financial Group, Inc., at an exchange ratio of 0.8981. Shares outstanding after the stock offering and the exchange totaled 10,576,849.
“We are pleased with our ability to increase the level of interest-earning assets during the second quarter, particularly in light of the continued weakened economy and lack of significant loan demand. Nonperforming loans are expected to remain elevated in the near future as a result of economic uncertainty and delays caused by changes in the State of Connecticut’s foreclosure process,” 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-one branch locations, 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, 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, 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.
SELECTED FINANCIAL CONDITION DATA:
SELECTED OPERATING DATA:
SELECTED OPERATING DATA - Continued:
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(1)
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Net income per share and weighted average shares outstanding for the three and six months ended June 30, 2010 have been restated to reflect the effect of the Company’s stock offering and concurrent second-step conversion on January 12, 2011, at the exchange ratio of 0.8981.
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SELECTED FINANCIAL RATIOS:
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At or For the
Three Months Ended
June 30,
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At or For the
Six Months Ended
June 30,
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(Dollars in Thousands / Unaudited)
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2011
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2010
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2011
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2010
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Selected Performance Ratios:
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Return on average assets (1)
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0.30 | % | 0.32 | % | 0.20 | % | 0.28 | % | ||||||||
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Return on average equity (1)
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2.18 | 3.54 | 1.42 | 3.04 | ||||||||||||
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Interest rate spread
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2.70 | 2.88 | 2.70 | 2.91 | ||||||||||||
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Net interest margin
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3.00 | 3.12 | 3.00 | 3.15 | ||||||||||||
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Efficiency ratio (2)
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88.73 | 88.63 | 91.98 | 89.77 | ||||||||||||
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Asset Quality Ratios:
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Allowance for loan losses
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$ | 4,761 | $ | 4,878 | ||||||||||||
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Allowance for loan losses as a percent of total loans (3)
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0.76 | % | 0.80 | % | ||||||||||||
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Allowance for loan losses as a percent of nonperforming loans
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49.52 | 114.32 | ||||||||||||||
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Nonperforming loans
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$ | 9,614 | $ | 4,267 | ||||||||||||
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Nonperforming loans as a percent of total loans (3)
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1.53 | % | 0.70 | % | ||||||||||||
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Nonperforming assets (4)
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$ | 10,329 | $ | 6,012 | ||||||||||||
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Nonperforming assets as a percent of total assets
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1.09 | % | 0.68 | % | ||||||||||||
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Per Share Data:
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Book value per share
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$ | 12.29 | $ | 7.67 | ||||||||||||
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Tangible book value per share (5)
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11.90 | 7.28 | ||||||||||||||
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Dividends per share
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0.03 | 0.03 | ||||||||||||||
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(1)
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Quarterly ratios have been annualized.
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(2)
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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.
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(3)
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Total loans exclude net deferred costs and include loans held for sale.
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(4)
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Nonperforming assets consist of nonperforming loans and other real estate owned.
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(5)
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Tangible book value per share equals book value per share less the effect of intangible assets (which consisted of goodwill and other intangibles of $4.1 million) at both June 30, 2011 and 2010.
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CONTACT:
Diane Phillips
Executive Assistant/Investor Relations Administrator
Email: investorrelations@banksi.com
(860) 456-6514