10-Q

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to ______

 Commission File Number:  0-54241
 
SI FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
__________________________________________________
Maryland
 
80-0643149
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
803 Main Street, Willimantic, Connecticut
 
06226
(Address of principal executive offices)
 
(Zip Code)
 
(860) 423-4581
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer o
Accelerated Filer x
 
 
Non-Accelerated Filer o
Smaller Reporting Company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No  x
 
As of November 2, 2015, there were 12,218,218 shares of the registrant’s common stock outstanding.
 



SI FINANCIAL GROUP, INC.
TABLE OF CONTENTS
 
 
 
 
Page No.
 
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
Item 1.
 
Financial Statements (Unaudited):
 
 
 
 
 
 
 
Consolidated Balance Sheets at September 30, 2015 and December 31, 2014
 
 
 
 
 
 
Consolidated Statements of Income for the three and nine months ended September 30, 2015 and 2014
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014
 
 
 
 
 
 
Consolidated Statement of Changes in Shareholders’ Equity for the nine months ended September 30, 2015
 
 
 
 
 
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 




PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.
SI FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts / Unaudited)
 
September 30,
2015
 
December 31,
2014
ASSETS:
 
 
 
Cash and due from banks:
 
 
 
Noninterest-bearing
$
14,011

 
$
18,965

Interest-bearing
22,551

 
20,286

Total cash and cash equivalents
36,562

 
39,251

 
 
 
 
Available for sale securities, at fair value
176,177

 
173,040

Loans held for sale
165

 
747

Loans receivable (net of allowance for loan losses of $9,246 at September 30, 2015 and $7,797 at December 31, 2014)
1,142,998

 
1,044,864

Federal Home Loan Bank stock, at cost
12,421

 
10,333

Federal Reserve Bank stock, at cost
3,621

 
—

Bank-owned life insurance
21,755

 
21,306

Premises and equipment, net
21,669

 
21,711

Goodwill and other intangibles
18,246

 
18,697

Accrued interest receivable
4,230

 
3,853

Deferred tax asset, net
7,676

 
8,048

Other real estate owned, net
1,341

 
1,271

Other assets
6,785

 
7,412

Total assets
$
1,453,646

 
$
1,350,533

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
 

 
 

Liabilities:
 

 
 

Deposits:
 

 
 

Noninterest-bearing
$
151,718

 
$
146,062

Interest-bearing
891,412

 
864,651

Total deposits
1,043,130

 
1,010,713

 
 
 
 
Mortgagors' and investors' escrow accounts
1,946

 
3,600

Federal Home Loan Bank advances
224,459

 
148,277

Junior subordinated debt owed to unconsolidated trust
8,248

 
8,248

Accrued expenses and other liabilities
21,884

 
21,956

Total liabilities
1,299,667

 
1,192,794

 
 
 
 
Shareholders' Equity:
 

 
 

Preferred stock ($.01 par value; 1,000,000 shares authorized; none issued)
—

 
—

Common stock ($.01 par value; 35,000,000 shares authorized; 12,224,153 and 12,776,426 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively)
122

 
128

Additional paid-in-capital
124,849

 
125,459

Unallocated common shares held by ESOP
(3,768
)
 
(4,128
)
Unearned restricted shares
(889
)
 
(1,312
)
Retained earnings
32,952

 
37,497

Accumulated other comprehensive income
713

 
95

Total shareholders' equity
153,979

 
157,739

Total liabilities and shareholders' equity
$
1,453,646

 
$
1,350,533

 

See accompanying notes to unaudited interim consolidated financial statements.

1


SI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts / Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Interest and dividend income:
 
 
 
 
 
 
 
Loans, including fees
$
11,278

 
$
10,735

 
$
32,823

 
$
32,489

Securities:
 

 
 

 
 
 
 
Taxable interest
766

 
877

 
2,253

 
2,651

Tax-exempt interest
14

 
59

 
63

 
160

Dividends
140

 
46

 
281

 
143

Other
19

 
11

 
57

 
39

Total interest and dividend income
12,217

 
11,728

 
35,477

 
35,482

 
 
 
 
 
 
 
 
Interest expense:
 

 
 

 
 
 
 
Deposits
1,403

 
1,355

 
4,150

 
4,033

Federal Home Loan Bank advances
846

 
602

 
2,124

 
1,921

Subordinated debt and other borrowings
84

 
84

 
251

 
251

Total interest expense
2,333

 
2,041

 
6,525

 
6,205

 
 
 
 
 
 
 
 
Net interest income
9,884

 
9,687

 
28,952

 
29,277

 
 
 
 
 
 
 
 
Provision for loan losses
1,017

 
350

 
1,712

 
1,195

 
 
 
 
 
 
 
 
Net interest income after provision for loan losses
8,867

 
9,337

 
27,240

 
28,082

 
 
 
 
 
 
 
 
Noninterest income:
 

 
 

 
 
 
 
