**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM**  **10-K**


**(Mark
      One)**





**ý**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the fiscal year ended December 31, 2005**





**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: 0-50876





**NAUGATUCK
      VALLEY FINANCIAL CORPORATION**


(Exact
      name of registrant as specified in its charter)





**United
                States**
            
            **65-1233977**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)**333
                Church Street, Naugatuck, Connecticut**
            
            **06770**(Address
                of
                principal executive offices
            
            (Zip
                Code)








Registrant’s
      telephone number, including area code: **(203)
      720-5000**





Securities
      registered pursuant to Section 12(b) of the Act: **None**





Securities
      registered pursuant to Section 12(g) of the Act:





**Common
      Stock, par value $0.01 per share**


(Title
      of
      Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No ý





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No ý





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 ý No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of the registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.  o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer o Accelerated
      filer o Non-accelerated
      filer ý





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).


Yes o  No ý





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates as of June 30, 2005, was $35,518,059.





The
      number of shares outstanding of the registrant’s common stock as of March 1,
      2006 was 7,604,375.


Of
      such
      shares outstanding, 4,182,407 shares were held by Naugatuck Valley Mutual
      Holding Company.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





**Portions
      of the 2005 Annual Report to Stockholders and portions of the Proxy Statement
      for the 2006 Annual Meeting of Stockholders are incorporated by reference in
      Parts II and III, respectively, of this Form 10-K.**

















**INDEX**




Part
                IPageItem
                1.
            Business
            1Item
                1A.
            Risk
                Factors
            19Item
                1B.
            Unresolved
                Staff Comments
            21Item
                2.
            Properties
            22Item
                3.
            Legal
                Proceedings
            23Item
                4.
            Submission
                of Matters to a Vote of Securities Holders
            23Part
                IIItem
                5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters
                andIssuer Purchases of Equity Securities
            23Item
                6.
            Selected
                Financial Data
            23Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            23Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            23Item
                8.
            Financial
                Statements and Supplementary Data
            23Item
                9.
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            23Item
                9A.
            Controls
                and Procedures
            23Item
                9B.
            Other
                Information
            24Part
                IIIItem
                10.
            Directors
                and Executive Officers of the Registrant
            24Item
                11.
            Executive
                Compensation
            24Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters
            24Item
                13.
            Certain
                Relationships and Related Transactions
            25Item
                14.
            Principal
                Accountant Fees and Services
            25Part
                IVItem
                15.
            Exhibits
                and Financial Statement Schedules
            25SIGNATURES











*This
      report contains certain “forward-looking statements” within the meaning of the
      federal securities laws. These statements are not historical facts, rather
      statements based on Naugatuck Valley Financial Corporation’s current
      expectations regarding its business strategies, intended results and future
      performance. Forward-looking statements are preceded by terms such as “expects,”
“believes,” “anticipates,” “intends” and similar expressions.*





*Management’s
      ability to predict results or the effect of future plans or strategies is
      inherently uncertain. Factors which could affect actual results include interest
      rate trends, the general economic climate in the market area in which Naugatuck
      Valley Financial operates, as well as nationwide, Naugatuck Valley Financial’s
      ability to control costs and expenses, competitive products and pricing, loan
      delinquency rates and changes in federal and state legislation and regulation.* *Additional
      factors that may affect our results are discussed in this Annual Report on
      Form
      10-K under “Item 1A. Risk Factors.”*  *These
      factors should be considered in evaluating the forward-looking statements and
      undue reliance should not be placed on such statements. Except as may be
      required by applicable law or regulation, Naugatuck Valley Financial assumes
      no
      obligation to update any forward-looking statements.*








**PART
      I**





**ITEM
      1.****BUSINESS.**





**General**





Naugatuck
      Valley Financial Corporation was organized as a federal corporation at the
      direction of Naugatuck Valley Savings and Loan in connection with the mutual
      holding company reorganization of Naugatuck Valley Savings. The reorganization
      was completed on September 30, 2004. In the reorganization, Naugatuck Valley
      Financial sold 43% of its outstanding shares of common stock (3,269,881 shares)
      to the public, contributed 2% of its outstanding shares of common stock (152,087
      shares) to the Naugatuck Valley Savings and Loan Foundation and issued 55%
      of
      its outstanding shares of common stock (4,182,407 shares) to Naugatuck Valley
      Mutual Holding Company, the mutual holding company parent of Naugatuck Valley
      Savings.





As
      long
      as Naugatuck Valley Mutual exists, it will own at least a majority of Naugatuck
      Valley Financial’s common stock. Naugatuck Valley Financial’s business activity
      is the ownership of the outstanding capital stock of Naugatuck Valley Savings
      and management of the investment of offering proceeds retained from the
      reorganization. Naugatuck Valley Financial neither owns nor leases any property
      but instead uses the premises, equipment and other property of Naugatuck Valley
      Savings with the payment of appropriate rental fees, as required by applicable
      law and regulations. In the future, Naugatuck Valley Financial may acquire
      or
      organize other operating subsidiaries; however, there are no current plans,
      arrangements, agreements or understandings, written or oral, to do so. Naugatuck
      Valley Financial has no significant assets, other than all of the outstanding
      shares of Naugatuck Valley Savings and U.S. government and agency securities,
      and no significant liabilities. Accordingly, the information set forth in this
      report, including the consolidated financial statements and related financial
      data, relates primarily to Naugatuck Valley Savings.





Naugatuck
      Valley Savings is a federally chartered savings bank, and has served its
      customers in Connecticut since 1922. We operate as a community-oriented
      financial institution offering traditional financial services to consumers
      and
      businesses in our market area. We attract deposits from the general public
      and
      use those funds to originate one- to four-family, multi-family and commercial
      real estate, construction, commercial business, and consumer loans, which we
      primarily hold for investment.





Naugatuck
      Valley Mutual is our federally chartered mutual holding company parent. As
      a
      mutual holding company, Naugatuck Valley Mutual is a non-stock company that
      has
      as its members the depositors of Naugatuck Valley Savings. Naugatuck Valley
      Mutual does not engage in any business activity other than owning a majority
      of
      the common stock of Naugatuck Valley Financial.





