SI Financial Group, Inc. (the “Company”) (NASDAQ:SIFI), the
holding company for Savings Institute Bank and Trust Company (the
“Bank”), reported a net loss of $1.6 million, or $0.13 loss per
share, for the quarter ended December 31, 2017 versus net
income of $6.5 million, or $0.55 diluted earnings per share, for
the quarter ended December 31, 2016. The Company
reported net income of $5.2 million, or $0.44 diluted earnings per
share, for the year ended December 31, 2017 compared to $11.3
million, or $0.95 diluted earnings per share, for the year ended
December 31, 2016. The net loss for the quarter and
lower net income for the year ended December 31, 2017 was
related to a charge to income tax expense of $4.0 million as a
result of the revaluation of the Company's net deferred tax asset
due to the passage of the Tax Cuts and Jobs Act on December 22,
2017, which reduced the corporate income tax rate from 35% to
21%. This charge was recorded as additional income tax
expense in the Company's statement of income for the quarter ended
December 31, 2017. Additionally, net income for the
quarter and year ended December 31, 2016 included $7.3 million
($5.1 million after tax) in net proceeds from the sale of the
Company's ownership interest in Vantis Life Insurance Company in
December 2016. Excluding the aforementioned charge to income
tax expense in 2017, the Company would have reported net income of
$2.4 million and $9.2 million, or $0.20 and $0.77 diluted earnings
per share, for the quarter and year ended December 31, 2017,
respectively. Excluding the aforementioned Vantis Life
Insurance Company sale in 2016, the Company would have reported net
income of $1.4 million and $6.3 million, or $0.12 and $0.53 diluted
earnings per share, for the quarter and year ended December 31,
2016, respectively.(1)
Net interest income decreased $1.5 million to $10.9 million for
the quarter ended December 31, 2017 and increased $78,000 to $42.9
million for the year ended December 31, 2017 compared to the
same periods in 2016. Net interest income decreased for the
quarter ended December 31, 2017 compared to the same period in
the prior year due to $2.0 million reported as dividends in
conjunction with the sale of the Company's ownership interest in
Vantis Life Insurance Company in December 2016.
Notwithstanding such dividends, net interest income increased for
the quarter and year ended December 31, 2017 as a result of an
increase in the average balance and average rate earned on loans
and a decrease in the average balance of borrowings, partially
offset by increases in the average balance of deposits and the
average rate paid on deposits and borrowings.
The provision for loan losses decreased $257,000 and $1.5
million for the quarter and year ended December 31, 2017,
respectively, compared to the same periods in 2016, primarily due
to reductions in reserves for impaired loans and net loan
charge-offs. At December 31, 2017, nonperforming loans
totaled $6.4 million, compared to $5.4 million at December 31,
2016, resulting from increases in nonperforming multi-family and
commercial real estate loans of $2.4 million, partially offset by a
decrease in nonperforming residential real estate loans of $1.0
million. Net loan charge-offs were $43,000 and $147,000 for
the quarter and year ended December 31, 2017, respectively,
consisting primarily of residential real estate loan
charge-offs. Net loan charge-offs for the quarter and year
ended December 31, 2016 were $68,000 and $233,000,
respectively.
Noninterest income decreased $5.2 million and $4.4 million to
$2.5 million and $11.2 million for the quarter and year ended
December 31, 2017, respectively, versus the comparable periods
in the prior year primarily due to the net proceeds of $5.3 million
from the sale of the Company's ownership interest in Vantis Life
Insurance Company in December 2016 as mentioned above. Fees
earned from mortgage banking activities increased $348,000 and
$316,000 for the quarter and the year ended December 31, 2017,
respectively, due to increased volume and gains on residential
fixed-rate loan sales. Service fees increased $92,000 and
$459,000 for the quarter and year ended December 31, 2017,
respectively, compared to the same periods in 2016, primarily due
to a higher volume of overdraft charges. Other noninterest
income increased $702,000 for the year ended December 31, 2017 as a
result of a pre-tax gain of $795,000 on the sale of the Company's
trust and asset management business in May 2017. As a result
of the sale, wealth management fees decreased $303,000 and $661,000
for the quarter and year ended December 31, 2017,
respectively.
