Edgar Filing: SI Financial Group, Inc.

FWP

Second Step Conversion and Offering

January 2011

Issuer Free Writing Prospectus

Filed Pursuant to Rule 433

Registration Statement No. 333-169302

Legal Disclaimers

This presentation is for informational purposes only and does not constitute an offer to sell nor a

solicitation of an offer to buy shares of common stock of SI Financial Group, Inc. The offer is made

only by the prospectus.

Please refer to the prospectus dated November 10, 2010.

SI Financial Group, Inc. has filed a registration statement (including a prospectus) with the Securities

and Exchange Commission (SEC) for the offering to which this communication relates. Before you

invest, you should read the prospectus in that registration statement and other documents the issuer has

filed with the SEC for more complete information about the issuer and this offering. You may get these

documents

for

free

visiting

EDGAR

the

SEC

Web

site

www.sec.gov.

Alternatively,

the

issuer,

any underwriter or any dealer participating in the offering will

arrange to send you the prospectus if you

request it by calling toll-free at (877) 643-8198.

The shares of common stock of SI Financial Group, Inc. are not deposits or savings accounts and are not

insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Forward Looking Statements

This presentation contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or

similar expressions. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-

looking statements due to, among others, the following factors:

general economic conditions, either nationally or in our market areas, that are worse than expected;

changes in the interest rate environment that reduce our margins or reduce fair value of financial instruments;

increased competitive pressures among financial services companies;

changes in consumer spending, borrowing and savings habits;

legislative or regulatory changes that adversely affect our business;

adverse changes in the securities and credit markets; and

changes in accounting policies and practices, as may be adopted by bank regulatory agencies or the Financial Accounting Standards Board.

Any of the forward-looking statements that we make in this presentation and in other public statements we make may later prove incorrect because of inaccurate

assumptions, the factors illustrated above or other factors that we cannot foresee. Consequently, no forward-looking statement can be guaranteed.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Please see “Risk Factors” beginning on page 17 of the prospectus.

$52.4 million

(3)

Subscription & Community Results:

1.5%

Dividend Yield:

0.9006x

(4)

Exchange Ratio:

Stifel Nicolaus Weisel

Bookrunner:

Week of January 10, 2011

Expected Close / Pricing:

$1.5 million individual / 5.0% group

Maximum Purchase Limitations:

(Individual / Group)

$84.9 million

(4)

Pro Forma Market Cap:

$44.6 million -

$69.4 million

(2)

Gross Proceeds:

5,578,125 –

8,678,906

(2)

Shares Offered:

$8.00

Price Per Share:

Nasdaq Global Market / “SIFI”

(1)

Listing / Ticker:

SI Financial Group, Inc.

Issuer:

Offering Summary

(1)

Shares currently trade on the Nasdaq Global Market. For the first 20 trading days after the closing, shares will trade under the symbol “SIFID.”

(2)

Based on the range from the minimum to the adjusted maximum of the independent valuation appraisal. Based on offer price of $8.00 per share.

(3)

Includes shares sold to Savings Institute’s ESOP and 401(k).

(4)

Based on the midpoint of the independent valuation appraisal. Based on offer price of $8.00 per share.

Second Step Conversion Mechanics

SI Bancorp, MHC

(owns 61.9% of

common stock)

Public Stockholders

(own 38.1% of common stock)

Current Structure

Public Stockholders

(own 100% of common stock)

Post Second Step Structure

Savings Institute Bank

and Trust Company

SI Financial Group, Inc.

Savings Institute Bank

and Trust Company

SI Financial Group, Inc.

Company Overview

Company History

Headquartered in Willimantic, CT

Established in 1842

Total assets in 1995: $252 million

Experienced Management Team

Savings Institute’s management team is comprised of experienced individuals that

have operated through various credit cycles and have executed the Bank’s growth

strategy

Savings Institute expects that its management team and board of directors will

purchase approximately 22,850 shares in the offering

Following the conversion management and the board of directors are expected to

own 291,918 shares of common stock, which equals 2.8% of the outstanding

shares*

Mr. Brouillard and Mr. Hull are the 2 largest management shareholders, expected

following the conversion to own 72,067 and 47,484 shares, respectively

* Assumes conversion and offering at the midpoint of the offering range.

Name

Position

Years of

Experience

Years with

Savings Institute

Rheo A. Brouillard

Director, President and Chief Executive Officer

Brian J. Hull

Chief Financial Officer and Treasurer

David T. Weston

Senior Vice President and Senior Trust Officer

William E. Anderson

Senior Vice President and Retail Banking Officer

Laurie L. Gervais

Senior Vice President and Director of Human Resources

Michael J. Moran

Senior Vice President and Senior Credit Officer

Company Profile

* At the midpoint of the offering range.