**Available
      Information**





Naugatuck
      Valley Financial’s annual report on Form 10-K, quarterly reports on
      Form 10-Q, current reports on Form 8-K, and any amendments to such
      reports filed or furnished pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934, as amended, are made available free of charge
      on our website, www.nvsl.com ,
      as


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          to Index


soon
      as
      reasonably practicable after such reports are electronically filed with, or
      furnished to, the Securities and Exchange Commission. Information on our website
      shall not be considered a part of this Form 10-K.





**Market
      Area**





We
      are
      headquartered in Naugatuck, Connecticut, which is located in south-western
      Connecticut approximately six miles south of Waterbury and 26 miles north of
      Bridgeport. In addition to our main office, we operate five branch offices
      in
      the Greater Naugatuck Valley which we consider our market area. The Greater
      Naugatuck Valley encompasses the communities in the central and lower Naugatuck
      Valley regions in New Haven and Fairfield Counties. The economy in our market
      area is primarily oriented to the service, retail, construction, and
      manufacturing industries.





**Competition**





We
      face
      significant competition for the attraction of deposits and origination of loans.
      Our most direct competition for deposits has historically come from the several
      financial institutions operating in our market area and, to a lesser extent,
      from other financial service companies, such as brokerage firms, credit unions
      and insurance companies. We also face competition for investors’ funds from
      money market funds and other corporate and government securities. In addition,
      banks owned by Bank of America Corporation, Wachovia Corporation, J.P. Morgan
      Chase & Co. and TD Bank Financial Group, all of which are large
      super-regional bank holding companies, also operate in our market area. These
      institutions are significantly larger than us and, therefore, have significantly
      greater resources.





Our
      competition for loans comes from financial institutions in our market area
      and
      from other financial service providers, such as mortgage companies and mortgage
      brokers. Competition for loans also comes from the increasing number of
      non-depository financial service companies entering the mortgage market, such
      as
      insurance companies, securities companies and specialty finance companies.





We
      expect
      competition to increase in the future as a result of legislative, regulatory
      and
      technological changes and the continuing trend of consolidation in the financial
      services industry. Technological advances, for example, have lowered the
      barriers to enter new market areas, allowed banks to expand their geographic
      reach by providing services over the Internet and made it possible for
      non-depository institutions to offer products and services that traditionally
      have been provided by banks. Changes in federal law permit affiliation among
      banks, securities firms and insurance companies, which promotes a competitive
      environment in the financial services industry. Competition for deposits and
      the
      origination of loans could limit our growth in the future.





**Lending
      Activities**





***General*** **.** **** Our
      loan
      portfolio consists primarily of one- to four-family residential mortgage loans.
      To a lesser but growing extent, our loan portfolio includes multi-family and
      commercial real estate loans, construction loans, commercial business loans
      and
      consumer loans. Substantially all of our loans are made to borrowers residing
      within Connecticut.





***One-
      to Four-Family Residential Loans*** **.**  Our
      primary lending activity is the origination of mortgage loans to enable
      borrowers to purchase or refinance existing homes or to construct new
      residential dwellings in our market area. We offer fixed-rate and
      adjustable-rate mortgage loans with terms up to 30 years. Borrower demand for
      adjustable-rate loans versus fixed-rate loans is a function of the level of
      interest rates, the expectations of changes in the level of interest rates,
      the
      difference between the interest rates and loan fees offered for fixed-rate
      mortgage loans and the initial period interest rates and loan fees for
      adjustable-rate loans. The relative amount of fixed-rate mortgage loans and
      adjustable-rate mortgage loans that can be originated at any time is largely
      determined by the demand for each in a competitive environment and the effect
      each has on our interest rate risk. The loan fees charged, interest rates and
      other provisions of mortgage loans are determined by us on the basis of our
      own
      pricing criteria and competitive market conditions.





We
      offer
      fixed-rate loans with terms of either 10, 15, 20, 30 or 40 years. Our
      adjustable-rate mortgage loans are based on either a 15, 20 or 30-year
      amortization schedule and interest rates and payments on our


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adjustable-rate
      mortgage loans adjust annually after either a one, three, five or seven year
      initial fixed period. Interest rates and payments on our adjustable-rate loans
      generally are adjusted to a rate typically equal to 2.75% above the one-year
      constant maturity Treasury index. The maximum amount by which the interest
      rate
      may be increased or decreased is generally 2% per adjustment period and the
      lifetime interest rate cap is generally 6% over the initial interest rate of
      the
      loan.





Due
      to
      historically low interest rate levels, borrowers generally have preferred
      fixed-rate loans in recent years. While we anticipate that our adjustable-rate
      loans will better offset the adverse effects on our net interest income of
      an
      increase in interest rates as compared to fixed-rate mortgages, the increased
      mortgage payments required of adjustable-rate loans in a rising interest rate
      environment could cause an increase in delinquencies and defaults. The
      marketability of the underlying property also may be adversely affected in
      a
      high interest rate environment. In addition, although adjustable-rate mortgage
      loans help make our asset base more responsive to changes in interest rates,
      the
      extent of this interest sensitivity is limited by the annual and lifetime
      interest rate adjustment limits.





While
      one- to four-family residential real estate loans are normally originated with
      up to 30-year terms, such loans typically remain outstanding for substantially
      shorter periods because borrowers often prepay their loans in full upon sale
      of
      the property pledged as security or upon refinancing the original loan.
      Therefore, average loan maturity is a function of, among other factors, the
      level of purchase and sale activity in the real estate market, prevailing
      interest rates and the interest rates payable on outstanding loans. As interest
      rates declined and remained low over the past few years, we have experienced
      high levels of loan repayments and refinancings.





We
      generally do not make conventional loans with loan-to-value ratios exceeding
      97%
      and generally make loans with a loan-to-value ratio 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. We require all properties securing mortgage
      loans to be appraised by a Board-approved independent appraiser. We require
      title insurance on all first mortgage loans. Borrowers must obtain hazard
      insurance, or flood insurance for loans on property located in a flood zone,
      before closing the loan.





In
      an
      effort to provide financing for first-time buyers, we offer a first-time home
      buyers program. We offer fixed-rate residential mortgage loans through this
      program to qualified individuals and originate the loans using modified
      underwriting guidelines, lower rates and terms of up to 40 years.





***Multi-Family
      and Commercial Real Estate Loans*** **.**  We
      offer
      fixed-rate and adjustable-rate mortgage loans secured by multi-family and
      commercial real estate. Our multi-family and commercial real estate loans are
      generally secured by condominiums, apartment buildings, single-family
      subdivisions and owner-occupied properties used for businesses. We intend to
      continue to grow this segment of our loan portfolio.





