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 $3.1
million, or $0.27 diluted earnings per share, for the quarter ended
March 31, 2019 versus $2.0 million, or $0.17 diluted earnings
per share, for the quarter ended March 31, 2018.
Excluding after-tax costs of $60,000 associated with the pending
merger with Berkshire Hills Bancorp, Inc. ("Berkshire"), the
Company would have reported net income of $3.2 million, or $0.27
diluted earnings per share, for the quarter ended March 31,
2019.(1) Following the approval of the merger by the
Company's stockholders on April 2, 2019, the Company anticipates
the merger with Berkshire to be completed in the second quarter of
2019, subject to customary closing conditions.
Net interest income increased $579,000 to $11.5 million for the
quarter ended March 31, 2019, compared to $10.9 million for
the quarter ended March 31, 2018, primarily as a result of
increases in the average rate and balance of loans and other
interest-earning assets and a reduction in the average balance of
FHLB advances, partially offset by increases in the average rates
paid on deposits and borrowings and a higher average balance of
deposits. The increase in yields earned and rates paid
reflects the rising interest rate environment.
The provision for loan losses decreased $207,000 for the first
quarter of 2019 compared to the same period in 2018, primarily due
to decreases in general reserve risk factors as well as reductions
in net loan charge-offs. Net loan recoveries were $13,000 for
the quarter ended March 31, 2019 compared to net loan
charge-offs of $55,000 for the quarter ended March 31,
2018. At March 31, 2019, nonperforming loans were $8.5
million compared to $7.9 million at March 31, 2018, resulting
primarily from increases in nonperforming residential real estate
loans and multi-family and commercial real estate loans of $691,000
and $402,000, respectively.
Noninterest income increased $369,000 to $2.8 million for the
quarter ended March 31, 2019 compared to the same period in
the prior year, primarily due to fee income of $255,000 from
interest rate swap agreements. Service fees increased
$121,000 for the quarter ended March 31, 2019 compared to the
same quarter in 2018 due to a higher volume of electronic banking
transactions and an increase in service and overdraft fees.
Although residential loan sale volume increased during the first
quarter of 2019, income from mortgage banking activities decreased
$17,000 compared to the same period in 2018 due to lower average
gains on sales.
Noninterest expenses decreased $366,000 for the first quarter of
2019 compared to the same period in 2018, primarily due to a
decrease of $189,000 in other noninterest expenses, which was in
large part due to a reduction in the provision for credit losses
and losses on electronic banking. Outside professional
services decreased $127,000 for the quarter ended March 31,
2019 versus the same period in 2018 due primarily to a decline in
legal expenses. Occupancy and equipment decreased $121,000
during the first quarter of 2019 compared to the same period in
2018 primarily due to lower building maintenance and equipment
expense. Expenses from other real estate owned decreased
$90,000 for the first quarter of 2019, compared to the same period
in 2018 as a result of write-downs of existing foreclosed
properties and the sale of three foreclosed properties held by the
Bank. Salaries and benefits increased $167,000 for the first
quarter of 2019 versus the comparable period in 2018 primarily
attributable to an increase in salaries, related compensation and
benefits.
Total assets increased $41.3 million, or 2.5%, to $1.69 billion
at March 31, 2019, principally due to increases of $32.8
million in cash and cash equivalents, $9.7 million in operating
leases right-of-use assets and $3.7 million in net loans
receivable, offset by a decrease of $4.7 million in available for
sale securities. The increase of $9.7 million in operating
leases right-of-use assets is due to the initial recognition and
measurement of operating leases as a result of the adoption of new
lease accounting guidance requiring the capitalization of lease
assets and liabilities on the balance sheet related to leases with
terms greater than twelve months. The higher balance of net
loans receivable reflects increases of $28.1 million in
multi-family and commercial real estate loans, offset by decreases
of $19.9 million in commercial business loans and $5.2 million in
residential mortgage loans. Originations of commercial real
estate loans, residential mortgage loans and consumer loans
decreased $21.3 million, $4.9 million and $3.0 million,
respectively, during the first quarter of 2019 compared to the same
period in 2018. The reduction in available for sale
securities reflects maturities of mortgage-back securities.
Total liabilities increased $37.6 million, or 2.5%, to $1.52
billion at March 31, 2019. Deposits increased $29.0
million, or 2.2%, resulting from certificates of deposit growth of
$38.1 million, partially offset by decreases of $8.2 million in NOW
and money market accounts and savings accounts of $686,000.
