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 $2.7
million, or $0.23 diluted earnings per share, for the quarter ended
September 30, 2018 versus $2.2 million, or $0.19 diluted
earnings per share, for the quarter ended September 30,
2017. The Company reported net income of $8.1 million, or
$0.68 diluted earnings per share, for the nine months ended
September 30, 2018 compared to $6.8 million, or $0.57 diluted
earnings per share, for the nine months ended September 30,
2017.
Net interest income increased $600,000 to $11.5 million and $1.4
million to $33.5 million for the three and nine months ended
September 30, 2018, respectively, as compared to the same
periods in 2017. Net interest income increased primarily as a
result of increases in the average balance of loans, the average
yield earned on loans and other interest-earning assets and a
reduction in the average balance of FHLB advances, partially offset
by a higher average balance of deposits, increases in the average
rates paid on deposits and borrowings as well as a decrease in the
average balance on investment securities. The increase in
yields and rates paid reflects the rising interest rate
environment.
The provision for loan losses increased $838,000 and $1.5
million for the three and nine months ended September 30,
2018, respectively, compared to the same periods in 2017, primarily
due to increases in nonperforming loans, reserves for impaired
loans and an increase in commercial real estate loans, which carry
a higher degree of risk than other loans held in the loan
portfolio. At September 30, 2018, nonperforming loans
increased to $8.4 million compared to $3.6 million at
September 30, 2017, resulting predominantly from increases in
nonperforming multi-family and commercial real estate and
residential real estate loans of $2.5 million and $1.9 million,
respectively. Net loan charge-offs were $17,000 and $129,000
for the three and nine months ended September 30, 2018,
respectively, compared to $101,000 and $104,000 for the three and
nine months ended September 30, 2017, respectively.
Noninterest income increased $404,000 to $2.9 million for the
three months ended September 30, 2018 and decreased $31,000 to $8.6
million for the nine months ended September 30, 2018 compared
to the same periods in the prior year. The increase in
noninterest income for the three months ended September 30,
2018 compared to the same period in 2017 was primarily due to
$488,000 of income from interest rate swap agreements entered into
during the third quarter of 2018. The decrease in noninterest
income for the nine months ended September 30, 2018 as compared to
the same period in 2017 was primarily due to a pre-tax gain in May
2017 of $795,000 on the sale of the Company's trust and asset
management business, partially offset by income of $684,000 in June
2018 resulting from the release of funds held in escrow related to
the December 2016 sale of the Company's ownership interest in
Vantis Life Insurance Company. Wealth management fees
decreased $15,000 and $516,000 for the three and nine months ended
September 30, 2018, respectively, versus the comparable
periods in the prior year as a result of the sale of the Company's
trust and asset management business in 2017. Fees earned from
mortgage banking activities decreased $176,000 and $239,000 for the
three and nine months ended September 30, 2018, respectively,
primarily due to lower volume and lower gains on residential
fixed-rate loan sales versus the comparable periods in 2017 due to
the rising interest rate market. The cash surrender value of
bank owned life insurance increased $97,000 and $276,000 for the
three and nine months ended September 30, 2018, respectively,
compared to the same periods in the prior year resulting from the
purchase of new policies in October 2017.
Noninterest expenses increased $294,000 and decreased $167,000
for the three and nine months ended September 30, 2018,
respectively, compared to the same periods in 2017. Salaries
and benefits increased $334,000 and $413,000 for the three and nine
months ended September 30, 2018, respectively, due to an
increase in employee compensation, benefits and related
taxes. Outside professional services decreased $111,000 and
$205,000 for the three and nine months ended September 30,
2018, respectively, versus the same periods in 2017 due primarily
to a decrease in legal expenses. Compared to the same periods
in 2017, other real estate operations decreased $14,000 and
$213,000 for the three and nine months ended September 30,
2018, respectively, due to the sale of five foreclosed properties
held by the Bank during 2018. Other noninterest expenses
decreased $189,000 for the nine months ended September 30,
2018 versus the comparable period in 2017 in large part due to
$373,000 of fraudulent debit card transactions which occurred in
early 2017. Regulatory assessments increased $14,000 and
decreased $60,000 for the three and nine months ended
September 30, 2018, respectively. The decrease for the
nine months ended September 30, 2018 was a result of a lower FDIC
assessment rate. Computer and electronic banking expenses
decreased $89,000 for the nine months ended September 30, 2018
versus the comparable period in 2017 as a result of contract
renegotiations with a third party provider for electronic banking
services.