We
      originate multi-family and commercial real estate loans for terms generally
      up
      to 20 years. Interest rates and payments on adjustable-rate loans adjust every
      one, three or five years. Interest rates and payment on our adjustable rate
      loans generally are adjusted to a rate typically equal to 2.5% above the
      one-year, three-year or five-year Federal Home Loan Bank classic advance
      rate **.** There
      are
      no adjustment period or lifetime interest rate caps. Loan amounts generally
      do
      not exceed 80% of the appraised value.





Loans
      secured by multi-family and commercial real estate generally have larger
      balances and involve a greater degree of risk than one- to four-family
      residential mortgage loans. Of primary concern in multi-family and commercial
      real estate lending is the borrower’s creditworthiness and the feasibility and
      cash flow potential of the project. Payments on loans secured by income
      properties often depend on successful operation and management of the
      properties. As a result, repayment of such loans may be subject to a greater
      extent than residential real estate loans to adverse conditions in the real
      estate market or the economy. To monitor cash flows on income properties, we
      require borrowers and loan guarantors, if any, to provide annual financial
      statements on multi-family and commercial real estate loans. In reaching a
      decision on whether to make a multi-family or commercial real estate loan,
      we
      consider the net operating income of the property, the borrower’s expertise,
      credit history and profitability and the value of the underlying property.
      We
      require either an environmental survey or impaired property insurance for all
      multi-family and commercial real estate loans.


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 3


***Construction
      Loans*** **.**   We
      originate loans to individuals to finance the construction of residential
      dwellings for personal use. Our construction loans generally provide for the
      payment of interest only during the construction phase, which is usually nine
      months. At the end of the construction phase, the loan converts to a permanent
      mortgage loan. Loans generally can be made with a maximum loan to value ratio
      of
      80% of the appraised value with a maximum term of 30 years. The largest
      outstanding residential construction loan at December 31, 2005 was $799,000,
      $676,000 of which was outstanding. **** This
      loan
      was performing according to its terms at December 31, 2005. We also make
      commercial construction loans for commercial development projects, including
      condominiums, apartments buildings, single family subdivisions, as well as
      owner-occupied properties used for business. These loans provide for payment
      of
      interest only during the construction phase and may, in the case of an apartment
      or commercial building, convert to a permanent mortgage loan or, in the case
      of
      a single family subdivision or construction or builder loan, be paid in full
      with the sale of the property after construction is complete. In the case of
      a
      commercial construction loan, the construction period may be from nine months
      to
      two years. Loans are generally made to a maximum of 80% of the appraised value
      as determined by an appraisal of the property made by an independent licensed
      appraiser. We also require an inspection of the property before disbursement
      of
      funds during the term of the construction loan for both residential and
      commercial construction loans. The largest outstanding commercial construction
      loan at December 31, 2005 was $3.2 million, of which $1.4 million was
      outstanding. This loan was performing according to its terms at December 31,
      2005.





We
      originate land loans to individuals on approved residential building lots for
      personal use for terms of up to 20 years and to a maximum loan-to-value ratio
      of
      75% of the lower of the appraisal value or purchase price. Our land loans adjust
      annually after a five-year initial fixed period. Interest rates are equal to
      3.75% above the one-year constant maturity Treasury index.





We
      also
      originate loans to local contractors and developers for the purpose of making
      improvements to, and on, approved subdivisions and condominium projects within
      two years of the date of the original loan. Such loans generally are written
      with a maximum loan-to-value ratio of 80% of the lower of the appraised value
      or
      purchase price of the land. These loans adjust when and as the index changes
      at
      a rate that is generally equal to the prime rate as published in *The
      Wall Street Journal* plus 1%.
      We require title insurance and, if applicable, a hazardous waste survey
      reporting that the land is free of hazardous or toxic waste.





Construction
      financing is generally considered to involve a higher degree of risk of loss
      than long-term financing on improved, occupied real estate. Risk of loss on
      a
      construction loan depends largely upon the accuracy of the initial estimate
      of
      the property’s value at completion of construction or development and the
      estimated cost (including interest) of construction. During the construction
      phase, a number of factors could result in delays and cost overruns. If the
      estimate of construction costs proves to be inaccurate, we may be required
      to
      advance funds beyond the amount originally committed to permit completion of
      the
      development. If the estimate of value proves to be inaccurate, we may be
      confronted, at or before the maturity of the loan, with a project having a
      value
      which is insufficient to assure full repayment. As a result of the foregoing,
      construction lending often involves the disbursement of substantial funds with
      repayment dependent, in part, on the success of the ultimate project rather
      than
      the ability of the borrower or guarantor to repay principal and interest. If
      we
      are forced to foreclose on a project before or at completion due to a default,
      there can be no assurance that we will be able to recover all of the unpaid
      balance of, and accrued interest on, the loan as well as related foreclosure
      and
      holding costs.





***Commercial
      Business Loans*** **.**  We
      make
      commercial business loans to a variety of professionals, sole proprietorships
      and small businesses primarily in our market area. We offer a variety of
      commercial lending products. These loans are typically secured, primarily by
      business assets. These loans are originated with maximum loan-to-value ratios
      of
      75% of the value of the personal property. We originate one- to seven-year
      term
      loans for the acquisition of equipment or business expansion, lines of credit
      for seasonal financing needs and demand loans for short term financing needs
      with specific repayment sources. Commercial business loans are usually written
      at variable rates which use the prime rate as published in *The
      Wall Street Journal* as an
      index and, depending on the qualifications of the borrower, a 0.5% to 3.0%
      margin is added. These rates will change when and as the index rate changes
      without caps. Fixed-rate loans are written at market rates determined at the
      time the loan is granted and are based on the length of the term and the
      qualifications of the borrower. Our largest commercial business loan
      relationship was a $1.1 million loan secured by a leasehold interest in
      commercial real estate. This loan was performing according to its original
      terms
      at December 31, 2005.


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When
      making commercial business loans, we consider the financial statements of the
      borrower, the borrower’s payment history of both corporate and personal debt,
      the debt service capabilities of the borrower, the projected cash flows of
      the
      business, and viability of the industry in which the customer operates and
      the
      value of the collateral.