Service fees
1,699

 
1,762

 
5,039

 
5,265

Wealth management fees
303

 
293

 
916

 
926

Increase in cash surrender value of bank-owned life insurance
146

 
147

 
449

 
433

Net gain on sales of securities
14

 
—

 
146

 
64

Mortgage banking
139

 
81

 
416

 
396

Net gain (loss) on fair value of derivatives
(7
)
 
78

 
(22
)
 
69

Other
452

 
85

 
749

 
527

Total noninterest income
2,746

 
2,446

 
7,693

 
7,680

 
 
 
 
 
 
 
 
Noninterest expenses:
 

 
 

 
 
 
 
Salaries and employee benefits
4,986

 
4,897

 
15,059

 
15,128

Occupancy and equipment
1,816

 
1,883

 
5,660

 
5,852

Computer and electronic banking services
1,413

 
1,417

 
4,168

 
4,082

Outside professional services
436

 
420

 
1,410

 
1,422

Marketing and advertising
259

 
216

 
779

 
754

Supplies
149

 
146

 
441

 
465

FDIC deposit insurance and regulatory assessments
255

 
303

 
748

 
953

Core deposit intangible amortization
150

 
150

 
451

 
463

Other real estate operations
160

 
72

 
444

 
303

Other
521

 
500

 
1,452

 
1,873

Total noninterest expenses
10,145

 
10,004

 
30,612

 
31,295

 
 
 
 
 
 
 
 
Income before income tax provision
1,468

 
1,779

 
4,321

 
4,467

Income tax provision
494

 
579

 
1,421

 
1,447

Net income
$
974

 
$
1,200

 
$
2,900

 
$
3,020

 
 
 
 
 
 
 
 
Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.08

 
$
0.10

 
$
0.24

 
$
0.25

Diluted
$
0.08

 
$
0.10

 
$
0.24

 
$
0.24

 

See accompanying notes to unaudited interim consolidated financial statements.

2


SI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands / Unaudited)

 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
974

 
$
1,200

 
$
2,900

 
$
3,020

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Available for sale securities:
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses)
 
411

 
(382
)
 
633

 
546

Reclassification adjustment for losses (gains) recognized in net income (1)
 
(9
)
 
—

 
(96
)
 
(42
)
    Net unrealized holding gains (losses) on available for sale securities
 
402

 
(382
)
 
537

 
504

Net unrealized gain on interest-rate swap derivative
 
29

 
31

 
81

 
77

Other comprehensive income (loss)
 
431

 
(351
)
 
618

 
581

Comprehensive income
 
$
1,405

 
$
849

 
$
3,518

 
$
3,601

 
 
 
 
 
 
 
 
 
 
 
(1) Amounts are included in net gain on sales of securities in noninterest income on the consolidated statements of income. Income tax expense (benefit) associated with the reclassification adjustment for the three and nine months ended September 30, 2015 was $5,000 and $50,000 and for the three and nine months ended September 30, 2014 was $0 and $22,000, respectively.

See accompanying notes to unaudited interim consolidated financial statements.

    
 



3


SI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(In Thousands, Except Share Data / Unaudited)

 
Common Stock
 
Additional
Paid-in
Capital
 
Unallocated
Common
Shares Held
by ESOP
 
Unearned
Restricted
Shares
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Shareholders'
Equity
 
Shares
 
Dollars
 
 
 
 
 
 
Balance at December 31, 2014
12,776,426

 
$
128

 
$
125,459

 
$
(4,128
)
 
$
(1,312
)
 
$
37,497

 
$
95

 
$
157,739

Comprehensive income
—

 
—

 
—

 
—

 
—

 
2,900

 
618

 
3,518

Cash dividends declared ($0.12 per share)
—

 
—

 
—

 
—

 
—

 
(1,444
)
 
—

 
(1,444
)
Equity incentive plans compensation
—

 
—

 
230

 
—

 
453

 
—

 
—

 
683

Allocation of 36,477 ESOP shares
—

 
—

 
65

 
360

 
—

 
—

 
—

 
425

Restricted shares activity
 
 
 
 
30

 
 
 
(30
)
 
 
 
 
 
—

Tax benefit from share-based compensation
—

 
—

 
5

 
—

 
—

 
—

 
—

 
5

Stock options exercised
297,546

 
3

 
3,268

 
—

 
—

 
—

 
—

 
3,271

Common shares repurchased
(849,819
)
 
(9
)
 
(4,208
)
 
—

 
—

 
(6,001
)
 
—

 
(10,218
)
Balance at September 30, 2015
12,224,153

 
$
122

 
$
124,849

 
$
(3,768
)
 
$
(889
)
 
$
32,952

 
$
713

 
$
153,979

 
See accompanying notes to unaudited interim consolidated financial statements.


