Press Releases

BANK FOUNDATION ASSISTS AREA NON-PROFITS

Willimantic, CT (December 23, 2009) – The SI Financial Group Foundation, Inc. has awarded more than $53,000 to local charitable organizations that provide essential community programs and services to the areas they serve.

Established in 2004 in connection with the Bank’s minority stock offering, the Foundation recently made grants to: New London Homeless Hospitality Center, Pawcatuck Neighborhood Center; Windham Area Interfaith Ministry; and, The Windham Region No Freeze Hospitality Center.  Also receiving grants in 2009 were: Quinebaug Valley Community College Foundation, Three Rivers Community College Foundation, Natchaug Hospital; Lebanon Elementary School PTO/Bailey’s Garden; and several local, community organizations.

With assets in excess of $2.0 million, SI Financial Group Foundation, Inc. is keenly interested in funding community development via affordable housing, job training and programs that assist the economically disadvantaged. Other areas of support include: cultural, educational, health, and social services.

The SI Financial Group Foundation, Inc. will be seeking applications again in March for distribution in July.  Applications are available by contacting Sandra Mitchell at (860) 456-6509 or Sandra_Mitchell@banksi.com.

SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2009

Willimantic, Connecticut October 28, 2009.  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 $378,000, or $0.03 basic and diluted earnings per common share, for the quarter ended September 30, 2009 versus a net loss of $4.7 million, or $0.41 basic and diluted loss per common share, for the quarter ended September 30, 2008.  The Company reported a net loss for the nine months ended September 30, 2009 of $185,000, or $0.02 basic and diluted loss per common share, versus a net loss of $3.8 million, or $0.33 basic and diluted loss per common share, for the nine months ended September 30, 2008.

For the three and nine months ended September 30, 2009, net interest income increased 3.3% to $6.5 million from $6.2 million and increased 8.2% to $19.3 million from $17.9 million, respectively, compared to the same periods in 2008.  The increase in net interest income was due to a lower cost of funds and an increase in the average balance of loans, offset by an increase in average deposits and a decrease in the average rate earned on interest-earning assets. 

The provision for loan losses increased $467,000 and $2.1 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in the prior year.  The higher provision in 2009 related to an increase in loan charge-offs.  The loan portfolio continues to be impacted by adverse economic and real estate market conditions.  At September 30, 2009, nonperforming loans totaled $6.7 million, compared to $8.5 million at September 30, 2008.  Specific reserves relating to nonperforming loans decreased to $721,000 at September 30, 2009 compared to $1.2 million at September 30, 2008.  Net loan charge-offs were $309,000 and $3.3 million for the three and nine months ended September 30, 2009, respectively, compared to $326,000 and $429,000 for the three and nine months ended September 30, 2008, respectively.  The increase in loan charge-offs and the decrease in nonperforming loans and specific reserves for the nine months ended September 30, 2009 primarily resulted from the charge-off of two commercial construction loan relationships aggregating $2.3 million that were previously identified as impaired with established specific reserves.

Noninterest income was $2.7 million for the quarter ended September 30, 2009, compared to a loss of $4.6 million for the quarter ended September 30, 2008.  Noninterest income was $7.5 million for the first nine months of 2009 compared to $478,000 for the same period of 2008.  Lower noninterest income for the three and nine months ended September 30, 2008 was primarily attributable to a $7.1 million other-than-temporary impairment charge on certain investments to fair value.  Service fees decreased as a result of a decrease in overdraft charges on certain deposit products.  The Company realized net losses on the sale of bonds of $189,000, offset by gains on the sale of stocks of $62,000 during the quarter ended September 30, 2009.  For the nine months ended September 30, 2009, the Company realized a gain of $57,000 and $70,000, respectively, resulting primarily from the sale of mortgage-backed securities and corporate debt securities, offset by other-than-temporary impairment charges totaling $150,000 on two pooled trust preferred securities.  Impairment charges of $47,000 and $383,000 were recorded during the three and nine months ended September 30, 2009, respectively, to reduce the carrying value of the Bank’s investment in two small business investment company limited partnerships.  For 2009, the Company reported a net gain on the sale of loans of $587,000 resulting from the sale of $46.2 million of fixed-rate longer-term residential mortgage loans, compared to a net gain on the sale of loans of $108,000 resulting from the sale of $8.6 million of residential mortgage loans for the same period in 2008.  