Unlike
      residential mortgage loans, which generally are made on the basis of the
      borrower’s ability to make repayment from his or her employment or other income,
      and which are secured by real property whose value tends to be more easily
      ascertainable, commercial business loans are of higher risk and typically are
      made on the basis of the borrower’s ability to make repayment from the cash flow
      of the borrower’s business. As a result, the availability of funds for the
      repayment of commercial business loans may depend substantially on the success
      of the business itself. Further, any collateral securing such loans may
      depreciate over time, may be difficult to appraise and may fluctuate in
      value.





***Consumer
      Loans*** **.**  We
      offer
      a variety of consumer loans, primarily second mortgage loans and home equity
      lines of credit, and, to a much lesser extent, loans secured by passbook or
      certificate accounts, automobiles and unsecured loans. Unsecured loans generally
      have a maximum borrowing limit of $5,000 and a maximum term of three
      years.





The
      procedures for underwriting consumer loans include an assessment of the
      applicant’s payment history on other debts and ability to meet existing
      obligations and payments on the proposed loans. Although the applicant’s
      creditworthiness is a primary consideration, the underwriting process also
      includes a comparison of the value of the collateral, if any, to the proposed
      loan amount. Second mortgage loans have fixed rates of interest for terms of
      up
      to 15 years. These loans are originated with maximum loan-to-value ratios of
      80%
      of the appraised value of the property. Home equity lines of credit have
      adjustable rates of interest that are indexed to the prime rate as published
      in *The
      Wall Street Journal* for
      terms of up to 10 years. These loans are originated with maximum loan-to-value
      ratios of 80% of the value of the appraised value of the property and we require
      that we have a second lien position on the property.





Consumer
      loans may entail greater risk than do residential mortgage loans, particularly
      in the case of consumer loans that are unsecured or secured by assets that
      depreciate rapidly. In such cases, repossessed collateral for a defaulted
      consumer loan may not provide an adequate source of repayment for the
      outstanding loan and the remaining deficiency often does not warrant further
      substantial collection efforts against the borrower. In addition, 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. Furthermore, the application of various federal and
      state laws, including federal and state bankruptcy and insolvency laws, may
      limit the amount which can be recovered on such loans.





***Loan
      Originations, Purchases and Sales*** **.**  Loan
      originations come from a number of sources. The primary source of loan
      originations are our in-house loan originators, and to a lesser extent, local
      mortgage brokers, advertising and referrals from customers. We occasionally
      purchase loans or participation interests in loans.





We
      consider loan sales as part of our interest rate risk management efforts. We
      sell longer-term fixed-rate loans in the secondary market based on prevailing
      market interest rate conditions, an analysis of the composition and risk of
      the
      loan portfolio, liquidity needs and interest rate risk management goals.
      Generally, loans are sold without recourse and with servicing retained. We
      did
      not sell any loans during the year ended December 31, 2005. We sold
      $1.9 million and $8.9 million of loans in the years ended December 31,
      2004 and 2003, respectively. We occasionally sell participation interests in
      loans.





***Loan
      Approval Procedures and Authority*** **.**  Our
      lending activities follow written, nondiscriminatory, underwriting standards
      and
      loan origination procedures established by our Board of Directors and
      management.





For
      one-
      to four-family loans and owner occupied residential construction loans, two
      members of the mortgage loan committee, one of whom must be the President and
      Chief Executive Officer or a vice president, may approve loans up to $417,000
      and a majority of the members of the Board loan committee must approve loans
      over $417,000. For unsecured commercial business loans, a majority of the
      members of the Board must approve loans over $500,000 and two members of the
      Board of Directors loan committee must approve loans over $250,000 and up to
      $500,000. Unsecured business loans of $250,000 or less must be approved by
      two
      members of the officers’


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 5


loan
      committee. Loans of $50,000 or less which are unsecured can be approved by
      one
      member of the officers’ loan committee and later presented to the officers’ loan
      committee for ratification. For secured commercial loans and commercial
      construction loans, a majority of the members of the Board must approve loans
      over $1.2 million and two members of the Board of Directors loan committee
      must
      approve loans over $500,000 and up to $1.2 million. Loans of $500,000 or less
      secured by real estate where the loan-to-value is 80% or less can be approved
      by
      two members of the officers’ loan committee and for $100,000 or less secured by
      real estate with an 80% loan-to-value one member of the officers’ loan committee
      can approve with a later ratification by the officers’ loan committee. The Board
      of Directors must approve all consumer loans over $200,000. Various bank
      personnel have been delegated authority to approve smaller commercial loans
      and
      consumer loans.





***Loans
      to One Borrower*** **.**  The
      maximum amount that we may lend to one borrower and the borrower’s related
      entities is limited, by regulation, to generally 15% of our stated capital
      and
      reserves. At December 31, 2005, our regulatory limit on loans to one borrower
      was **** $6.2
      million. **** At
      that
      date, our largest lending relationship was **** $3.7 **** million
      and included a home mortgage loan and a commercial construction loan, all of
      which were performing according to the original repayment terms at December
      31,
      2005.





***Loan
      Commitments*** **.**   We
      issue
      commitments for fixed-rate and adjustable-rate mortgage loans conditioned upon
      the occurrence of certain events. Commitments to originate mortgage loans are
      legally binding agreements to lend to our customers and generally expire in
      60
      days or less.





***Delinquencies*** **.**  When
      a
      borrower fails to make a required loan payment, we take a number of steps to
      have the borrower cure the delinquency and restore the loan to current status.
      We make initial contact with the borrower when the loan becomes 15 days past
      due. If payment is not then received by the 30 th day of
      delinquency, additional letters and phone calls generally are made. We send
      a
      letter notifying the borrower that we will commence foreclosure proceedings
      if
      the loan is not brought current within 91 days. When the loan becomes 91 days
      past due, we generally commence foreclosure proceedings against any real
      property that secures the loan or attempt to repossess any personal property
      that secures a consumer loan. If a foreclosure action is instituted and the
      loan
      is not brought current, paid in full, or refinanced before the foreclosure
      sale,
      the real property securing the loan generally is sold at foreclosure. We may
      consider loan workout arrangements with certain borrowers under certain
      circumstances.





Management
      informs the Board of Directors on a monthly basis of the amount of loans
      delinquent more than 90 days, all loans in foreclosure and all foreclosed and
      repossessed property that we own.