4


SI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands / Unaudited)
 
Nine Months Ended
September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
2,900

 
$
3,020

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Provision for loan losses
1,712

 
1,195

Employee stock ownership plan expense
425

 
416

Equity incentive plan expense
683

 
559

Excess tax benefit from share-based compensation
(5
)
 
(4
)
Amortization of investment premiums and discounts, net
851

 
724

Amortization of loan premiums and discounts, net
1,457

 
1,051

Depreciation and amortization of premises and equipment
2,036

 
1,921

Amortization of core deposit intangible
451

 
463

Amortization of deferred debt issue costs
16

 
79

Net gain on sales of securities
(146
)
 
(64
)
Net loss (gain) on fair value of derivatives
22

 
(69
)
Deferred income tax provision
53

 
28

Loans originated for sale
(18,807
)
 
(12,633
)
Proceeds from sale of loans held for sale
19,524

 
13,353

Net gain on sales of loans held for sale
(234
)
 
(201
)
Net loss on sales or write-downs of other real estate owned
201

 
67

Increase in cash surrender value of bank-owned life insurance
(449
)
 
(433
)
Impairment charge on long-lived assets
—

 
175

Change in operating assets and liabilities:
 

 
 

Accrued interest receivable
(377
)
 
123

Other assets
727

 
1,947

Accrued expenses and other liabilities
33

 
1,143

Net cash provided by operating activities
11,073

 
12,860

 
 
 
 
Cash flows from investing activities:
 

 
 

Purchases of available for sale securities
(35,450
)
 
(24,626
)
Proceeds from sales of available for sale securities
9,703

 
1,109

Proceeds from maturities of and principal repayments on available for sale securities
22,719

 
23,063

Purchases of Federal Home Loan Bank stock
(2,088
)
 
—

Purchases of Federal Reserve Bank stock
(3,621
)
 
—

Redemption of Federal Home Loan Bank stock
—

 
2,776

Loan principal collections, net of originations
(4,996
)
 
42,628

Purchases of loans
(96,640
)
 
(38,643
)
Proceeds from sales of other real estate owned
62

 
1,109

Purchases of premises and equipment
(1,994
)
 
(2,134
)
Net cash provided by (used in) investing activities
(112,305
)
 
5,282

 
 
 
 

5


SI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(In Thousands / Unaudited)
 
Nine Months Ended
September 30,
 
2015
 
2014
Cash flows from financing activities:
 

 
 

Net increase in deposits
32,417

 
13,090

Net decrease in mortgagors' and investors' escrow accounts
(1,654
)
 
(1,420
)
Proceeds from Federal Home Loan Bank advances
120,478

 
10,000

Repayments of Federal Home Loan Bank advances
(44,312
)
 
(32,203
)
Excess tax benefit from share-based compensation
5

 
4

Cash dividends on common stock
(1,444
)
 
(1,107
)
Stock options exercised
708

 
552

Common shares repurchased
(7,655
)
 
(761
)
Net cash provided by (used in) financing activities
98,543

 
(11,845
)
 
 
 
 
 
 
 
 
Net change in cash and cash equivalents
(2,689
)
 
6,297

Cash and cash equivalents at beginning of period
39,251

 
27,321

Cash and cash equivalents at end of period
$
36,562

 
$
33,618

 
 
 
 
Supplemental cash flow information:
 

 
 

Interest paid
$
6,490

 
$
6,234

Income taxes received (paid), net
989

 
(555
)
Transfer of loans to other real estate owned
333

 
108

Stock options exercised by net-share settlement
2,563

 
190


 See accompanying notes to unaudited interim consolidated financial statements.

6
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 


NOTE 1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business
SI Financial Group, Inc. (the “Company”) is the holding company for Savings Institute Bank and Trust Company (the “Bank”). Established in 1842, the Bank is a community-oriented financial institution headquartered in Willimantic, Connecticut. The Bank provides a variety of financial services to individuals, businesses and municipalities through its twenty-six offices in eastern Connecticut and Rhode Island. Its primary products include savings, checking and certificate of deposit accounts, residential and commercial mortgage loans, commercial business loans and consumer loans.  In addition, wealth management services, which include trust, financial planning, life insurance and investment services, are offered to individuals and businesses through the Bank’s offices. The Company does not conduct any material business other than owning all of the stock of the Bank and making payments on the subordinated debentures held by the Company.

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Bank’s wholly-owned subsidiaries, SI Mortgage Company and SI Realty Company, Inc. All significant intercompany accounts and transactions have been eliminated.

Basis of Financial Statement Presentation
The interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, with the instructions to Form 10-Q and Rule 10.01 of Regulation S-X of the Securities and Exchange Commission ("SEC") and general practices within the banking industry. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been omitted.  Information in the accompanying interim consolidated financial statements and notes to the financial statements of the Company as of September 30, 2015 and for the three and nine months ended September 30, 2015 and 2014 is unaudited. These unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited financial statements of the Company and the accompanying notes for the year ended December 31, 2014 contained in the Company’s Form 10-K.

In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial condition, results of operations and cash flows as of and for the periods covered herein. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the operating results for the year ending December 31, 2015 or for any other period.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the balance sheets and reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, deferred income taxes and the impairment of long-lived assets.