Noninterest expenses increased $445,000 and $2.0 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008, primarily due to increases in the FDIC assessment, salaries and benefits, and computer and electronic banking services.  The increase in the FDIC assessment of $801,000 was attributable to the expiration of credits during 2008, an increase in the assessment rate for 2009 and an FDIC-imposed industry-wide five basis point special assessment totaling $393,000.  Higher costs associated with employee benefits, loan origination commissions and related taxes contributed to the increase in salaries and employee benefits.  Loan origination commissions increased due to higher residential mortgage volume as a result of lower market interest rates.  Computer and electronic banking services expense increased due to higher telecommunication costs and transaction activity.   Lower depreciation expense reduced occupancy and equipment expense.

Total assets increased $20.3 million, or 2.4%, to $873.4 million at September 30, 2009 from $853.1 million at December 31, 2008.  Contributing to the increase in assets were increases of $15.7 million in cash and cash equivalents and $11.5 million in available for sale securities, offset by a decrease in net loans receivable of $7.9 million.  Despite increases in residential mortgage loan originations, net loans receivable decreased from the sale of longer-term fixed-rate residential mortgage loans and lower commercial mortgage and business loan originations.  Lower commercial loan originations were offset by the purchase of $27.0 million in USDA and SBA loans that are fully guaranteed by the U.S. government.  An increase in residential mortgage loan originations of $52.1 million was partially offset by the sale of residential mortgage loans, from current production, totaling $46.2 million during 2009.  Overall loan originations increased $18.6 million, or 17.5%, during the first nine months of 2009 compared to the same period in 2008 due primarily to a decrease in market interest rates.  Available for sale securities increased primarily as a result of the purchase of mortgage-backed securities, U.S. government and agency obligations and government-sponsored enterprise securities.  

Total liabilities were $796.0 million at September 30, 2009 compared to $780.2 million at December 31, 2008.  Deposits increased $34.9 million, or 5.6%, which included increases in NOW and money market accounts of $23.8 million, certificates of deposit of $6.4 million and noninterest-bearing deposits of $5.2 million.  The increase in deposits was due to branch expansion, marketing and promotional initiatives and competitively priced deposit products.  Borrowings decreased $16.5 million from $147.8 million at December 31, 2008 to $131.3 million at September 30, 2009, resulting from net repayments of Federal Home Loan Bank advances.

Total stockholders’ equity increased $4.5 million from $72.9 million at December 31, 2008 to $77.4 million at September 30, 2009.  The increase in stockholders’ equity was attributable to a decrease in net unrealized holding losses on available for sale securities aggregating $4.1 million (net of taxes), offset by net operating losses of $185,000 and stock repurchases of 11,243 shares at a cost of $68,000.

March 31, 2009, required management to separately identify whether other-than-temporary impairment charges totaling $7.1 million that were previously recognized in earnings during the third and fourth quarters of 2008 were related to credit losses or other noncredit factors at the measurement date of impairment.  Management determined, based on the present value of expected cash flows in accordance with applicable guidance, that $4.0 million of the $7.1 million in other-than-temporary impairment charges were related to noncredit factors and therefore, recorded a cumulative effect adjustment of $2.7 million (net of taxes) to retained earnings with a corresponding adjustment to accumulated other comprehensive loss.  The Company does not intend to sell these impaired securities and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis of each of these securities.

“The results for the quarter reflect a continued commitment to maintaining both credit quality and capital.  For the quarter, nonperforming assets and other real estate owned declined by $1.2 million to 0.89% of total assets at September 30, 2009.  Capital levels remain well above regulatory requirements for well-capitalized institutions with Tier 1 capital at 8.07% and total risk-based capital at 16.44%.  We remain diligent in our efforts to steer the Bank in a positive direction through this recession and as the economy begins to improve,” 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 our Annual Report on Form 10-K for the year ended December 31, 2008, 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.

(1)    Weighted-average shares outstanding for 2008 have been adjusted retrospectively for restricted shares that were determined “participating” in accordance with Financial Accounting Standards Board Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-based Payment Transactions Are Participating Securities.”

 SELECTED FINANCIAL RATIOS:

1. 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 impairments on securities. 
3. Nonperforming assets consist of nonperforming loans and other real estate owned.