Total assets increased $26.2 million, or 1.7%, to $1.61 billion
at September 30, 2018, principally due to increases of $39.2
million in net loans receivable, $671,000 in the cash surrender
value of life insurance and $533,000 in loans held for sale, offset
by decreases of $6.7 million in cash and cash equivalents, $6.5
million in available for sale securities and $618,000 in other real
estate owned. The higher balance of net loans receivable
reflects increases of $75.0 million, $6.0 million and $5.9 million
in multi-family and commercial real estate loans, condominium
association loans and construction loans, respectively, offset by
decreases of $16.7 million in both residential mortgage loans and
SBA and USDA guaranteed loans, $8.9 million in time share loans and
$5.7 million in consumer loans. The reduction in residential
mortgage loans was a result of a sale of $54.8 million of long-term
fixed-rate loans in the secondary market during 2018.
Multi-family and commercial real estate originations increased
$84.0 million for the first nine months of 2018 compared to the
same period in 2017. Originations of commercial business
loans, residential real estate loans and consumer loans decreased
$8.1 million, $5.5 million and $3.1 million, respectively, during
the first nine months of 2018 compared to the same period in
2017.
Total liabilities increased $24.6 million, or 1.7%, to $1.44
billion at September 30, 2018, primarily due to increases in
deposits of $42.0 million, or 3.5%, which included increases in
certificates of deposit of $36.1 million and noninterest-bearing
deposits of $22.8 million, offset by decreases in NOW and money
market accounts of $9.8 million and savings accounts of $6.7
million. Although market competition has intensified, deposit
growth remained strong due to competitively-priced deposit products
and marketing initiatives. Borrowings decreased $17.3 million
from $178.3 million at December 31, 2017 to $161.0 million at
September 30, 2018, resulting from repayments of Federal Home
Loan Bank advances with funds from excess deposits.
Total shareholders' equity increased $1.5 million from $168.5
million at December 31, 2017 to $170.0 million at
September 30, 2018. The increase in shareholders' equity
was attributable to net income of $8.1 million, partially offset by
the repurchase of common shares totaling $3.2 million, dividends
paid of $2.1 million and unrealized losses on securities included
in other comprehensive loss of $1.9 million. At
September 30, 2018, the Bank’s regulatory capital exceeded the
amounts required for the Bank to be considered “well-capitalized”
under applicable regulatory capital guidelines.
“The Bank continues to increase its focus on commercial lending,
as evidenced by increases of $75.9 million in commercial loan
originations and $2.4 million in interest income on loans during
2018 compared to the prior year. Similarly, deposits
increased $42.0 million during the current year, which included
nearly $23.0 million in noninterest-bearing deposits," 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-three branch locations, the
Bank offers a full-range of financial services to individuals,
businesses and municipalities within its market area.
Forward-Looking StatementsThis 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, 2017, 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:
|
|
September 30, |
|
December 31, |
(In Thousands /
Unaudited) |
|
2018 |
|
2017 |
|
|
|
|
|
ASSETS |
|
|
|
|
Noninterest-bearing
cash and due from banks |
|
$ |
16,915 |
|
|
$ |
16,872 |
|
Interest-bearing cash
and cash equivalents |
|
59,829 |
|
|
66,614 |
|
Securities |
|
160,522 |
|
|
167,545 |
|
Loans held for
sale |
|
1,368 |
|
|
835 |
|
Loans receivable,
net |
|
1,276,373 |
|
|
1,237,174 |
|
Bank-owned life
insurance |
|
34,397 |
|
|
33,726 |
|
Premises and equipment,
net |
|
19,099 |
|
|
19,409 |
|
Intangible assets |
|
16,442 |
|
|
16,893 |
|
Deferred tax asset |
|
6,943 |
|
|
6,412 |
|
Other real estate
owned, net |
|
608 |
|
|
1,226 |
|
Other assets |
|
14,639 |
|
|