Headquartered in Willimantic, CT, SI

Financial reorganized to a two-tier

mutual holding company in 2000 and sold

a minority interest in 2004

As of September 30, 2010:

Total assets: $890.3 million

Pro forma market cap: $84.9 million*

Number of banking offices: 21

Number of full-time employees: 241

Number of part-time employees: 31

Market Area Overview

Savings Institute operates 21 full-service community banking locations in

Windham, New London, Tolland, Hartford and Middlesex counties in

Connecticut

30 miles east of Hartford, Connecticut

Diverse economy primarily oriented to the educational, service, entertainment,

manufacturing and retail industries. Largest employers include:

The Mohegan Sun and Foxwoods casinos

General Dynamics Defense Systems

Pfizer, Inc.

Several institutions of higher education (University of Connecticut, Eastern

Connecticut State University, Mitchell College, Connecticut College)

Small to mid-sized businesses generally support the local economies

During the current economic downturn Savings Institute’s primary market area has

remained a relatively stable banking market

Since 2000 primary market’s population has grown by approximately 7.1% versus 3.8%

for Connecticut

In the 5 counties Savings Institute maintains branches median household income levels

ranged from $56,000 to $75,000 versus $68,000 for Connecticut and $51,000 for the

U.S.

Market Area Presence

Savings Institute is among the top 10 banks by market share in 3

of the 5 counties

in which it does business

Source: FDIC. Data as of 6/30/10.

(1) Market presence for First Niagara shown pro forma for pending New Alliance acquisition.

Windham, CT

Tolland, CT

Rank

Institution

Branches

Deposits

($000s)

Market

Rank

Institution

Branches

Deposits

($000s)

Market

SI Financial Group Inc. (MHC) (CT)

$286,031

20.7%

First Niagara Finl Group (NY) (1)

$644,286

29.9%

PSB Holdings Inc. (MHC) (CT)

278,902

20.2

Rockville Financial Inc. (MHC) (CT)

556,090

25.6

Citizens National Bancorp (CT)

176,751

12.8

Bank of America Corp. (NC)

230,925

10.6

Bank of America Corp. (NC)

164,942

11.9

People's United Financial Inc. (CT)

196,932

9.1

First Niagara Finl Group (NY) (1)

154,691

11.2

Stafford Savings Bank (CT)

151,559

7.0

Liberty Bank (CT)

125,369

9.1

SI Financial Group Inc. (MHC) (CT)

122,134

5.6

Jewett City Savings Bank (CT)

92,172

6.7

Webster Financial Corp. (CT)

91,965

4.2

People's United Financial Inc. (CT)

56,357

4.1

Liberty Bank (CT)

78,527

3.6

Royal Bank of Scotland Group

33,914

2.5

Toronto-Dominion Bank

39,846

1.8

Eastern Federal Bank (CT)

13,357

1.0

New England Bancshares (CT)

23,006

1.1

Total For Institutions In Market

$1,382,486

Total For Institutions In Market

$2,171,405

New London, CT

Rank

Institution

Branches

Deposits

($000s)

Market

Royal Bank of Scotland Group

$858,595

20.6%

Chelsea Groton Bank (CT)

634,610

15.2

People's United Financial Inc. (CT)

545,719

13.1

Liberty Bank (CT)

468,258

11.2

Bank of America Corp. (NC)

435,322

10.4

Dime Bank (CT)

433,400

10.4

SI Financial Group Inc. (MHC) (CT)

203,022

4.9

Eastern Federal Bank (CT)

109,173

2.6

Jewett City Savings Bank (CT)

101,468

2.4

Webster Financial Corp. (CT)

84,697

2.0

Total For Institutions In Market

$4,168,798

Reasons for the Conversion –

Why Now?

Optimizing future growth opportunities

Continue to execute proven business model

Consolidation opportunities in current and new markets

Support organic growth through community-oriented focus

Enhance existing products and services

Provide new products and services

Improve capital strength in a difficult economic and regulatory environment

Minimize regulatory uncertainty

Improve shareholder returns

Fully public structure provides increased structural flexibility

in an uncertain

regulatory environment

Business Strategy

Continue community oriented focus by offering a full range of financial products

and services to its customers

Grow through acquisition opportunities in areas in or adjacent to existing market

area

Actively manage the balance sheet and diversify the asset mix

Prudently increase percentage of assets consisting of multi-family, commercial real

estate and commercial business loans

Continue conservative underwriting practices and maintain a high

quality loan

portfolio

Increase core deposits by emphasizing demand, savings and money market

accounts

Supplement noninterest income through expanded mortgage banking operations

and existing wealth management operations

Acquisition Opportunities

In Connecticut, Rhode Island and

Massachusetts there are

approximately 26 public and private

banks and thrifts with assets

between $100 million and $500

million

11 are de novo

4 have TARP outstanding

2 have Texas ratios of greater than

50%*

On a selective basis Savings

Institute would consider expanding

into contiguous or near-contiguous

markets via:

Whole bank acquisitions

Branch acquisitions

FDIC assisted transactions

* Texas ratio defined as nonperforming assets, accruing restructured debt and accruing loans 90+ days past due divided by tangible common equity plus loan loss reserves.