Reclassifications
Amounts in the Company’s prior year consolidated financial statements are reclassified to conform to the current year presentation.  Such reclassifications have no effect on net income.


7
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

Loans Receivable
Loans receivable are stated at current unpaid principal balances, net of the allowance for loan losses and deferred loan origination fees and costs. Management has the ability and intent to hold its loans receivable for the foreseeable future or until maturity or pay-off.

A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Impairment is measured on a loan by loan basis for residential and commercial mortgage loans and commercial business loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not typically identify individual consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring ("TDR") agreement.

Troubled Debt Restructurings
The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and concessions have been made by the Company to the original contractual terms that would not otherwise be considered for a borrower with similar risk characteristics, such as below market interest rate reductions, deferral of interest or principal payments, or maturity extensions due to the borrower’s financial condition, the modification is considered a TDR. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is handled by the Company’s Collections Department for resolution which may result in foreclosure.

Management considers all nonaccrual loans, with the exception of certain consumer loans, to be impaired. Also, all TDRs are initially classified as impaired and follow the Company's nonaccrual policy. If the loan was current prior to modification, nonaccrual status would not be required. If the loan was on nonaccrual prior to modification or if the payment amount significantly increases, the loan will remain on nonaccrual for a period of at least six months. Loans qualify for return to accrual status once the borrower has demonstrated the willingness and the ability to perform in accordance with the restructured terms of the loan agreement for a period of not less than six consecutive months. In most cases, loan payments less than 90 days past due are considered minor collection delays and the related loans are generally not considered impaired.

Impaired classification may be removed after a year following the restructure if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar risk characteristics at the time of restructuring.

Allowance for Loan Losses
The allowance for loan losses, a material estimate which could change significantly in the near-term, is established through a provision for loan losses charged to earnings to account for losses that are inherent in the loan portfolio and estimated to occur, and is maintained at a level that management considers adequate to absorb losses in the loan portfolio. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of the principal loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses when received. In the determination of the allowance for loan losses, management may obtain independent appraisals for significant properties, if necessary.

Management's judgment in determining the adequacy of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is evaluated on a monthly basis by management and is based on the evaluation of the known and

8
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SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

inherent risk characteristics and size and composition of the loan portfolio, the assessment of current economic and real estate market conditions, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, historical loan loss experience, the level and trends of nonperforming loans, delinquencies, classified assets and loan charge-offs and evaluations of loans and other relevant factors.

The allowance for loan losses consists of the following key elements:

•
Specific allowance for identified impaired loans. For loans identified as impaired, an allowance is established when the present value of expected cash flows (or observable market price of the loan or fair value of the collateral if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan.

•
General valuation allowance. The general component represents a valuation allowance on the remainder of the loan portfolio, after excluding impaired loans. For this portion of the allowance, loans are segregated by category and assigned an allowance percentage based on historical loan loss experience adjusted for qualitative factors stratified by the following loan segments: residential one- to four-family, multi-family and commercial real estate, construction, commercial business and consumer. Management uses a rolling average of historical losses based on the time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices; changes in international, national, regional and local economic and business conditions and developments that affect the collectibility of the portfolio, including the condition of various market segments; changes in the size and composition of the loan portfolio and in the terms of the loans; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due loans, the volume of nonaccrual loans and the volume and severity of adversely classified or graded loans; changes in the quality of the loan review system; changes in the underlying collateral for collateral-dependent loans; the existence and effect of any concentrations of credit and changes in the level of such concentrations; the effect of other external factors such as competition and legal and regulatory capital requirements on the level of estimated credit losses in the portfolio.

The qualitative factors are determined based on the following various risk characteristics for each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

•
Residential – One- to Four-Family – The Bank primarily originates conventional loans with loan-to-value ratios less than 95% and generally originates loans with loan-to-value ratios in excess of 80% only when secured by first liens on owner-occupied one- to four-family residences. Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance or additional collateral. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality of this segment.

•
Multi-family and Commercial – Loans in this segment are originated for the purpose of acquiring, developing, improving or refinancing multi-family and commercial real estate where the property is the primary collateral securing the loan, and the income generated from the property is the primary repayment source. The underlying cash flows generated by the properties can be adversely impacted by the economy as evidenced by increased vacancy rates. Payments on loans secured by income-producing properties often depend on the successful operation and management of the properties. Management continually monitors the cash flows of these loans.


9
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SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

•
Construction – This segment includes loans to individuals and, to a lesser extent, builders to finance the construction of residential dwellings. The Bank also originates construction loans for commercial development projects. Upon the completion of construction, the loan generally converts to a permanent mortgage loan. Credit risk is affected by cost overruns, correct estimates of the sale price of the property, time to sell at an adequate price and market conditions.

•
Commercial Business – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy and reduced viability of the industry in which the customer operates will have a negative impact on the credit quality in this segment. The Bank also provides loans to investors in the time share industry, which are secured by consumer receivables, and provides loans for capital improvements to condominium associations, which are secured by the assigned rights to levy special assessments to condominium owners.