14,250 |
|
Total
assets |
|
$ |
1,607,135 |
|
|
$ |
1,580,956 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
Liabilities |
|
|
|
|
Deposits |
|
$ |
1,250,093 |
|
|
$ |
1,208,047 |
|
Borrowings |
|
161,028 |
|
|
178,342 |
|
Other
liabilities |
|
26,002 |
|
|
26,086 |
|
Total
liabilities |
|
1,437,123 |
|
|
1,412,475 |
|
|
|
|
|
|
Shareholders'
equity |
|
170,012 |
|
|
168,481 |
|
Total
liabilities and shareholders' equity |
|
$ |
1,607,135 |
|
|
$ |
1,580,956 |
|
SELECTED OPERATING DATA:
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
(In Thousands /
Unaudited) |
|
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
|
Interest and dividend
income |
|
$ |
14,854 |
|
$ |
13,649 |
|
|
$ |
42,672 |
|
$ |
40,349 |
|
Interest expense |
|
3,389 |
|
2,784 |
|
|
9,215 |
|
8,305 |
|
Net
interest income |
|
11,465 |
|
10,865 |
|
|
33,457 |
|
32,044 |
|
|
|
|
|
|
|
|
Provision for loan
losses |
|
1,009 |
|
171 |
|
|
2,022 |
|
501 |
|
Net
interest income after provision for loan losses |
|
10,456 |
|
10,694 |
|
|
31,435 |
|
31,543 |
|
|
|
|
|
|
|
|
Noninterest income |
|
2,919 |
|
2,515 |
|
|
8,632 |
|
8,663 |
|
Noninterest
expenses |
|
9,952 |
|
9,658 |
|
|
29,856 |
|
30,023 |
|
Income
before income taxes |
|
3,423 |
|
3,551 |
|
|
10,211 |
|
10,183 |
|
|
|
|
|
|
|
|
Income tax
provision |
|
719 |
|
1,307 |
|
|
2,147 |
|
3,378 |
|
Net
income |
|
$ |
2,704 |
|
$ |
2,244 |
|
|
$ |
8,064 |
|
$ |
6,805 |
|
SELECTED OPERATING DATA - Concluded:
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
(Unaudited) |
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
Basic |
$ |
0.23 |
|
$ |
0.19 |
|
|
$ |
0.68 |
|
$ |
0.57 |
|
Diluted |
$ |
0.23 |
|
$ |
0.19 |
|
|
$ |
0.68 |
|
$ |
0.57 |
|
|
|
|
|
|
|
Weighted
average shares outstanding: |
|
|
|
|
|
Basic |
11,723,926 |
|
11,874,142 |
|
|
11,832,723 |
|
11,850,229 |
|
Diluted |
11,802,822 |
|
11,962,825 |
|
|
11,917,026 |
|
11,939,719 |
|
SELECTED FINANCIAL RATIOS:
|
At or For the |
|
|
At or For the |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
September 30, |
|
|
September 30, |
|
(Dollars in Thousands,
Except per Share Data / Unaudited) |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
Selected
Performance Ratios: (1) |
|
|
|
|
|
|
|
|
|
Return on average
assets |
0.67 |
|
% |
0.56 |
|
% |
|
0.68 |
|
% |
0.58 |
|
% |
Return on average
equity |
6.30 |
|
|
5.20 |
|
|
|
6.34 |
|
|
5.39 |
|
|
Interest rate
spread |
2.78 |
|
|
2.69 |
|
|
|
2.77 |
|
|
2.68 |
|
|
Net interest
margin |
3.04 |
|
|
2.90 |
|
|
|
3.00 |
|
|
2.88 |
|
|
Efficiency ratio
(2) |
69.19 |
|
|
72.18 |
|
|
|
70.94 |
|
|
73.75 |
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
|
|
|
|
|
Allowance for loan
losses |
|
|
|
|
|
$ |
14,227 |
|
|
$ |
12,217 |
|
|
Allowance for loan
losses as a percent of total loans (3) |
|
|
|
|
|
1.10 |
|
% |
0.99 |
|
% |
Allowance for loan
losses as a percent of nonperforming loans |
|
|
|
|
|
169.07 |
|
|
335.08 |
|
|
Nonperforming
loans |
|
|
|
|
|
$ |
8,415 |
|
|
$ |
3,646 |
|
|
Nonperforming loans as
a percent of total loans (3) |
|
|
|
|
|
0.65 |
|
% |
0.29 |
|
% |
Nonperforming assets
(4) |
|
|
|
|
|
$ |
9,023 |
|
|
$ |
5,325 |
|
|
Nonperforming assets as
a percent of total assets |
|
|
|
|
|
0.56 |
|
% |
0.34 |
|
% |
|
|
|
|
|
|
|
|
|
|
Per Share
Data: |
|
|
|
|
|
|
|
|
|
Book value per
share |
|
|
|
|
|
$ |
14.13 |
|
|
$ |
13.98 |
|
|
Less: Intangible assets
per share (5) |
|
|
|
|
|
(1.37 |
) |
|
(1.39 |
) |
|
Tangible book value per
share (5) |
|
|
|
|
|
12.76 |
|
|
12.59 |
|
|
Dividends declared per
share |
|
|
|
|
|
$ |
0.18 |
|
|
$ |
0.15 |
|
|
|
|
(1) Ratios have been annualized. |
(2) Represents noninterest expenses divided by the
sum of net interest and noninterest income. |
(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 $16.4 million and $17.0 million
at September 30, 2018 and 2017, respectively. |
CONTACT:Catherine Pomerleau, Executive
Assistant/Investor Relations AdministratorEmail:
investorrelations@savingsinstitute.bank(860) 456-6514
SI Financial Grp., Inc. (NASDAQ:SIFI)
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