SAVINGS INSTITUTE EMPLOYEE’S CARING & GIVING PROGRAM AWARDS GRANTS

Willimantic, CT (August 7, 2009) – The Savings Institute Bank & Trust Company Employees’ Caring & Giving Program recently awarded $4,325 to 18 charitable organizations.
Employees targeted organizations dedicated to aiding families in need. Those organizations receiving grants were: Holy Family Home Shelter in Willimantic; Catholic Charities and TVCCA Shelter for the Homeless in Norwich; Mother’s Retreat in Groton; New London Homeless Hospitality Center; and, Stonington Human Services. Also receiving funds were:  Killingly Central School; Danielson United Methodist Church Fuel Bank; Lebanon Social Services; The Network Against Domestic Abuse in Enfield; and, Town of Enfield Fuel Bank. Additional recipients included: Town of Tolland Human Services; Charles N. Enes Community Center in South Windsor and the Town of South Windsor Fuel Bank; East Hampton Volunteer Food Bank; Colchester Social Services, Hebron Social Services; and Rutland County Women’s Network and Shelter in Rutland, VT.
The Caring & Giving program has been making quarterly grants since its inception in 1998.  Bank employees created the program as a way of self-directing their yearly charitable contributions. For the year 2009, employees pledged, and will award, more than $17,600 to assist organizations that address such issues as families in need, hunger and homelessness, helping the elderly and assisting individuals with disabilities or special needs.
            SI Financial Group, Inc. (NASDQ Global: SIFI) is the parent company of Savings Institute Bank & Trust Company. Savings Institute Bank & Trust Company is headquartered in Willimantic, Connecticut with twenty-one offices in eastern Connecticut. The Bank is a full service community-oriented financial institution dedicated to serving the financial service needs of individuals and businesses within its market area.

SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED - JUNE 30, 2009

Willimantic, Connecticut—July 22, 2009.  SI Financial Group, Inc. (the “Company”) (NASDAQ Global Market:  SIFI), the holding company of Savings Institute Bank and Trust Company (the “Bank”), reported a net loss $619,000, or $(0.05) basic and diluted earnings per common share, for the quarter ended June 30, 2009 versus net income of $463,000, or $0.04 basic and diluted earnings per common share, for the quarter ended June 30, 2008.  The Company reported a net loss for the six months ended June 30, 2009 of $563,000, or $(0.05) basic and diluted earnings per common share, compared to net income of $918,000, or $0.08 basic and diluted earnings per common share, for the six months ended June 30, 2008.

For the three and six months ended June 30, 2009, net interest income increased 9.4% to $6.6 million from $6.0 million and increased 10.9% to $12.9 million from $11.6 million, respectively, compared to the same periods in 2008.  The increase in net interest income was due to a higher average balance of loans and  a lower cost of funds, offset by a decrease in the average rate earned on interest-earning assets and an increase in average deposits. 

The provision for loan losses increased $1.3 million and $1.6 million for the three and six months ended June 30, 2009, respectively, compared to the same periods in the prior year.  The higher provision in 2009 related to increases in loan charge-offs and nonperforming loans.  The loan portfolio continues to be impacted by adverse market conditions.  At June 30, 2009, nonperforming loans totaled $8.6 million, compared to $7.9 million at June 30, 2008.  Specific reserves relating to nonperforming loans decreased to $252,000 at June 30, 2009 compared to $1.2 million at June 30, 2008.  Net loan charge-offs were $1.7 million and $3.0 million for the three and six months ended June 30, 2009, respectively, compared to $21,000 and $103,000 for the three and six months ended June 30, 2008, respectively.  Higher loan charge-offs for 2009 primarily related to two commercial construction relationships aggregating $2.3 million with previously recorded specific reserves.

Noninterest income was $2.6 million for the quarters ended June 30, 2009 and 2008.  Noninterest income was $4.8 million for the first half of 2009 compared to $5.1 million for the same period of 2008.  The decrease in other noninterest income for the six months ended June 30, 2009 was primarily due to impairment charges of $336,000 that were recorded during the first quarter of 2009 to reduce the carrying value of the Bank’s investment in two small business investment company limited partnerships.  In addition, other noninterest income for 2008 included the recovery of $131,000 in administrative fees and expenses related to the Bank’s acquisition of certain assets and operations of the former Circle Trust Company, which were previously deemed uncollectible.  Service fees decreased as a result of a decrease in overdraft charges on certain deposit products.  Wealth management fees were lower principally due to a decrease in the market value of assets under management.  For 2009, the Company reported net gains on the sale of loans of $382,000 resulting from the sale of $26.8 million of fixed-rate longer-term residential mortgage loans, compared to net gains on the sale of loans of $81,000 resulting from the sale of $6.6 million of residential mortgage loans for the same period in 2008.  Net gain on the sale of securities of $254,000 during 2009 resulted from the sale of primarily mortgage-backed securities and corporate debt securities, offset by other-than-temporary impairment charges on two pooled trust preferred securities totaling $150,000.   