**Investment
      Activities**





We
      have
      legal authority to invest in various types of liquid assets, including U.S.
      Treasury obligations, securities of various federal agencies and of state and
      municipal governments, mortgage-backed securities and certificates of deposit
      of
      federally insured institutions. Within certain regulatory limits, we also may
      invest a portion of our assets in corporate securities and mutual funds. We
      also
      are required to maintain an investment in Federal Home Loan Bank of Boston
      stock.





At
      December 31, 2005, our investment portfolio consisted of U.S. government and
      agency securities with maturities primarily less than three years,
      mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae
      with
      stated final maturities of 30 years or less, collateralized mortgage obligations
      with stated final maturities of 30 years or less, municipal securities with
      maturities of 15 years or less, preferred money market securities with terms
      of
      91 days or less, and insured certificates of deposit at other financial
      institutions.





Our
      investment objectives are to provide and maintain liquidity, to maintain a
      balance of high quality, diversified investments to minimize risk, to provide
      collateral for pledging requirements, to establish an acceptable level of
      interest rate risk, to provide an alternate source of low-risk investments
      when
      demand for loans is weak, and to generate a favorable return. Considering our
      interest rate risk position and with the objective of enhancing earnings, we
      implemented two leverage strategies during 2005. In the first strategy, we
      borrowed $28.8 million from the Federal Home Loan Bank of Boston on a short-term
      basis to fund the purchase of a like amount of long-term securities. In the
      second strategy, we borrowed up to $11.0 million of short-term funds from the
      Federal Home Loan Bank of Boston to fund the purchase of same term money market
      preferred securities. Our Board of Directors has the overall responsibility
      for
      our investment portfolio, including approval of our investment policy and


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 6


appointment
      of our Asset/Liability Committee. The Asset/Liability Committee is responsible
      for approval of investment strategies and monitoring of investment performance.
      Our Executive Vice President and our Controller are co-designated investment
      portfolio managers and are responsible for the daily investment activities
      and
      are authorized to make investment decisions consistent with our investment
      policy. The Asset/Liability Committee meets regularly with the Controller,
      the
      Executive Vice President and President and Chief Executive Officer in order
      to
      determine and review investment strategies and transactions.





**Deposit
      Activities and Other Sources of Funds**





***General*** **.**  Deposits
      and loan repayments are the major sources of our funds for lending and other
      investment purposes. Loan repayments are a relatively stable source of funds,
      while deposit inflows and outflows and loan prepayments are significantly
      influenced by general interest rates and money market conditions.




***Deposit
      Accounts*** **.**  The
      vast
      majority of our depositors are residents of the State of Connecticut. Deposits
      are attracted from within our primary market area through the offering of a
      broad selection of deposit instruments, including NOW accounts, checking
      accounts, money market accounts, regular savings accounts, club savings
      accounts, certificate accounts and various retirement accounts **.** Generally,
      we do not utilize brokered funds. Deposit account terms vary according to the
      minimum balance required, the time periods the funds must remain on deposit
      and
      the interest rate, among other factors. In determining the terms of our deposit
      accounts, we consider the rates offered by our competition, profitability to
      us,
      matching deposit and loan products and customer preferences and concerns. We
      generally review our deposit mix and pricing weekly **.** Our
      current strategy is to offer competitive rates, and even higher rates on
      long-term deposits, but not be the market leader in every type and
      maturity.





***Borrowings*** **.**  We
      borrow
      from the Federal Home Loan Bank of Boston to supplement our supply of lendable
      funds and to meet deposit withdrawal requirements. The Federal Home Loan Bank
      functions as a central reserve bank providing credit for member financial
      institutions. As a member, we are required to own capital stock in the Federal
      Home Loan Bank of Boston and are authorized to apply for advances on the
      security of such stock and certain of our mortgage loans and other assets
      (principally securities which are obligations of, or guaranteed by, the United
      States), provided certain standards related to creditworthiness have been met.
      Advances are made under several different programs, each having its own interest
      rate and range of maturities. Depending on the program, limitations on the
      amount of advances are based either on a fixed percentage of an institution’s
      net worth or on the Federal Home Loan Bank’s assessment of the institution’s
      creditworthiness. Under its current credit policies, the Federal Home Loan
      Bank
      generally limits advances to 25% of a member’s assets, and short-term borrowings
      of less than one year may not exceed 10% of the institution’s assets. The
      Federal Home Loan Bank determines specific lines of credit for each member
      institution.





In
      addition, we occasionally borrow short-term from correspondent banks
      to **** cover
      temporary cash needs.





**Subsidiaries**





Naugatuck
      Valley Mortgage Servicing Corporation, established in 1999 under Connecticut
      law
      as a subsidiary of Naugatuck Valley Savings and Loan, is a passive investment
      corporation organized in order to take advantage of certain tax benefits. Its
      primary business is to service mortgage loans which we have originated and
      subsequently transferred to Naugatuck Valley Mortgage Servicing. At December
      31,
      2005, Naugatuck Valley Mortgage Servicing had $196.3 million in
      assets.





**Personnel**





At
      December 31, 2005, we had 88 full-time employees and 16 part-time employees,
      none of whom is represented by a collective bargaining unit. We believe our
      relationship with our employees is good.





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 7


**Regulation
      and Supervision**





**General**





Naugatuck
      Valley Savings and Loan is subject to extensive regulation, examination and
      supervision by the Office of Thrift Supervision, as its primary federal
      regulator, and the Federal Deposit Insurance Corporation, as its deposits
      insurer. Naugatuck Valley Savings and Loan is a member of the Federal Home
      Loan
      Bank System and its deposit accounts are insured up to applicable limits by
      the
      Savings Association Insurance Fund managed by the Federal Deposit Insurance
      Corporation. Naugatuck Valley Savings and Loan must file reports with the Office
      of Thrift Supervision and the Federal Deposit Insurance Corporation concerning
      its activities and financial condition in addition to obtaining regulatory
      approvals before entering into certain transactions such as mergers with, or
      acquisitions of, other financial institutions. There are periodic examinations
      by the Office of Thrift Supervision and, under certain circumstances, the
      Federal Deposit Insurance Corporation to evaluate Naugatuck Valley Savings
      and
      Loan’s safety and soundness and compliance with various regulatory requirements.
      This regulatory structure is intended primarily for the protection of the
      insurance fund and depositors. The regulatory structure also gives the
      regulatory authorities extensive discretion in connection with their supervisory
      and enforcement activities and examination policies, including policies with
      respect to the classification of assets and the establishment of adequate loan
      loss reserves for regulatory purposes. Any change in such policies, whether
      by
      the Office of Thrift Supervision, the Federal Deposit Insurance Corporation
      or
      Congress, could have a material adverse impact on our operations.