Although market competition continues to be intense, deposit growth
remained strong because of competitively-priced deposit products
and marketing initiatives. The increase in total liabilities
includes operating lease liabilities of $9.8 million related to the
adoption of the new lease accounting standard.
Total shareholders' equity increased $3.7 million from $172.1
million at December 31, 2018 to $175.8 million at
March 31, 2019. The increase in shareholders' equity was
attributable to net income of $3.1 million and a decrease in
unrealized losses on securities included in other comprehensive
income of $1.0 million, partially offset by dividends paid of
$708,000. At March 31, 2019, the Bank’s regulatory
capital exceeded the amounts required for the Bank to be considered
“well-capitalized” under applicable regulatory capital
guidelines.
“As we prepare for our merger with Berkshire Bank, we are very
pleased with the improvement in core operating results as compared
to the prior year. In particular, key metrics such as
earnings per share, return on average assets and the efficiency
ratio reflect management’s ongoing efforts to drive
performance. Strong deposit growth has continued to fund loan
demand and reduce the Bank’s use of borrowings while maintaining a
consistent net interest margin," 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.
Non-GAAP Financial MeasuresWe believe that
certain non-GAAP financial measures provide investors with
information useful in understanding our financial performance, our
performance trends and financial position. Specifically, we
provide measures based on what we believe are our operating
earnings on a consistent basis and exclude non-core operating items
which affect the GAAP reporting of results of operations. We,
as well as securities analysts, investors and other interested
parties, use these measures to compare peer company operating
performance. We believe our presentation and discussion,
together with the accompanying reconciliations, provide a complete
understanding of factors and trends affecting our business and
allows investors to view performance in a manner similar to
management. These non-GAAP measures should not be considered
a substitute for GAAP basis measures and results, and we strongly
encourage investors to review our consolidated financial statements
in their entirety and not to rely on any single financial
measure. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial
measures with other companies' non-GAAP financial measures having
the same or similar names.
(1) The table below presents a reconciliation of net income and
earnings per share to shareholders, excluding the tax-affected
transaction costs related to the pending merger with Berkshire, for
the quarter ended March 31, 2019.
|
|
|
(Dollars in Thousands,
Except Per Share Data/Unaudited) |
|
|
Net
Income: |
|
|
Net income - GAAP
basis |
|
$ |
3,134 |
|
Merger-related
transaction costs (after tax) |
|
60 |
|
Net income - Non GAAP
basis |
|
$ |
3,194 |
|
|
|
|
Earnings Per
Share: |
|
|
Diluted as reported -
GAAP basis |
|
$ |
0.27 |
|
Merger-related
transaction costs (after tax) |
|
— |
|
Diluted adjusted -
Non-GAAP basis |
|
$ |
0.27 |
|
|
|
|
|
|
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, 2018, 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:
|
|
|
|
|
|
|
March 31, |
|
December 31, |
(In Thousands /
Unaudited) |
|
2019 |
|
2018 |
|
|
|
|
|
ASSETS |
|
|
|
|
Noninterest-bearing
cash and due from banks |
|
$ |
14,489 |
|
|
$ |
17,433 |
|
Interest-bearing cash
and cash equivalents |
|
106,230 |
|
|
70,496 |
|
Securities |
|
150,885 |
|
|
156,495 |