Noninterest expenses increased $875,000 and $1.5 million for the three and six months ended June 30, 2009, respectively compared to the same periods in 2008, primarily due to increases in the FDIC assessment, salaries and benefits and computer and electronic banking services.  The increase in the 2009 FDIC assessment of $639,000 was attributable to the expiration of credits during 2008, an increase in the assessment rate for 2009 and an FDIC-imposed industry-wide five basis point special assessment totaling $393,000 that was accrued during the quarter ended June 30, 2009.  Compensation costs increased as a result of additional salaries and benefits, loan origination commissions and related payroll taxes.  Loan origination commissions increased due to higher residential mortgage volume related to a decrease in market interest rates.  Computer and electronic banking services expense rose as a result of increased telecommunication costs and transaction activity.    

Total assets increased $19.6 million, or 2.3%, to $872.7 million at June 30, 2009 from $853.1 million at December 31, 2008.  Contributing to the increase in assets were increases of $10.1 million in net loans receivable, $4.8 million in cash and cash equivalents, $3.1 million in available for sale securities and $2.0 million in loans held for sale.  The increase in net loans receivable represents an increase in commercial business loans and consumer loans offset by a decrease in construction and residential mortgage loans.  Commercial business loans increased as a result of the purchase of $21.8 million in USDA and SBA loans that are fully guaranteed by the U.S. government.  An increase in residential mortgage loan originations of $40.9 million was partially offset by residential mortgage loan sales of $26.8 million during 2009.  Overall loan originations increased $10.8 million, or 13.5%, during the first half of 2009 compared to the same period in 2008 due primarily to a decrease in market interest rates.  Available for sale securities increased as a result of the purchase of predominately mortgage-backed securities, tax-exempt municipal bonds and U.S. government and agency obligations.

Total liabilities were $797.2 million at June 30, 2009 compared to $780.2 million at December 31, 2008.  Deposits increased $28.4 million, or 4.6%, which included increases in NOW and money market accounts of $18.4 million, certificates of deposit of $5.9 million and noninterest-bearing deposits of $3.6 million.  The increase in deposits was due to branch expansion, marketing and promotional initiatives and competitively priced deposit products.  Borrowings decreased $11.0 million from $147.8 million at December 31, 2008 to $136.8 million at June 30, 2009, resulting from net repayments of Federal Home Loan Bank advances.

Total stockholders’ equity increased $2.5 million from $72.9 million at December 31, 2008 to $75.5 million at June 30, 2009.  The increase in stockholders’ equity was attributable to a decrease in net unrealized holding losses on available for sale securities aggregating $2.8 million (net of taxes), offset by net operating losses of $563,000 and stock repurchases of 11,243 shares at a cost of $68,000.

The early adoption of Financial Accounting Standards Board Staff Position FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” during the quarter ended
March 31, 2009, required management to separately identify whether other-than-temporary impairment charges totaling $7.1 million that were previously recognized in earnings during the third and fourth quarters of 2008 were related to credit losses or other noncredit factors at the measurement date of impairment.  Management determined, based on the present value of expected cash flows in accordance with applicable guidance that $4.0 million of the $7.1 million in other-than-temporary impairment charges were related to noncredit factors and therefore, recorded a cumulative effect adjustment of $2.7 million (net of taxes) to retained earnings with a corresponding adjustment to accumulated other comprehensive losses.  The Company does not intend to sell these impaired securities and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis of each of these securities.

“ Growth and strong capital continue to be highlights of the Company’s performance during the second quarter.  Results for the quarter included the FDIC’s special assessment and a decision to continue to take a conservative approach with both the loan and investment portfolios.  Despite these, core operations remain well positioned for the future with increases in both net interest income and 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, 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.