•
Consumer – Loans in this segment primarily include home equity lines of credit (representing both first and second liens), indirect automobile loans and, to a lesser extent, loans secured by marketable securities, passbook or certificate accounts, motorcycles, automobiles and recreational vehicles, as well as unsecured loans. Consumer loan collections depend on the borrower’s continuing financial stability and, therefore, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

In computing the allowance for loan losses, we do not assign a general valuation allowance to the Small Business Administration (“SBA”) and United States Department of Agriculture (“USDA”) loans that we purchase as such loans are fully guaranteed. These loans are included in commercial business loans. See Note 4 for details.
 
The majority of the Company's loans are collateralized by real estate located in eastern Connecticut and Rhode Island. To a lesser extent, certain commercial real estate loans are secured by collateral located outside of our primary market area. Accordingly, the collateral value of a substantial portion of the Company's loan portfolio and real estate acquired through foreclosure is susceptible to changes in local market conditions.
 
Although management believes it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and the Company’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance for loan losses in conformity with GAAP, our regulators, in reviewing the loan portfolio, may request us to increase our allowance for loan losses based on judgments different from ours. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses would adversely affect the Company’s financial condition and results of operations.

Interest and Fees on Loans
Interest on loans is accrued and included in net interest income based on contractual rates applied to principal amounts outstanding. Accrual of interest is discontinued when loan payments are 90 days or more past due, based on contractual terms, or when, in the judgment of management, collectibility of the loan or loan interest becomes uncertain. Subsequent recognition of income occurs only to the extent payment is received subject to management's assessment of the collectibility of the remaining interest and principal. A nonaccrual loan is restored to accrual status when it is no longer delinquent and collectibility of interest and principal is no longer in doubt and the borrower has made regular payments in accordance with the terms of the loan over a period of at least six months. Interest collected on nonaccrual loans is recognized only to the extent cash payments are

10
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

received, and may be recorded as a reduction to principal if the collectibility of the principal balance of the loan is unlikely.

Loan origination fees, direct loan origination costs and loan purchase premiums are deferred, and the net amount is recognized as an adjustment of the related loan's yield utilizing the interest method over the contractual life of the loan. In addition, discounts related to fair value adjustments for loans receivable acquired in a business combination or asset purchase are accreted into earnings over the contractual term as an adjustment of the loan's yield. The Company periodically evaluates the cash flows expected to be collected for loans acquired with deteriorated credit quality. Changes in the expected cash flows compared to the expected cash flows as of the date of acquisition may impact the accretable yield or result in a charge to the provision for loan losses to the extent of a shortfall.

Common Share Repurchases
The Company is chartered in the state of Maryland. Maryland law does not provide for treasury shares, rather shares repurchased by the Company constitute authorized but unissued shares. GAAP states that accounting for treasury stock shall conform to state law. Therefore, the cost of shares repurchased by the Company has been allocated to common stock, additional paid-in capital and retained earnings balances.

Recent Accounting Pronouncements
Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. In January 2014, the Financial Accounting Standards Board ("FASB") issued amended guidance that clarifies when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amended guidance clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. In addition, the amended guidance requires interim and annual disclosures of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The adoption of the amended guidance on January 1, 2015 did not have a material impact on the Company’s consolidated financial statements.

Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure - In August 2014, the FASB issued amended guidance that addresses the diversity in practice regarding the classification and measurement of foreclosed loans which were part of a government-sponsored loan guarantee program (e.g. HUD, FHA, VA). The amended guidance outlines certain criteria that, if met, the loan (residential or commercial) should be derecognized and a separate other receivable should be recorded upon foreclosure at the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The adoption of the amended guidance on January 1, 2015 did not have a material impact on the Company’s consolidated financial statements.

Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs - In April 2015, the FASB issued guidance simplifying the presentation of debt issuance costs. The amended guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amended guidance should be applied on a retrospective basis and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted. The adoption of the amended guidance is not expected to have a material impact on the Company's consolidated financial statements.

11
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 


Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - In August 2015, the FASB issued amended guidance pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force meeting that the update issued in April 2015 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within the previous update for debt issuance costs related to line-of-credit-arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there were any outstanding borrowings on the line-of-credit arrangement. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

NOTE 2.  EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Unvested restricted shares are considered outstanding in the computation of basic earnings per share since the shares participate in dividends and the rights to the dividends are non-forfeitable. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. The Company’s common stock equivalents relate solely to stock options. Repurchased common shares and unallocated common shares held by the Bank’s ESOP are not deemed outstanding for earnings per share calculations.
 
Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented, and are not considered in diluted earnings per share calculations. The Company had anti-dilutive common shares outstanding of 321,793 and 342,819 for the three and nine months ended September 30, 2015, respectively, and 677,590 and 485,459 for the three and nine months ended September 30, 2014, respectively.