Financial Highlights

Franchise Growth

Savings Institute has grown organically and through acquisitions, resulting in an

asset CAGR since 2005 of 5.5%

Since 2005 has acquired 2 branches, opened 4 branches and relocated or renovated 6

existing branches, expanding market presence in Tolland, New London, Hartford and

Middlesex counties

Total Assets ($000s)

$691,868

$757,037

$790,198

$853,122

$872,354

$890,318

$200,000

$400,000

$600,000

$800,000

$1,000,000

2005

2006

2007

2008

2009

9/30/2010

Diversified Loan Portfolio

Savings Institute has diversified its portfolio mix by increasing commercial real

estate, multifamily and commercial business lending while maintaining prudent

underwriting practices

Increased focus on SBA and USDA guaranteed commercial lending

At September 30, 2010

Total Loans: $608.0 million

At December 31, 2005

Total Loans: $516.4 million

Other loans consist of home equity (4%) and other consumer (1%).

1-4 Family

Residential

52%

Other

Commercial

Construction

SBA and USDA

Guaranteed

Commercial

11%

Other

Multifamily and

CRE

19%

1-4 Family

Residential

46%

Multifamily and

CRE

27%

Other

SBA and USDA

Guaranteed

Commercial

16%

Construction

Other

Commercial

Asset Quality Trends

Savings Institute has maintained high asset quality with solid reserve coverage

Aggressive early recognition of nonperforming loans

NPAs and TDRs/Assets

Peer group comprised of all publicly traded banks and thrifts in

Connecticut. Operating data as of 9/30/10.

0.18%

0.24%

0.30%

0.70%

1.30%

1.78%

0.09%

0.19%

1.09%

1.10%

0.77%

1.01%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2005Y

2006Y

2007Y

2008Y

2009Y

9/30/2010

Peer Median

Savings Institute

2005

2006

2007

2008

2009

9/30/2010

Total Nonperforming Loans

$240

$1,392

$7,632

$9,328

$3,007

$4,208

Other Real Estate Owned

325

913

3,680

2,256

Total Nonperforming Assets

$565

$1,392

$8,545

$9,328

$6,687

$6,464

Accruing Troubled Debt Restructurings

2,561

Total NPAs and TDRs

$639

$1,464

$8,616

$9,397

$6,754

$9,025

NPLs/Loans

0.05%

0.24%

1.29%

1.50%

0.49%

0.68%

NPLs/Assets

0.03

0.18

0.97

1.09

0.34

0.47

NPAs and TDRs/Assets

0.09

0.19

1.09

1.10

0.77

1.01

Reserves/Loans

0.71

0.76

0.89

0.97

0.80

0.81

Reserves/NPLs

1,529.6

313.6

68.7

64.8

162.7

118.7

Securities Portfolio

Savings Institute maintains a diversified securities portfolio totaling $173 million as

of September 30, 2010

Savings Institute has previously taken $1.2 million in OTTI charges on 3 pooled trust

preferred securities

Savings Institute performs impairment analyses on its securities

portfolio quarterly

As of September 30, 2010 investments below investment grade consisted of pooled trust

preferred securities with a book value of $7.0 million and a fair value of $4.7 million and

non-agency

MBS

with

book

value

$3.9

million

and

fair

value

$3.6

million

September 30, 2010

(1)

Other securities consist of Non-Agency MBS –

HELOC (1.9%),

Tax Exempt Debt (0.1%), Foreign Government Debt (0.1%)

and Equity Securities (0.6%)

Other (1)

USG and Agency

Obligations

14%

Corporate Debt

Agency MBS -

Residential

54%

Non-Agency MBS

- Residential

State and

Municipal Debt

CDOs (TRuPs)

GSE Debt

Obligations

Improving Deposit Mix

Savings Institute has grown deposits and emphasized the growth of core deposits through

investments to its branch network, new product offerings and attracting commercial deposits

from small and medium size businesses

As of 9/30/2010 time deposits included approximately $4.4 million in brokered deposits

Since

2005

total

deposits

and

non-time

deposits

have

grown

CAGRs

6.1%

and

7.6%,

respectively

Total deposits exclude mortgagors’

and investors’

escrow accounts.