SELECTED FINANCIAL CONDITION DATA:

SELECTED OPERATING DATA:

 SELECTED FINANCIAL RATIOS:

• Quarterly ratios have been annualized.
• Represents noninterest expenses divided by the sum of net interest and dividend income and noninterest income, less any realized gains or losses on the sale of securities.
• Nonperforming assets consist of nonperforming loans and other real estate owned.

SAVINGS INSTITUTE EMPLOYEE’S CARING & GIVING PROGRAM AWARDS GRANTS

Willimantic, CT (May 8, 2009) – The Savings Institute Bank & Trust Company Employees’ Caring & Giving Program recently awarded $4,400 to 18 local charitable organizations.
Employees targeted organizations dedicated to alleviating hunger and homelessness. Those organizations receiving grants were: Windham Area Interfaith Ministry, No Freeze Hospitality Center, Holy Family Home Shelter and Covenant Soup Kitchen in Willimantic; Friends of Assisi Food Pantry and Community Kitchens of NE CT, Inc. in Danielson; Reliance House and TVCCA Shelter for the Homeless in Norwich; and Mystic Area Shelter and Hospitality. Also receiving funds were:  East Lyme Caring and Sharing; St. Mary’s Food Pantry in Jewett City; Senior Nutrition Program, Meals on Wheels in Bozrah; East Hampton Volunteer Food Bank; Tolland Senior Services; Enfield Food Shelf; Town of South Windsor Food Bank; New London Community Meal Center and Rutland Open Door Mission in Rutland, VT.
In announcing the grant recipients, Senior Vice President, William Anderson said, "We are pleased and proud of generosity shown by our employees who continue to assist the less fortunate in the communities we serve." 
The Caring & Giving program has been making quarterly grants since its inception in 1998.  Bank employees created the program as a way of self-directing their yearly charitable contributions. For the year 2009, employees pledged, and will award, more than $17,600 to assist organizations that address such issues as families in need, hunger and homelessness, helping the elderly and assisting individuals with disabilities or special needs.
            SI Financial Group, Inc. (NASDQ Global: SIFI) is the parent company of Savings Institute Bank & Trust Company. Savings Institute Bank & Trust Company is headquartered in Willimantic, Connecticut with twenty-one offices in eastern Connecticut. The Bank is a full service community-oriented financial institution dedicated to serving the financial service needs of individuals and businesses within its market area.

SI FINANCIAL GROUP, INC. REPORTS RESULTS FOR THE QUARTER ENDED MARCH 31, 2009

Willimantic, Connecticut—April 22, 2009.  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 $56,000, resulting in negligible basic and diluted earnings per common share, for the quarter ended March 31, 2009 versus net income of $455,000, or $0.04 basic and diluted earnings per common share, for the quarter ended March 31, 2008.    

Net interest income increased 12.5% to $6.3 million for the quarter ended March 31, 2009 from $5.6 million for the quarter ended March 31, 2008.  The increase in net interest income was due to a higher average balance of loans, federal funds and other interest-earning assets and a lower cost of funds, offset by a decrease in the average rate earned on interest-earning assets and an increase in average deposits and Federal Home Loan Bank borrowings. 

The provision for loan losses increased $355,000 to $490,000 for the first quarter of 2009 compared to the same period in the prior year.  The higher provision in 2009 related to increases in nonperforming loans and charge-offs, which continue to be impacted by adverse market conditions.  At March 31, 2009, nonperforming loans totaled $9.5 million, compared to $7.7 million at March 31, 2008.  Specific reserves relating to nonperforming loans decreased to $498,000 at March 31, 2009 compared to $1.3 million at March 31, 2008.  For the quarter ended March 31, 2009, net loan charge-offs increased $1.2 million to $1.3 million, compared to $82,000 for the quarter ended March 31, 2008, primarily due to a $1.0 million charge-off of a commercial construction loan with a previously recorded specific reserve.

Noninterest income was $2.5 million for the quarters ended March 31, 2009 and 2008.  For the quarter ended March 31, 2009, the Company reported net gains on the sale of loans of $191,000 resulting from the sale of $15.0 million of residential mortgage loans, compared to net gains on the sale of loans of $59,000 resulting from the sale of $5.0 million of residential mortgage loans for the same period in 2008.  Service fees decreased $94,000 as a result of a decrease in overdraft charges on certain deposit products.  The increase of $27,000 on the sale of primarily mortgage-backed securities was offset by other-than-temporary impairment charges on two pooled trust preferred securities totaling $150,000.   