Noninterest expenses decreased $768,000 and $203,000 for the
quarter and year ended December 31, 2017, respectively,
compared to the same periods in 2016. The decrease in
noninterest expenses was primarily due to a $500,000 cash
contribution in 2016 to SI Financial Group Foundation, a charitable
foundation dedicated to providing assistance to charitable causes
within the communities we serve. Salaries and
employee benefits decreased $305,000 for the fourth quarter of 2017
as compared to 2016, primarily attributable to decreases in
employee compensation and insurance, partially offset by an
increase in deferred compensation. Salaries and employee
benefits increased $367,000 for the year ended December 31,
2017, as a result of lower deferred compensation costs in 2016
because of a post-retirement benefit payout in June 2016.
Computer and electronic banking expenses decreased $13,000 and
$309,000 for the quarter and year ended December 31, 2017,
respectively, compared to 2016 primarily due to the reconfiguration
of the telecommunication infrastructure and contract renegotiations
with a third party provider. Regulatory assessments decreased
$177,000 for the year ended December 31, 2017 due to a lower
FDIC assessment rate compared to the year ended December 31,
2016. The decrease in noninterest expenses for the year ended
December 31, 2017 were offset by $373,000 in fraudulent debit
card transactions during the first quarter of 2017. Other
real estate operations increased $88,000 and $393,000 for the
quarter and year ended December 31, 2017, respectively,
compared to the same periods in 2016, primarily due to the
foreclosure of six properties as well as holding costs related to
the other real estate properties.
Total assets increased $30.1 million, or 1.9%, to $1.58 billion
at December 31, 2017, principally due to increases of $16.9
million in net loans receivable, $12.4 million in cash surrender
value of life insurance and $10.3 million in cash and cash
equivalents, offset by decreases of $5.3 million in available for
sale securities, $3.2 million in the deferred tax asset and $2.3
million in Federal Home Loan Bank stock. The higher balance
of net loans receivable reflects increases in multi-family and
commercial mortgage loans of $60.3 million, other commercial
business loans of $9.0 million and condominium association loans of
$3.6 million, offset by decreases in SBA and USDA guaranteed loans
of $26.9 million, residential real estate loans of $19.8 million
and construction loans of $7.3 million. Compared to
2016, residential real estate, commercial real estate, commercial
business and consumer loan originations decreased $10.5 million,
$7.7 million, $2.9 million and $1.2 million, respectively, during
2017. The decrease in available for sale securities was due
to maturities during the year ended December 31, 2017, which were
used to fund loan growth. The $4.0 million reduction of the
deferred tax asset related to the revaluation of the deferred tax
asset as of the enactment date of the new tax reform legislation in
December 2017.
Total liabilities increased $26.3 million, or 1.9%, to $1.41
billion at December 31, 2017. Deposits increased $77.4
million, or 6.8%, during 2017. Contributing to higher
deposits in 2017 were increases in NOW and money market deposits of
$49.2 million, noninterest bearing deposits of $19.3 million and
certificates of deposit of $11.7 million, offset by a decrease in
savings accounts of $2.5 million. Deposit growth remained
strong due to competitive products and marketing initiatives.
The increase in total liabilities was offset by a decrease of $47.7
million in borrowings, from $226.0 million at December 31,
2016 to $178.3 million at December 31, 2017, resulting from
repayments of Federal Home Loan Bank advances with funds from
excess deposits.
Total shareholders’ equity increased $3.8 million from $164.7
million at December 31, 2016 to $168.5 million at
December 31, 2017. The increase in shareholders' equity
was attributable to net income of $5.2 million, offset by a net
unrealized loss on available for sale securities aggregating
$517,000 (net of taxes), and dividends declared of $2.4
million. At December 31, 2017, the Bank’s regulatory
capital exceeded the amounts required for it to be considered
“well-capitalized” under applicable regulatory capital
guidelines.
