SI Financial Group, Inc. Reports Results for the Three and Six Months Ended June...

SI Financial Group, Inc. Reports Results for the Three and Six Months Ended June 30, 2008

WILLIMANTIC, Conn.--(Business Wire)--
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 $463,000, or $0.04 basic and
diluted earnings per common share, for the quarter ended June 30, 2008
versus net income of $377,000, or $0.03 basic and diluted earnings per
common share, for the quarter ended June 30, 2007. Net income for the
six months ended June 30, 2008 was $918,000, or $0.08 basic and
diluted earnings per common share, compared to $826,000, or $0.07
basic and diluted earnings per common share, for the six months ended
June 30, 2007. Higher net income for 2008 resulted from increases in
net interest income and noninterest income, offset by increases in
noninterest expenses, the provision for income taxes and the provision
for loan losses.

For the three and six months ended June 30, 2008, net interest
income increased 11.7% to $6.0 million from $5.4 million and increased
9.3% to $11.6 million from $10.6 million, respectively, compared to
the same periods in 2007. The increase in net interest income was due
to a higher average balance of interest-earning assets and higher
yields on securities, offset by an increase in the cost of funds
related to an increase in the average balance of deposits and Federal
Home Loan Bank borrowings. Despite an increase in the cost of funds,
the average yield on deposits and borrowings declined for the three
and six months ended June 30, 2008 compared to the same periods in
2007.

The provision for loan losses increased $95,000 and $65,000 for
the three and six months ended June 30, 2008, respectively, primarily
due to an increase in nonperforming loans and loan growth, offset by a
decrease in loan charge-offs. At June 30, 2008, nonperforming loans
totaled $7.9 million compared to $3.3 million at June 30, 2007.
Specific reserves relating to nonperforming loans increased to $1.2
million at June 30, 2008 from $660,000 at June 30, 2007. At June 30,
2008, two commercial construction relationships accounted for $5.1
million of nonperforming loans and $1.0 million in specific reserves.
Net loan charge-offs were $21,000 and $103,000 for the three and six
months ended June 30, 2008, respectively, compared to $110,000 and
$172,000 for the three and six months ended June 30, 2007. Higher loan
charge-offs for 2007 related to the write-down of a commercial real
estate property subsequently transferred to other real estate owned
and charge-offs associated with the indirect automobile loan
portfolio, which was sold in June 2007.

Noninterest income was $2.6 million for the quarter ended June 30,
2008 compared to $2.3 million for the quarter ended June 30, 2007.
Noninterest income was $5.2 million for the first half of 2008
compared to $4.7 million for the same period of 2007. Contributing to
the increase in noninterest income for the three and six months ended
June 30, 2008, were increases in service fees of $172,000 and
$331,000, respectively, other noninterest income of $122,000 and
$139,000, respectively, and wealth management fees of $50,000 and
$99,000, respectively. Service fees rose during the first half of 2008
as a result of an increase in overdraft charges on certain deposit
products and higher electronic banking usage. The increase in other
noninterest income for 2008 represents the recovery of 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. Wealth management fees were higher
principally due to growth in the assets under management. The
increases in noninterest income in 2008 were offset by a decrease of
$177,000 in the net gain on the sale of available for sale securities
for the first half of 2008 as a result of a gain of $321,000 from the
sale of marketable equity securities during the first half of 2007.

Noninterest expenses increased $761,000 and $1.1 million for the
three and six months ended June 30, 2008, respectively, compared to
the same periods in 2007. Higher noninterest expenses were primarily
attributable to increased operating costs associated with three
additional branch offices, which resulted in higher compensation costs
due to increased staffing levels and greater occupancy expense related
to facility leases and other occupancy-related expenses. Computer and
electronic banking services expense rose due to increased
telecommunication costs and transaction activity. During the first
half of 2008, an impairment charge of $63,000 was recorded to reduce
the carrying value of the Bank's investment in a small business
investment company limited partnership. The increase in noninterest
expenses was offset by a decrease in outside professional services in
2008 due to charges associated with the termination of the agreement
to purchase a mortgage company during the first half of 2007.

Total assets increased $70.7 million, or 8.9%, to $860.9 million
at June 30, 2008 from $790.2 million at December 31, 2007.
Contributing to the increase in assets were increases of $36.4 million
in available for sale securities, $22.0 million in net loans
receivable, $6.8 million in cash and cash equivalents and $3.6 million
in intangible assets, offset by a decrease of $913,000 in other real
estate owned. Available for sale securities increased as a result of
the purchases of predominately mortgage-backed securities with funds
received from the Bank's Colchester and New London, Connecticut branch
acquisitions during the first quarter of 2008. The increase in net
loans receivable included increases in commercial and residential
mortgage loans and commercial business loans, offset by decreases in
construction loans and home equity lines of credit. Of the $22.0
million increase in net loans receivable, $7.4 million represented
primarily commercial loans acquired in connection with the Colchester
and New London branch acquisitions. Loan originations increased $14.0
million for the first half of 2008 compared to the same period of
2007. The increase in intangible assets, consisting of goodwill and
core deposit intangibles, resulted from the Colchester and New London
branch acquisitions. The decrease in other real estate owned reflects
the sale of a commercial real estate property and a residential real
estate property during the first half of 2008.