The computation of earnings per share is as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in Thousands, Except Per Share Amounts)
Net income
$
974

 
$
1,200

 
$
2,900

 
$
3,020

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 

 
 

 
 
 
 
Basic
11,793,218

 
12,310,368

 
12,036,573

 
12,315,829

Effect of dilutive stock options
21,713

 
23,065

 
28,485

 
38,382

Diluted
11,814,931

 
12,333,433

 
12,065,058

 
12,354,211

 
 
 
 
 
 
 
 
Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.08

 
$
0.10

 
$
0.24

 
$
0.25

Diluted
$
0.08

 
$
0.10

 
$
0.24

 
$
0.24




12
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

NOTE 3.  SECURITIES

Available for Sale Securities
The amortized cost, gross unrealized gains and losses and fair values of available for sale securities at September 30, 2015 and December 31, 2014 are as follows:
 
 
September 30, 2015
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
 
(In Thousands)
Debt securities:
 
 
 
 
 
 
 
U.S. Government and agency obligations
$
68,172

 
$
620

 
$
(224
)
 
$
68,568

Government-sponsored enterprises
30,329

 
335

 
—

 
30,664

Mortgage-backed securities:(1)
 
 
 

 
 

 
 

Agency - residential
69,527

 
872

 
(519
)
 
69,880

Non-agency - residential
161

 
—

 
(5
)
 
156

Corporate debt securities
1,000

 
—

 
—

 
1,000

Collateralized debt obligation
1,155

 
—

 
(25
)
 
1,130

Obligations of state and political subdivisions
1,535

 
2

 
—

 
1,537

Tax-exempt securities
3,183

 
59

 
—

 
3,242

Total available for sale securities
$
175,062

 
$
1,888

 
$
(773
)
 
$
176,177

 
 
 
 
 
 
 
 
 
(1) Agency securities refer to debt obligations issued or guaranteed by government corporations or government-sponsored enterprises (“GSEs”).  Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by any of the GSEs or the U.S. Government.
 
 
December 31, 2014
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
 
(In Thousands)
Debt securities:
 
 
 
 
 
 
 
U.S. Government and agency obligations
$
66,232

 
$
385

 
$
(226
)
 
$
66,391

Government-sponsored enterprises
27,435

 
120

 
(67
)
 
27,488

Mortgage-backed securities:(1)
 
 
 
 
 
 
 

Agency - residential
67,008

 
907

 
(1,065
)
 
66,850

Non-agency - residential
254

 
3

 
(4
)
 
253

Corporate debt securities
1,000

 
—

 
—

 
1,000

Collateralized debt obligation
1,188

 
—

 
(7
)
 
1,181

Obligations of state and political subdivisions
3,039

 
167

 
(6
)
 
3,200

Tax-exempt securities
6,583

 
97

 
(3
)
 
6,677

Total available for sale securities
$
172,739

 
$
1,679

 
$
(1,378
)
 
$
173,040

 
 
 
 
 
 
 
 
 
(1) Agency securities refer to debt obligations issued or guaranteed by government corporations or GSEs.  Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by any of the GSEs or the U.S. Government.


13
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

The amortized cost and fair value of debt securities by contractual maturities at September 30, 2015 are presented below. Maturities are based on the final contractual payment dates and do not reflect the impact of potential prepayments or early redemptions. Because mortgage-backed securities ("MBS") are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.
 
 
Amortized
Cost
 
Fair
Value
 
(In Thousands)
Within 1 year
$
2,536

 
$
2,539

After 1 but within 5 years
52,956

 
53,554

After 5 but within 10 years
12,250

 
12,216

After 10 years
37,632

 
37,832

 
105,374

 
106,141

Mortgage-backed securities
69,688

 
70,036

Total debt securities
$
175,062

 
$
176,177


The following is a summary of realized gains and losses on the sales/calls of securities for the three and nine months ended September 30, 2015 and 2014:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
(In Thousands)
Gross gains on sales/calls
$
14

 
$
—

 
$
169

 
$
64

Gross losses on sales/calls
—

 
—

 
(23
)
 
—

Net gain on sales/calls of securities
$
14

 
$
—

 
$
146

 
$
64


There were no sales of available for sale securities for the three months ended September 30, 2015 and 2014. Proceeds from the sale of available for sale securities were $9.7 million and $1.1 million for the nine months ended September 30, 2015 and 2014, respectively.

The following tables present information pertaining to securities with gross unrealized losses at September 30, 2015 and December 31, 2014, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position.
 