$244,251

$278,632

$273,897

$314,811

$311,309

$299,679

$265,046

$260,044

$274,438

$305,840

$347,478

$374,619

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

2005

2006

2007

2008

2009

9/30/2010

Time Deposits

Non-Time Deposits

Cost of

Interest

Bearing

Deposits

1.98%

2.74%

3.19%

2.85%

2.25%

1.62%

Core Profitability

Since 2005 Savings Institute has been profitable every year, after excluding the

following events:

2009 FDIC special assessment of $393,000

2008 write down on securities of $7.1 million

As provision for loan losses expense returns closer to historical levels net income has

improved

Dollars in Thousands

3,397

2,778

1,412

1,713

690

2,725

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2005

2006

2007

2008*

2009*

9 Months Ended 9/30/2010

Annualized

Net Income

* Excludes events as noted above.

Strong Capital Profile

* Assumes offering completed at the midpoint of the offering range.

(1) Represents bank level data.

Through internal capital generation Savings Institute has remained well capitalized

throughout the current economic crisis

On a pro forma basis, Savings Institute will continue to have a strong capital base

for growth and execution of its business plan

As of June 30, 2010

Regulatory

Minimum

Actual

Pro Forma

for Offering*

Tangible Common Equity

8.08%

10.56%

Leverage (1)

5.00%

8.08

10.56

Tier 1 (1)

6.00

13.91

18.61

Total Risk Based Capital (1)

10.00

14.84

19.49

Stock Buybacks and Dividends

Since completing first step of the conversion in December 2004, SI Financial has

repurchased approximately 775,000 shares

Approximately 15.4% of original offering

Between March 2005 and November 2010 SI Financial has paid stockholders a

total of $0.69 in quarterly dividends

Quarterly dividend was suspended in January 2009 in order to preserve capital

With improving earnings outlook, quarterly dividend of $0.03 reinstated in May

2010

Following completion of 2

Step Conversion SI Financial plans to pay initial

quarterly dividends of $0.03 or $0.12 per annum, resulting in an

annual dividend

yield of 1.50% based on the $8.00 per share offering price*

* The rate of such dividends will be in the discretion of the board of directors and will depend upon a number of factors. No assurance can be given that SI Financial will continue

to pay dividends or that they will not be reduced in the future.

Use of Proceeds

To finance the possible acquisition of

financial institutions or related

businesses in or adjacent to the

existing market area

To pay dividends to shareholders

To repurchase shares of outstanding

common stock

For general corporate purposes

To fund new loans

To invest in securities

To finance the possible expansion of

its business activities

For general corporate purposes

Possible Uses of Proceeds for

SI Financial Group

Possible Uses of Proceeds for

Savings Institute

Investment Merits

Community-oriented bank with experienced management team

Managed company through different credit cycles

Executed various bank and non-bank acquisitions

Strong asset quality track record and reserve coverage levels

Strong core deposit base

Diversified loan portfolio

Internal and external growth opportunities post-transaction

Offering Overview

Pro forma metrics (based on the appraisal prepared by RP Financial)

As of or for the Six Months Ended June 30, 2010

($000s)

Midpoint

Shares Offered

6,562,500

Exchange Shares

4,044,071

Total Shares Outstanding

10,606,571

Pro Forma Market Capitalization

$84,853

Gross Procceds of Stock Offering

52,500

Estimated Net Proceeds, as Adjusted

43,945

Exchange Ratio

0.9006x

Implied Price

$7.20

Pro Forma Net Income

1,179

Pro Forma Net Income Per Share

$0.12

Pro Forma Shareholders' Equity

125,270

Pro Forma Tang. Shareholders' Equity

121,091

Pro Forma Tang. Shareholders' Equity/Tang. Assets

13.03%

Pro Forma Shareholders' Equity Per Share

$11.81

Pro Forma Tang. Shareholders' Equity Per Share

$11.42

Price/Pro Forma Net Income Per Share

33.3x

Price/Pro Forma Shareholders' Equity Per Share

67.7%

Price/Pro Forma Tang. Shareholders' Equity Per Share

70.1%

Based on a $8.00 offering price

Valuation Overview

Compared to the peer group prepared by RP Financial, SI Financial’s valuation

represents a discount of 32.9% at the midpoint of the offering range on a price to

tangible book value basis

Midpoint

Appraisal Peer

Group Median

Price/Book Value

67.74%

102.12%

Price/Tangible Book Value

70.05%

104.45%

Price/Earnings

33.3x

14.5x

Market Capitalization ($MM)

$84.9

$82.6

Appraisal peer group comprised of BFED, CEBK, ESBF, ESSA, HARL, HIFS, NHTB, THRD, UBNK and WFD. Market data as of 12/17/10. Peer price/earnings

median based on LTM earnings.