“2017 was a remarkable year not only for the Bank, but for all
corporations as a result of the enactment of the new tax reform
legislation prior to year-end. While the reduction in the
corporate income tax rate will be positive beginning in 2018, the
revaluation of our deferred tax asset to reflect the lower tax rate
resulted in a charge to earnings of $4.0 million, reducing our net
income from $9.2 million to $5.2 million for 2017. In
addition, continued growth in deposits of over $77.0 million
allowed us to fund loan demand and reduce our reliance on wholesale
funding," 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-four 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 (loss) and earnings (loss) per share to shareholders,
excluding the revaluation of the deferred tax asset for the quarter
and year ended December 31, 2017 and the tax-affected Vantis sale
transaction for the quarter and year ended December 31, 2016.
|
Three Months Ended |
|
Years Ended |
|
December 31, |
|
December 31, |
|
2017 |
2016 |
|
2017 |
2016 |
Net Income
(Loss): |
|
|
|
|
|
Net Income (Loss) as
reported |
$ |
(1,563 |
) |
$ |
6,485 |
|
|
$ |
5,242 |
|
$ |
11,310 |
|
Net Gain on Sale of
Investment in Affiliate |
— |
|
(5,060 |
) |
|
— |
|
(5,060 |
) |
Revaluation of Deferred
Tax Asset |
3,969 |
|
— |
|
|
3,969 |
|
— |
|
Net income
adjusted |
$ |
2,406 |
|
$ |
1,425 |
|
|
$ |
9,211 |
|
$ |
6,250 |
|
|
|
|
|
|
|
Earnings (Loss)
Per Share: |
|
|
|
|
|
Diluted as
reported |
$ |
(0.13 |
) |
$ |
0.55 |
|
|
$ |
0.44 |
|
$ |
0.95 |
|
Net Gain on Sale of
Investment in Affiliate |
— |
|
(0.43 |
) |
|
— |
|
(0.42 |
) |
Revaluation of Deferred
Tax Asset |
0.33 |
|
— |
|
|
0.33 |
|
— |
|
Diluted adjusted |
$ |
0.20 |
|
$ |
0.12 |
|
|
$ |
0.77 |
|
$ |
0.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2016, 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:
|
|
December 31, |
|
December 31, |
(Dollars in Thousands /
Unaudited) |
|
2017 |
|
2016 |
|
|
|
|
|
ASSETS |
|
|
|
|
Noninterest-bearing
cash and due from banks |
|
$ |
16,872 |
|
|
$ |
18,225 |
|
Interest-bearing cash
and cash equivalents |
|
66,614 |
|
|
54,961 |
|
Securities |
|
167,545 |
|
|
175,153 |
|
Loans held for
sale |
|
835 |
|
|
1,393 |
|
Loans receivable,
net |
|
1,237,174 |
|
|
1,220,323 |
|
Bank-owned life
insurance |
|
33,726 |
|
|
21,293 |
|
Premises and equipment,
net |
|
19,409 |
|
|
19,884 |
|
Intangible assets |
|
16,893 |
|
|
17,494 |
|
Deferred tax asset |
|
6,412 |
|
|
9,658 |
|
Other real estate
owned, net |
|
1,226 |
|
|
1,466 |
|
Other assets |
|
14,250 |
|
|
11,040 |
|
|
|
|
|
|
Total
assets |
|
$ |
1,580,956 |
|
|
$ |
1,550,890 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
Liabilities |
|
|
|
|
Deposits |
|
$ |
1,208,047 |
|
|
$ |
1,130,685 |
|
Borrowings |
|
178,342 |
|
|
226,007 |
|
Other
liabilities |
|
26,086 |
|
|
29,471 |
|
Total
liabilities |
|
1,412,475 |
|
|
1,386,163 |
|
|
|
|
|
|
Shareholders'
equity |
|
168,481 |
|
|
164,727 |
|
|
|
|
|
|
Total
liabilities and shareholders' equity |
|
$ |
1,580,956 |
|
|
$ |
1,550,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED OPERATING DATA:
|
|
Three Months Ended |
|
Years Ended |
|
|
December 31, |
|
December 31, |
(Dollars in Thousands /
Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
|
|
|
|
|
|
|
Interest and dividend
income |
|
$ |
13,638 |
|
$ |
14,891 |
|
|