 
Less Than 12 Months
 
12 Months Or More
 
Total
September 30, 2015
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In Thousands)
U.S. Government and agency obligations
$
3,880

 
$
15

 
$
15,703

 
$
209

 
$
19,583

 
$
224

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

Agency - residential
4,731

 
19

 
28,634

 
500

 
33,365

 
519

Non-agency - residential
—

 
—

 
115

 
5

 
115

 
5

Collateralized debt obligation
—

 
—

 
1,130

 
25

 
1,130

 
25

Total
$
8,611

 
$
34

 
$
45,582

 
$
739

 
$
54,193

 
$
773



14
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

 
Less Than 12 Months
 
12 Months Or More
 
Total
December 31, 2014
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In Thousands)
U.S. Government and agency obligations
$
9,273

 
$
15

 
$
16,655

 
$
211

 
$
25,928

 
$
226

Government-sponsored enterprises
6,974

 
4

 
3,973

 
63

 
10,947

 
67

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

Agency - residential
4,251

 
122

 
32,127

 
943

 
36,378

 
1,065

Non-agency - residential
—

 
—

 
127

 
4

 
127

 
4

Collateralized debt obligation
1,181

 
7

 
—

 
—

 
1,181

 
7

Obligations of state and political subdivisions
—

 
—

 
668

 
6

 
668

 
6

Tax-exempt securities
1,141

 
3

 
—

 
—

 
1,141

 
3

Total
$
22,820

 
$
151

 
$
53,550

 
$
1,227

 
$
76,370

 
$
1,378


At September 30, 2015, twenty-three debt securities with gross unrealized losses had aggregate depreciation of approximately 1.41% of the Company’s amortized cost basis. The majority of the unrealized losses are related to the Company’s agency MBS. There were no investments deemed other-than-temporarily impaired for the three and nine months ended September 30, 2015 and 2014. The following summarizes, by security type, the basis for management’s determination during the preparation of the financial statements that the applicable investments within the Company’s securities portfolio were not other-than-temporarily impaired at September 30, 2015.

U.S. Government and Agency Obligations. The unrealized losses on the Company’s U.S. Government and agency obligations related primarily to a widening of the rate spread to comparable treasury securities. Because the decline in market value was attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the securities before their anticipated recovery, which may be at maturity, the Company did not consider these securities to be other-than-temporarily impaired at September 30, 2015.

Mortgage-backed Securities - Agency - Residential. The unrealized losses on the Company’s agency–residential mortgage-backed securities were caused by increases in the rate spread to comparable treasury securities. The Company does not expect these securities to settle at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2015.

Mortgage-backed Securities - Non-agency - Residential. The unrealized losses on the Company's non-agency - residential mortgage-backed securities relate to one investment which has been evaluated by management and no potential credit losses were identified. Because the Company does not intend to sell this security and it is not more likely than not that the Company will be required to sell this security before the recovery of its amortized cost basis, which may be maturity, the Company did not consider this investment to be other-than-temporarily impaired at September 30, 2015.

Collateralized Debt Obligations. The unrealized losses on the Company's collateralized debt obligations relate to one investment in a pooled trust preferred security ("PTPS"). The PTPS market has stabilized at depressed market values as a result of market saturation. The Company's PTPS was upgraded to investment grade and based on its senior credit profile, management does not believe this investment will suffer from any further credit-related losses. Because the Company does not intend to sell the investment and it is not more likely than not the

15
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

Company will be required to sell the investment before recovery of its amortized cost basis, which may be at maturity, the Company did not record impairment losses as of September 30, 2015.

NOTE 4.  LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loan Portfolio
The composition of the Company’s loan portfolio at September 30, 2015 and December 31, 2014 is as follows:
 
 
 
September 30, 2015
 
December 31, 2014
 
 
(In Thousands)
Real estate loans:
 
 
 
Residential - 1 to 4 family
$
430,287

 
$
430,575

Multi-family and commercial
339,682

 
298,320

Construction
17,409

 
13,579

Total real estate loans
787,378

 
742,474

 
 
 
 
 
Commercial business loans:
 

 
 

SBA and USDA guaranteed
153,811

 
118,466

Time share
57,760

 
45,669

Condominium association
26,237

 
21,386

Other
68,307

 
66,446

Total commercial business loans
306,115

 
251,967

 
 
 
 
 
Consumer loans:
 

 
 

Home equity
52,985

 
51,093

Indirect automobile
2,239

 
3,692

Other
1,915

 
1,864

Total consumer loans
57,139

 
56,649

 
 
 
 
 
Total loans
1,150,632

 
1,051,090

 
 
 
 
 
Deferred loan origination costs, net of fees
1,612

 
1,571

Allowance for loan losses
(9,246
)
 
(7,797
)
Loans receivable, net
$
1,142,998

 
$
1,044,864


The Company purchased commercial business loans totaling $96.6 million during the nine months ended September 30, 2015.