Noninterest expenses increased $921,000 for the quarter ended March 31, 2009 compared to the same period in 2008, primarily due to increases in salaries and benefits, impairment charges on other investments, FDIC assessment and computer and electronic banking services.  Compensation costs increased as a result of additional salaries and benefits, loan origination commissions and related payroll taxes.  Loan origination commissions increased due to higher residential mortgage volume related to a decrease in market interest rates.  During the first quarter of 2009, impairment charges of $336,000 were recorded to reduce the carrying value of the Bank’s investment in two small business investment company limited partnerships.  The increase in the 2009 FDIC assessment was attributable to the expiration of credits during 2008.  Computer and electronic banking services expense rose as a result of increased telecommunication costs and transaction activity.    

Total assets increased $11.4 million, or 1.3%, to $864.5 million at March 31, 2009 from $853.1 million at December 31, 2008.  Contributing to the increase in assets were increases of $13.9 million in cash and cash equivalents and $6.3 million in net loans receivable, offset by a decrease of $8.2 million in available for sale securities.  The increase in net loans receivable represents an increase in commercial business loans offset by a decrease in residential and commercial mortgage loans.  Commercial business loans increased as a result of the purchase of $14.9 million in USDA and SBA loans that are fully guaranteed by the U.S. government.  An increase in residential mortgage loan originations of $21.3 million were partially offset by residential mortgage loan sales of $15.0 million during the quarter ended March 31, 2009.  Overall loan originations increased $4.1 million in the first quarter of 2009 compared to the same period in 2008.  The decrease in available for sale securities reflects the sale of primarily mortgage-backed securities.

Total liabilities were $792.0 million at March 31, 2009 compared to $780.2 million at December 31, 2008.  Deposits increased $15.5 million, or 2.5%, which included an increase in NOW and money market accounts of $13.6 million, noninterest-bearing deposits of $989,000 and certificate of deposit accounts of $956,000.  The increase in deposits was due to branch expansion, marketing and promotional initiatives and competitively priced deposit products.  Borrowings decreased $2.0 million from $147.8 million at December 31, 2008 to $145.8 million at March 31, 2009, resulting from a decrease in Federal Home Loan Bank advances.

Total stockholders’ equity decreased $379,000 from $72.9 million at December 31, 2008 to $72.5 million at March 31, 2009.  The decrease in stockholders’ equity was attributable to an increase in net unrealized holding losses on available for sale securities aggregating $3.4 million (net of taxes), offset by a cumulative effect adjustment to retained earnings of $2.7 million as a result of the adoption of Financial Accounting Standards Board Staff Position FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”) and earnings of $56,000.

The early adoption of FSP FAS 115-2 and FAS 124-2 during the quarter ended March 31, 2009, required management to separately identify whether other-than-temporary impairment charges totaling $7.1 million that were previously recognized in earnings during the third and fourth quarters of 2008 were related to credit losses or other noncredit factors at the measurement date of impairment.  Management determined, based on the present value of expected cash flows in accordance with applicable guidance that $4.0 million of the $7.1 million in other-than-temporary impairment charges were related to noncredit factors and therefore, recorded a cumulative effect adjustment of $2.7 million (net of taxes) as a reduction to retained earnings with a corresponding adjustment to accumulated other comprehensive losses.  The Company does not intend to sell these impaired securities and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis of each of these securities.

“The results for the first quarter continue to reflect the conservative approach we have taken since the start of the recession.  Adding to the loan loss allowance and preserving capital is a strategy we believe is both prudent under the present economic conditions and one that will serve us well as conditions improve,” commented Rheo A. Brouillard, President and Chief Executive Officer.  “The quarter also saw strong deposit growth and significant residential mortgage loan activity as we continue to be active participants in our market area,” added Brouillard.

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 our Annual Report on Form 10-K for the year ended December 31, 2008, 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:

(1)    Weighted-average shares outstanding for 2008 have been adjusted retrospectively for restricted shares that were determined “participating” in accordance with Financial Accounting Standards Board Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-based Payment Transactions Are Participating Securities.”

 SELECTED FINANCIAL RATIOS:

1. Ratios have been annualized.
2. Represents noninterest expenses divided by the sum of net interest and dividend income and

noninterest income, less any realized gains or losses on the sale of securities and other-than-temporary impairments
on securities.