Total liabilities were $783.1 million at June 30, 2008 compared to
$708.1 million at December 31, 2007. Deposits increased $72.9 million,
or 13.3%, which included an increase in certificate of deposit
accounts of $36.8 million, NOW and money market accounts of $32.0
million and demand deposits of $4.5 million. Contributing to the
increase in deposits was $27.7 million in deposits that were assumed
in the purchase of the Colchester and New London, Connecticut branch
offices and competitively priced deposit products. Borrowings
decreased $2.0 million from $149.9 million at December 31, 2007 to
$147.9 million at June 30, 2008, resulting from a reduction in Federal
Home Loan Bank advances.

Total stockholders' equity decreased $4.3 million from $82.1
million at December 31, 2007 to $77.7 million at June 30, 2008. The
decrease in equity related to stock repurchases of 257,655 shares at a
cost of $2.5 million, an increase in net unrealized holding losses on
available for sale securities aggregating $2.4 million (net of taxes),
cumulative effect adjustment for a change in accounting principle of
$547,000, resulting from the application of Financial Accounting
Standards Board's Emerging Issues Task Force Issue No. 06-4,
"Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements" and
dividends of $0.08 per share aggregating $333,000, offset by earnings
of $918,000.

"We are pleased with the progress we have made with the expansion
and improvements in our branch network. The Colchester and New London,
Connecticut acquisitions, along with the relocation of our Norwich and
Brooklyn, Connecticut branch offices, have been enthusiastically
greeted by the communities they serve. On the national level, we have
witnessed bank failures and continued deterioration of the housing
market. While Connecticut has experienced an increase in foreclosure
activity, the extent of foreclosure in Connecticut is lower than other
areas of the country. Savings Institute remains financially strong and
maintains its commitment to serving the financial needs of our
communities. We remain well-capitalized and retain healthy liquidity
levels, which are derived from our core deposit base of Eastern
Connecticut," 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-two 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, 2007, 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.

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*T
SELECTED FINANCIAL CONDITION DATA:
December
(Dollars In Thousands / Unaudited) June 30, 31,
2008 2007
---------------------------------------------------------- -----------
ASSETS
Noninterest-bearing cash and due from banks $ 14,678 $ 14,543
Interest-bearing cash and cash equivalents 12,805 6,126
Securities 186,602 149,716
Loans held for sale - 410
Loans receivable, net 609,550 587,538
Bank-owned life insurance 8,562 8,410
Other assets 28,664 23,455
-------- -----------

Total assets $860,861 $790,198
======== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $621,273 $548,335
Borrowings 147,884 149,867
Other liabilities 13,956 9,909
-------- -----------
Total liabilities 783,113 708,111
-------- -----------

Stockholders' equity 77,748 82,087
-------- -----------

Total liabilities and stockholders' equity $860,861 $790,198
======== ===========
*T

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*T
SELECTED OPERATING DATA:
Three Months Six Months
Ended Ended
(Dollars In Thousands / Unaudited) June 30, June 30,
--------------- ---------------
2008 2007 2008 2007
------- ------- ------- -------

Interest and dividend income $11,707 $10,724 $23,146 $21,198
Interest expense 5,707 5,351 11,536 10,573
------- ------- ------- -------
Net interest income 6,000 5,373 11,610 10,625
------- ------- ------- -------

Provision for loan losses 150 55 285 220
------- ------- ------- -------
Net interest income after provision for
loan losses 5,850 5,318 11,325 10,405

Noninterest income 2,623 2,253 5,151 4,736
Noninterest expenses 7,806 7,045 15,140 13,991
------- ------- ------- -------
Income before provision for income
taxes 667 526 1,336 1,150

Provision for income taxes 204 149 418 324
------- ------- ------- -------
Net income $ 463 $ 377 $ 918 $ 826
======= ======= ======= =======
*T

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*T
SELECTED OPERATING DATA - Continued:

---------------------------------------------- -----------------------
Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
---------------------- -----------------------
2008 2007 2008 2007
---------------------------------- ----------- ----------- -----------

Earnings per common
share:
Basic $0.04 $ 0.03 $ 0.08 $ 0.07
Diluted $0.04 $ 0.03 $ 0.08 $ 0.07

Weighted-average common
shares outstanding:
Basic 11,333,100 11,830,072 11,382,278 11,817,690
Diluted 11,355,066 11,886,173 11,409,562 11,886,931
*T

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*T
SELECTED FINANCIAL RATIOS:
At or For the
(Dollars in Thousand / Unaudited) Three Months At or For the
Ended Six Months Ended
June 30, June 30,
------------- ----------------
2008 2007 2008 2007
---------------------------------------------- ------ ------- --------
Selected Performance Ratios: (1)
Return on average assets 0.22% 0.20% 0.22% 0.22%
Return on average equity 2.37 1.81 2.30 2.00
Interest rate spread 2.59 2.49 2.52 2.49
Net interest margin 2.98 3.00 2.95 2.99
Efficiency ratio (2) 90.88 92.38 91.11 93.03

Asset Quality Ratios:
Allowance for loan losses $5,427 $ 4,413
Allowance for loan losses as a percent
of total loans 0.88% 0.76%
Allowance for loan losses as a percent
of nonperforming loans 68.58 134.58
Nonperforming loans $7,913 $ 3,279
Nonperforming loans as a percent of
total loans 1.29% 0.57%
Nonperforming assets (3) $7,913 $ 4,232
Nonperforming assets as a percent of
total assets 0.92% 0.56%

(1) Quarterly 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.
(3) Nonperforming assets consist of nonperforming loans and other real
estate owned.
*T

SI Financial Group, Inc.
Sandra Mitchell, 860-456-6509
Vice President / Director of Corporate Communications
investorrelations@banksi.com

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