16
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

Allowance for Loan Losses
Changes in the allowance for loan losses for the three and nine months ended September 30, 2015 and 2014 are as follows:
Three Months Ended
September 30, 2015
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Balance at beginning of period
$
986

 
$
3,766

 
$
434

 
$
2,618

 
$
633

 
$
8,437

Provision (credit) for loan losses
30

 
666

 
(7
)
 
322

 
6

 
1,017

Loans charged-off
—

 
(136
)
 
—

 
(140
)
 
—

 
(276
)
Recoveries of loans previously charged-off
41

 
22

 
—

 
5

 
—

 
68

Balance at end of period
$
1,057

 
$
4,318

 
$
427

 
$
2,805

 
$
639

 
$
9,246

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30, 2015
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Balance at beginning of period
$
955

 
$
3,607

 
$
254

 
$
2,382

 
$
599

 
$
7,797

Provision for loan losses
74

 
843

 
173

 
582

 
40

 
1,712

Loans charged-off
(46
)
 
(156
)
 
—

 
(165
)
 
—

 
(367
)
Recoveries of loans previously charged-off
74

 
24

 
—

 
6

 
—

 
104

Balance at end of period
$
1,057

 
$
4,318

 
$
427

 
$
2,805

 
$
639

 
$
9,246


Three Months Ended
September 30, 2014
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Balance at beginning of period
$
984

 
$
3,465

 
$
221

 
$
2,208

 
$
567

 
$
7,445

Provision for loan losses
123

 
135

 
26

 
21

 
45

 
350

Loans charged-off
(137
)
 
(1
)
 
—

 
—

 
(42
)
 
(180
)
Recoveries of loans previously charged-off
—

 
—

 
—

 
1

 
3

 
4

Balance at end of period
$
970

 
$
3,599

 
$
247

 
$
2,230

 
$
573

 
$
7,619

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30, 2014
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Balance at beginning of period
$
975

 
$
3,395

 
$
169

 
$
1,875

 
$
502

 
$
6,916

Provision for loan losses
281

 
347

 
78

 
364

 
125

 
1,195

Loans charged-off
(317
)
 
(144
)
 
—

 
(13
)
 
(75
)
 
(549
)
Recoveries of loans previously charged-off
31

 
1

 
—

 
4

 
21

 
57

Balance at end of period
$
970

 
$
3,599

 
$
247

 
$
2,230

 
$
573

 
$
7,619



17
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

Further information pertaining to the allowance for loan losses at September 30, 2015 and December 31, 2014 is as follows:
September 30, 2015
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Allowance for loans individually evaluated and deemed to be impaired
$
310

 
$
40

 
$
—

 
$
—

 
$
—

 
$
350

Allowance for loans individually or collectively evaluated and not deemed to be impaired
747

 
4,278

 
427

 
2,805

 
639

 
8,896

Allowance for loans acquired with deteriorated credit quality
—

 
—

 
—

 
—

 
—

 
—

Total loan loss allowance
$
1,057

 
$
4,318

 
$
427

 
$
2,805

 
$
639

 
$
9,246

 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated and deemed to be impaired
$
5,893

 
$
3,765

 
$
—

 
$
485

 
$
77

 
$
10,220

Loans individually or collectively evaluated and not deemed to be impaired
424,394

 
332,193

 
17,409

 
304,876

 
57,062

 
1,135,934

Amount of loans acquired with deteriorated credit quality
—

 
3,724

 
—

 
754

 
—

 
4,478

Total loans
$
430,287

 
$
339,682

 
$
17,409

 
$
306,115

 
$
57,139

 
$
1,150,632

 
December 31, 2014
Residential -
1 to 4 Family
 
Multi-family
and Commercial
 
Construction
 
Commercial
Business
 
Consumer
 
Total
 
(In Thousands)
Allowance for loans individually evaluated and deemed to be impaired
$
287

 
$
52

 
$
—

 
$
20

 
$
—

 
$
359

Allowance for loans individually or collectively evaluated and not deemed to be impaired
668

 
3,555

 
254

 
2,362

 
599

 
7,438

Allowance for loans acquired with deteriorated credit quality
—

 
—

 
—

 
—

 
—

 
—

Total loan loss allowance
$
955

 
$
3,607

 
$
254

 
$
2,382

 
$
599

 
$
7,797

 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated and deemed to be impaired
$
5,318

 
$
1,872

 
$
—

 
$
470

 
$
—

 
$
7,660

Loans individually or collectively evaluated and not deemed to be impaired
424,885

 
292,215

 
13,579

 
251,140

 
56,649

 
1,038,468

Amount of loans acquired with deteriorated credit quality
372

 
4,233

 
—

 
357

 
—

 
4,962

Total loans
$
430,575

 
$
298,320

 
$
13,579

 
$
251,967

 
$
56,649

 
$
1,051,090



18
Table of Contents
SI FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014 AND DECEMBER 31, 2014

 
 
 
 
 
 

Past Due Loans
The following represents an aging of loans at September 30, 2015 and December 31, 2014:
September 30, 2015
30-59
Days
Past Due
 
60-89
Days
Past Due
 
90 Days or More
Past Due
 
Total 30
Days or More
Past Due
 
Current
 
Total
Loans
 
(In Thousands)
Real Estate:
 

 
 

 
 
 
 
 
 
 
 
Residential - 1 to 4 family
$
14

 
$
1,050

 
$
926

 
$
1,990

 
$
428,297

 
$
430,287

Multi-family and commercial
3,310

 
657