|
Loans held for
sale |
|
1,324 |
|
|
1,915 |
|
Loans receivable,
net |
|
1,316,229 |
|
|
1,312,565 |
|
Bank-owned life
insurance |
|
34,847 |
|
|
34,633 |
|
Premises and equipment,
net |
|
19,232 |
|
|
19,552 |
|
Operating leases
right-of-use assets |
|
9,704 |
|
|
— |
|
Intangible assets |
|
16,141 |
|
|
16,291 |
|
Deferred tax asset |
|
6,649 |
|
|
6,921 |
|
Other real estate
owned, net |
|
222 |
|
|
720 |
|
Other assets |
|
15,189 |
|
|
12,806 |
|
Total assets |
|
$ |
1,691,141 |
|
|
$ |
1,649,827 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
Liabilities |
|
|
|
|
Deposits |
|
$ |
1,317,009 |
|
|
$ |
1,288,031 |
|
Borrowings |
|
159,869 |
|
|
160,084 |
|
Operating lease
liability |
|
9,753 |
|
|
— |
|
Other
liabilities |
|
28,717 |
|
|
29,584 |
|
Total liabilities |
|
1,515,348 |
|
|
1,477,699 |
|
|
|
|
|
|
Shareholders'
equity |
|
175,793 |
|
|
172,128 |
|
Total
liabilities and shareholders' equity |
|
$ |
1,691,141 |
|
|
$ |
1,649,827 |
|
|
|
|
|
|
|
|
|
|
SELECTED OPERATING DATA:
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
(In Thousands /
Unaudited) |
|
2019 |
2018 |
|
|
|
|
Interest and dividend
income |
|
$ |
15,707 |
|
$ |
13,754 |
|
Interest expense |
|
4,203 |
|
2,829 |
|
Net interest
income |
|
11,504 |
|
10,925 |
|
|
|
|
|
Provision for loan
losses |
|
518 |
|
725 |
|
Net interest
income after provision for loan losses |
|
10,986 |
|
10,200 |
|
|
|
|
|
Noninterest income |
|
2,763 |
|
2,394 |
|
Noninterest
expenses |
|
9,685 |
|
10,051 |
|
Income before
income taxes |
|
4,064 |
|
2,543 |
|
|
|
|
|
Income tax
provision |
|
930 |
|
537 |
|
Net income |
|
$ |
3,134 |
|
$ |
2,006 |
|
|
|
|
|
|
|
|
|
SELECTED OPERATING DATA - Concluded:
|
|
|
Three Months Ended |
|
March 31, |
(Unaudited) |
2019 |
2018 |
|
|
|
Earnings per
share: |
|
|
Basic |
$ |
0.27 |
|
$ |
0.17 |
|
Diluted |
$ |
0.27 |
|
$ |
0.17 |
|
|
|
|
Weighted
average shares outstanding: |
|
|
Basic |
11,769,717 |
|
11,909,028 |
|
Diluted |
11,803,069 |
|
11,995,298 |
|
|
|
|
|
|
SELECTED FINANCIAL RATIOS:
|
|
|
|
At or For the |
|
|
Three Months Ended |
|
|
March 31, |
|
(Dollars in Thousands,
Except per Share Data / Unaudited) |
2019 |
|
2018 |
|
|
|
|
|
|
Selected
Performance Ratios: (1) |
|
|
|
|
Return on average
assets |
0.77 |
|
% |
0.52 |
|
% |
Return on average
equity |
7.28 |
|
|
4.79 |
|
|
Interest rate
spread |
2.69 |
|
|
2.80 |
|
|
Net interest
margin |
3.00 |
|
|
3.00 |
|
|
Efficiency ratio
(2) |
67.88 |
|
|
75.46 |
|
|
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
Allowance for loan
losses |
$ |
15,213 |
|
|
$ |
13,004 |
|
|
Allowance for loan
losses as a percent of total loans (3) |
1.15 |
|
% |
1.02 |
|
% |
Allowance for loan
losses as a percent of nonperforming loans |
180.00 |
|
|
164.50 |
|
|
Nonperforming
loans |
$ |
8,452 |
|
|
$ |
7,905 |
|
|
Nonperforming loans as
a percent of total loans (3) |
0.64 |
|
% |
0.62 |
|
% |
Nonperforming assets
(4) |
$ |
8,674 |
|
|
$ |
8,979 |
|
|
Nonperforming assets as
a percent of total assets |
0.51 |
|
% |
0.56 |
|
% |
|
|
|
|
|
Per Share
Data: |
|
|
|
|
Book value per
share |
$ |
14.58 |
|
|
$ |
13.80 |
|
|
Less: Intangible assets
per share(5) |
(1.34 |
) |
|
(1.37 |
) |
|
Tangible book value per
share (5) |
13.24 |
|
|
12.43 |
|
|
Dividends declared per
share |
$ |
0.06 |
|
|
$ |
0.06 |
|
|
(1)
Quarterly 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 $16.1 million and $16.7 million at March 31, 2019
and 2018, respectively. |
|
CONTACT:Catherine Pomerleau, Executive
Assistant/Investor Relations AdministratorEmail:
investorrelations@savingsinstitute.bank(860) 456-6514
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