Naugatuck
      Valley Financial and Naugatuck Valley Mutual, as savings and loan holding
      companies, are required to file certain reports with, are subject to examination
      by, and otherwise have to comply with the rules and regulations of the Office
      of
      Thrift Supervision. Naugatuck Valley Financial is also subject to the rules
      and
      regulations of the Securities and Exchange Commission under the federal
      securities laws.





Certain
      of the regulatory requirements that are applicable to Naugatuck Valley Savings
      and Loan, Naugatuck Valley Financial and Naugatuck Valley Mutual are described
      below. This description of statutes and regulations is not intended to be a
      complete explanation of such statutes and regulations and their effects on
      Naugatuck Valley Savings and Loan, Naugatuck Valley Financial and Naugatuck
      Valley Mutual and is qualified in its entirety by reference to the actual
      statutes and regulations.





**Regulation
      of Federal Savings Associations**





***Business
      Activities*** **.** Federal
      law and regulations, primarily the Home Owners’ Loan Act and the regulations of
      the Office of Thrift Supervision, govern the activities of federal savings
      banks, such as Naugatuck Valley Savings and Loan. These laws and regulations
      delineate the nature and extent of the activities in which federal savings
      banks
      may engage. In particular, certain lending authority for federal savings banks, *e.g.* ,
      commercial, non-residential real property loans and consumer loans, is limited
      to a specified percentage of the institution’s capital or assets. Naugatuck
      Valley Savings and Loan complies with all lending limits imposed by the Office
      of Thrift Supervision.





***Branching*** **.** Federal
      savings banks are authorized to establish branch offices in any state or states
      of the United States and its territories, subject to the approval of the Office
      of Thrift Supervision.





***Capital
      Requirements*** **.** The
      Office of Thrift Supervision’s capital regulations require federal savings
      institutions to meet three minimum capital standards: a 1.5% tangible capital
      to
      total assets ratio, a 4% leverage ratio (3% for institutions receiving the
      highest rating on the CAMELS examination rating system) and an 8% risk-based
      capital ratio. In addition, the prompt corrective action standards discussed
      below also establish, in effect, a minimum 2% tangible capital standard, a
      4%
      Tier 1 capital to total assets leverage ratio (3% for institutions receiving
      the
      highest rating on the CAMELS system) and, together with the risk-based capital
      standard itself, a 4% Tier 1 risk-based capital standard. The Office of Thrift
      Supervision regulations also require that, in meeting the tangible, leverage
      and
      risk-based capital standards, institutions must generally deduct investments
      in
      and loans to subsidiaries engaged in activities as principal that are not
      permissible for a national bank.


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The
      risk-based capital standard requires federal savings institutions to maintain
      Tier 1 (core) and total capital (which is defined as core capital and
      supplementary capital) to risk-weighted assets of at least 4% and 8%,
      respectively. In determining the amount of risk-weighted assets, all assets,
      including certain off-balance sheet assets, recourse obligations, residual
      interests and direct credit substitutes, are multiplied by a risk-weight factor
      of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation
      based on the risks believed inherent in the type of asset. Core (Tier 1) capital
      is generally defined as common stockholders’ equity (including retained
      earnings), certain noncumulative perpetual preferred stock and related surplus
      and minority interests in equity accounts of consolidated subsidiaries, less
      intangibles other than certain mortgage servicing rights and credit card
      relationships. The components of supplementary capital (Tier 2 capital)
      currently include cumulative preferred stock, long-term perpetual preferred
      stock, mandatory convertible securities, subordinated debt and intermediate
      preferred stock, the allowance for loan and lease losses limited to a maximum
      of
      1.25% of risk-weighted assets and up to 45% of unrealized gains on
      available-for-sale equity securities with readily determinable fair market
      values. Overall, the amount of supplementary capital included as part of total
      capital cannot exceed 100% of core capital.





The
      Office of Thrift Supervision also has authority to establish individual minimum
      capital requirements in appropriate cases upon a determination that an
      institution’s capital level is or may become inadequate in light of the
      particular circumstances. At December 31, 2005, Naugatuck Valley Savings and
      Loan met each of these capital requirements.





***Prompt
      Corrective Regulatory Action*** **.** The
      Office of Thrift Supervision is required to take certain supervisory actions
      against undercapitalized institutions, the severity of which depends upon the
      institution’s degree of undercapitalization. Generally, a savings institution
      that has a ratio of total capital to risk weighted assets of less than 8%,
      a
      ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a
      ratio of core capital to total assets of less than 4% (3% or less for
      institutions with the highest examination rating) is considered to be
“undercapitalized.” A savings institution that has a total risk-based capital
      ratio of less than 6%, a Tier 1 capital ratio of less than 3% or a leverage
      ratio that is less than 3% is considered to be “significantly undercapitalized”
and a savings institution that has a tangible capital to assets ratio equal
      to
      or less than 2% is deemed to be “critically undercapitalized.” Subject to a
      narrow exception, the Office of Thrift Supervision is required to appoint a
      receiver or conservator within specified time frames for an institution that
      is
“critically undercapitalized.” An institution must file a capital restoration
      plan with the Office of Thrift Supervision within 45 days of the date it is
      deemed to have received notice that it is “undercapitalized,” “significantly
      undercapitalized” or “critically undercapitalized.” Compliance with the plan
      must be guaranteed by any parent holding company in an amount of up to the
      lesser of 5% of the savings association’s total assets when it was deemed to be
      undercapitalized or the amount necessary to achieve compliance with applicable
      capital regulations. In addition, numerous mandatory supervisory actions become
      immediately applicable to an undercapitalized institution, including, but not
      limited to, increased monitoring by regulators and restrictions on growth,
      capital distributions and expansion. “Significantly undercapitalized” and
“critically undercapitalized” institutions are subject to more extensive
      mandatory regulatory actions. The Office of Thrift Supervision could also take
      any one of a number of discretionary supervisory actions, including the issuance
      of a capital directive and the replacement of senior executive officers and
      directors.