$ |
53,987 |
|
$ |
52,911 |
|
Interest expense |
|
2,776 |
|
2,555 |
|
|
11,081 |
|
10,083 |
|
Net
interest income |
|
10,862 |
|
12,336 |
|
|
42,906 |
|
42,828 |
|
|
|
|
|
|
|
|
Provision for loan
losses |
|
160 |
|
417 |
|
|
661 |
|
2,190 |
|
Net
interest income after provision for loan losses |
|
10,702 |
|
11,919 |
|
|
42,245 |
|
40,638 |
|
|
|
|
|
|
|
|
Noninterest income |
|
2,498 |
|
7,653 |
|
|
11,161 |
|
15,594 |
|
Noninterest
expenses |
|
9,772 |
|
10,540 |
|
|
39,795 |
|
39,998 |
|
Income
before income taxes |
|
3,428 |
|
9,032 |
|
|
13,611 |
|
16,234 |
|
|
|
|
|
|
|
|
Income tax
provision |
|
4,991 |
|
2,547 |
|
|
8,369 |
|
4,924 |
|
Net
income (loss) |
|
$ |
(1,563 |
) |
$ |
6,485 |
|
|
$ |
5,242 |
|
$ |
11,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED OPERATING DATA - Concluded:
|
Three Months Ended |
|
Years Ended |
|
December 31, |
|
December 31, |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
|
|
|
|
|
|
Earnings (loss)
per share: |
|
|
|
|
|
Basic |
$ |
(0.13 |
) |
$ |
0.55 |
|
|
$ |
0.44 |
|
$ |
0.96 |
|
Diluted |
$ |
(0.13 |
) |
$ |
0.55 |
|
|
$ |
0.44 |
|
$ |
0.95 |
|
|
|
|
|
|
|
Weighted
average shares outstanding: |
|
|
|
|
|
Basic |
11,886,618 |
|
11,819,843 |
|
|
11,859,401 |
|
11,806,927 |
|
Diluted |
11,886,618 |
|
11,892,518 |
|
|
11,926,519 |
|
11,868,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED FINANCIAL RATIOS:
|
At or For the |
|
At or For the |
|
Three Months Ended |
|
Years Ended |
|
December 31, |
|
December 31, |
(Dollars in Thousands,
Except Per Share Data / Unaudited) |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
Selected
Performance Ratios (1): |
|
|
|
|
|
|
|
Return (loss) on
average assets |
(0.39 |
)% |
|
1.69 |
% |
|
0.33 |
% |
|
0.75 |
% |
Return (loss) on
average equity |
(3.59 |
) |
|
15.97 |
|
|
3.09 |
|
|
7.09 |
|
Interest rate
spread |
2.71 |
|
|
3.23 |
|
|
2.69 |
|
|
2.85 |
|
Net interest
margin |
2.92 |
|
|
3.42 |
|
|
2.89 |
|
|
3.01 |
|
Efficiency ratio
(2) |
73.14 |
|
|
52.73 |
|
|
73.60 |
|
|
68.53 |
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios: |
|
|
|
|
|
|
|
Allowance for loan
losses |
|
|
|
|
$ |
12,334 |
|
|
$ |
11,820 |
|
Allowance for loan
losses as a percent of total loans (3) |
|
|
|
|
0.99 |
% |
|
0.96 |
% |
Allowance for loan
losses as a percent of nonperforming loans |
|
|
|
|
192.60 |
|
|
217.56 |
|
Nonperforming
loans |
|
|
|
|
$ |
6,404 |
|
|
$ |
5,433 |
|
Nonperforming loans as
a percent of total loans (3) |
|
|
|
|
0.51 |
% |
|
0.44 |
% |
Nonperforming assets
(4) |
|
|
|
|
$ |
7,630 |
|
|
$ |
6,899 |
|
Nonperforming assets as
a percent of total assets |
|
|
|
|
0.48 |
% |
|
0.44 |
% |
|
|
|
|
|
|
|
|
Per Share
Data: |
|
|
|
|
|
|
|
Book value per
share |
|
|
|
|
$ |
13.76 |
|
|
$ |
13.49 |
|
Less: Intangible
assets per share (5) |
|
|
|
|
(1.38 |
) |
|
(1.43 |
) |
Tangible book value per
share (5) |
|
|
|
|
12.38 |
|
|
12.06 |
|
Dividends per
share |
|
|
|
|
$ |
0.20 |
|
|
$ |
0.16 |
|
|
|
(1)
Quarterly ratios 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 losses 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 $16.9 million and $17.5 million at December 31, 2017
and 2016, respectively. |
CONTACT:Catherine Pomerleau, Executive
Assistant/Investor Relations AdministratorEmail:
investorrelations@banksi.com(860) 456-6514
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