***Loans
      to One Borrower*** **.** Federal
      law provides that savings institutions are generally subject to the limits
      on
      loans to one borrower applicable to national banks. Generally, subject to
      certain exceptions, savings institutions may not make a loan or extend credit
      to
      a single or related group of borrowers in excess of 15% of its unimpaired
      capital and surplus. An additional amount may be lent, equal to 10% of
      unimpaired capital and surplus, if secured by specified readily-marketable
      collateral.





***Standards
      for Safety and Soundness*** **.** As
      required by statute, the federal banking agencies have adopted Interagency
      Guidelines prescribing Standards for Safety and Soundness. The guidelines set
      forth the safety and soundness standards that the federal banking agencies
      use
      to identify and address problems at insured depository institutions before
      capital becomes impaired. If the Office of Thrift Supervision determines that
      a
      savings institution fails to meet any standard prescribed by the guidelines,
      the
      Office of Thrift Supervision may require the institution to
      submit
      an acceptable plan to achieve compliance with the standard. Naugatuck Valley
      has
      not received any notice that it has failed to meet any standard prescribed
      by
      the guidelines. 
 ***Limitation
        on Capital Distributions*** **.** Office
        of Thrift Supervision regulations impose limitations upon all capital
        distributions by a savings institution, including cash dividends, payments
        to
        repurchase its shares and payments to shareholders of another institution
        in a
        cash-out merger. Under the regulations, an application to and


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 9


the
      prior
      approval of the Office of Thrift Supervision is required before any capital
      distribution if the institution does not meet the criteria for “expedited
      treatment” of applications under Office of Thrift Supervision regulations
      ( *i.e.* ,
      generally, examination and Community Reinvestment Act ratings in the two top
      categories), the total capital distributions for the calendar year exceed net
      income for that year plus the amount of retained net income for the preceding
      two years, the institution would be undercapitalized following the distribution
      or the distribution would otherwise be contrary to a statute, regulation or
      agreement with the Office of Thrift Supervision. If an application is not
      required, the institution must still provide prior notice to the Office of
      Thrift Supervision of the capital distribution if, like Naugatuck Valley Savings
      and Loan, it is a subsidiary of a holding company. If Naugatuck Valley Savings
      and Loan’s capital were ever to fall below its regulatory requirements or the
      Office of Thrift Supervision notified it that it was in need of increased
      supervision, its ability to make capital distributions could be restricted.
      In
      addition, the Office of Thrift Supervision could prohibit a proposed capital
      distribution that would otherwise be permitted by the regulation, if the agency
      determines that such distribution would constitute an unsafe or unsound
      practice.





***Qualified
      Thrift Lender Test*** **.** Federal
      law requires savings institutions to meet a qualified thrift lender test. Under
      the test, a savings association is required to either qualify as a “domestic
      building and loan association” under the Internal Revenue Code or maintain at
      least 65% of its “portfolio assets” (total assets less: (i) specified
      liquid assets up to 20% of total assets; (ii) intangibles, including
      goodwill; and (iii) the value of property used to conduct business) in
      certain “qualified thrift investments” (primarily residential mortgages and
      related investments, including certain mortgage-backed securities) in at least
      9
      months out of each 12-month period.





A
      savings
      institution that fails the qualified thrift lender test is subject to certain
      operating restrictions and may be required to convert to a bank charter. Recent
      legislation has expanded the extent to which education loans, credit card loans
      and small business loans may be considered “qualified thrift investments.” At
      December 31, 2005, Naugatuck Valley Savings and Loan met the qualified thrift
      lender test.





***Transactions
      with Related Parties*** **.** Federal
      law limits Naugatuck Valley Savings and Loan’s authority to lend to, and engage
      in certain other transactions with (collectively, “covered transactions”),
“affiliates” ( *e.g* .,
      any
      entity that controls or is under common control with an institution, including
      Naugatuck Valley Financial, Naugatuck Valley Mutual and their non-savings
      institution subsidiaries). The aggregate amount of covered transactions with
      any
      individual affiliate is limited to 10% of the capital and surplus of the savings
      institution. The aggregate amount of covered transactions with all affiliates
      is
      limited to 20% of the savings institution’s capital and surplus. Loans and other
      specified transactions with affiliates are required to be secured by collateral
      in an amount and of a type specified by federal law. The purchase of low quality
      assets from affiliates is generally prohibited. Transactions with affiliates
      must be on terms and under circumstances that are at least as favorable to
      the
      institution as those prevailing at the time for comparable transactions with
      non-affiliated companies. In addition, savings institutions are prohibited
      from
      lending to any affiliate that is engaged in activities that are not permissible
      for bank holding companies and no savings institution may purchase the
      securities of any affiliate other than a subsidiary.





The
      Sarbanes-Oxley Act of 2002 generally prohibits a company from making loans
      to
      its executive officers and directors. However, the law contains a specific
      exception for loans by a depository institution to its executive officers and
      directors in compliance with federal banking laws. Under such laws, Naugatuck
      Valley Savings and Loan’s authority to extend credit to executive officers,
      directors and 10% shareholders (“insiders”), as well as entities such persons
      control, is limited. The law restricts both the individual and aggregate amount
      of loans Naugatuck Valley Savings and Loan may make to insiders based, in part,
      on Naugatuck Valley Savings and Loan’s capital position and requires certain
      Board approval procedures to be followed. Such loans must be made on terms
      substantially the same as those offered to unaffiliated individuals and not
      involve more than the normal risk of repayment. There is an exception for loans
      made pursuant to a benefit or compensation program that is widely available
      to
      all employees of the institution and does not give preference to insiders over
      other employees. There are additional restrictions applicable to loans to
      executive officers.




***Enforcement*.**
      The Office of Thrift Supervision has primary enforcement responsibility over
      federal savings institutions and has the authority to bring actions against
      the
      institution and all institution-affiliated parties, including stockholders,
      and
      any attorneys, appraisers and accountants who knowingly or recklessly
      participate in wrongful action likely to have an adverse effect on an insured
      institution. Formal enforcement action may range from the issuance of a capital
      directive or cease and desist order to removal of officers and/or directors
      to
      appointment of a receiver or conservator or termination of deposit insurance.
      Civil penalties cover a wide range of  Back
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 10




violations
      and can amount to $25,000 per day, or even $1 million per day in especially
      egregious cases. The Federal Deposit Insurance Corporation has authority to
      recommend to the Director of the Office of Thrift Supervision that enforcement
      action to be taken with respect to a particular savings institution. If action
      is not taken by the Director, the Federal Deposit Insurance Corporation has
      authority to take such action under certain circumstances. Federal law also
      establishes criminal penalties for certain violations.





***Assessments*** **.** Federal
      savings banks are required to pay assessments to the Office of Thrift
      Supervision to fund its operations. The general assessments, paid on a
      semi-annual basis, are computed based upon the savings institution’s (including
      consolidated subsidiaries) total assets, condition and complexity of portfolio.
      The OTS assessments paid by the Bank for the fiscal year ended December 31,
      2005
      totaled $71,672.





***Insurance
      of Deposit Accounts*** **.** Naugatuck
      Valley Savings and Loan is a member of the Savings Association Insurance Fund.
      The Federal Deposit Insurance Corporation maintains a risk-based assessment
      system by which institutions are assigned to one of three categories based
      on
      their capitalization and one of three subcategories based on examination ratings
      and other supervisory information. An institution’s assessment rate depends upon
      the categories to which it is assigned. Assessment rates for Savings Association
      Insurance Fund member institutions are determined semi-annually by the Federal
      Deposit Insurance Corporation and currently range from zero basis points of
      assessable deposits for the healthiest institutions to 27 basis points of
      assessable deposits for the riskiest.





The
      Federal Deposit Insurance Corporation has authority to increase insurance
      assessments. A material increase in Savings Association Insurance Fund insurance
      premiums would likely have an adverse effect on the operating expenses and
      results of operations of Naugatuck Valley Savings and Loan. Management cannot
      predict what insurance assessment rates will be in the future.





In
      addition to the assessment for deposit insurance, institutions are required
      to
      make payments on bonds issued in the late 1980s by the Financing Corporation
      to
      recapitalize the predecessor to the Savings Association Insurance Fund. During
      the year ended December 31, 2005, Financing Corporation payments for Savings
      Association Insurance Fund members averaged 1.39 basis points of assessable
      deposits. At December 31, 2005, Naugatuck Valley Savings and Loan had paid
      all
      fees and assessments for deposit insurance.





The
      Federal Deposit Insurance Corporation may terminate an institution’s insurance
      of deposits upon a finding that the institution has engaged in unsafe or unsound
      practices, is in an unsafe or unsound condition to continue operations or has
      violated any applicable law, regulation, rule, order or condition imposed by
      the
      Federal Deposit Insurance Corporation or the Office of Thrift Supervision.
      The
      management of Naugatuck Valley Savings and Loan does not know of any practice,
      condition or violation that might lead to termination of deposit
      insurance.





The
      Federal Deposit Insurance Reform Act of 2005 (the “Act”), signed by the
      President on February 8, 2006, revised the laws governing the federal deposit
      insurance system. The Act provides for the consolidation of the Bank and Savings
      Association Insurance Funds into a combined “Deposit Insurance Fund.”





Under
      the
      Act, insurance premiums are to be determined by the Federal Deposit Insurance
      Corporation (“FDIC”) based on a number of factors, primarily the risk of loss
      that insured institutions pose to the Deposit Insurance Fund. The legislation
      eliminates the current minimum 1.25% reserve ratio for the insurance funds,
      the
      mandatory assessments when the ratio fall below 1.25% and the prohibition on
      assessing the highest quality banks when the ratio is above 1.25%. The Act
      provides the FDIC with flexibility to adjust the new insurance fund’s reserve
      ratio between 1.15% and 1.5%, depending on projected losses, economic changes
      and assessment rates at the end of a calendar year.





The
      Act
      increased deposit insurance coverage limits from $100,000 to $250,000 for
      certain types of Individual Retirement Accounts, 401(k) plans and other
      retirement savings accounts. While it preserved the $100,000
      coverage limit for individual accounts and municipal deposits, the FDIC was
      furnished with the discretion to adjust all coverage levels to keep pace with
      inflation beginning in 2010. Also, institutions that become undercapitalized
      will be prohibited from accepting certain employee benefit plan deposits.


The
        consolidation of the Bank and Savings Association Insurance Funds must occur
        no
        later than the first day of the calendar quarter that begins 90-days after
        the
        date of the Act’s enactment, *i.e.* ,
        July 1,
        2006. The Act also


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states
      that the FDIC must promulgate final regulations implementing the remainder
      of
      its provisions not later than 270 days after its enactment.





At
      this
      time, management cannot predict the effect, if any, that the Act will have
      on
      insurance premiums paid by Naugatuck Valley Savings and Loan.





***Federal
      Home Loan Bank System*** **.** Naugatuck Valley Savings and Loan is a member of the Federal Home Loan Bank
      System, which consists of 12 regional Federal Home Loan Banks. The Federal
      Home
      Loan Bank provides a central credit facility primarily for member institutions.
      Naugatuck Valley Savings and Loan, as a member of the Federal Home Loan Bank
      of
      Boston, is required to acquire and hold shares of capital stock in that Federal
      Home Loan Bank. The Bank was in compliance with this requirement with an
      investment in Federal Home Loan Bank stock at December 31, 2005 of $3.2
      million.





The
      Federal Home Loan Banks are required to provide funds for the resolution of
      insolvent thrifts in the late 1980s and to contribute funds for affordable
      housing programs. These requirements could reduce the amount of dividends that
      the Federal Home Loan Banks pay to their members and could also result in the
      Federal Home Loan Banks imposing a higher rate of interest on advances to their
      members. If dividends were reduced, or interest on future Federal Home Loan
      Bank
      advances increased, our net interest income would likely also be
      reduced.





***Community
      Reinvestment Act.*** ** Under
      the
      Community Reinvestment Act, as implemented by Office of Thrift Supervision
      regulations, a savings association has a continuing and affirmative obligation
      consistent with its safe and sound operation to help meet the credit needs
      of
      its entire community, including low and moderate income neighborhoods. The
      Community Reinvestment Act does not establish specific lending requirements
      or
      programs for financial institutions nor does it limit an institution’s
      discretion to develop the types of products and services that it believes are
      best suited to its particular community, consistent with the Community
      Reinvestment Act. The Community Reinvestment Act requires the Office of Thrift
      Supervision, in connection with its examination of a savings association, to
      assess the institution’s record of meeting the credit needs of its community and
      to take such record into account in its evaluation of certain applications
      by
      such institution.





The
      Community Reinvestment Act requires public disclosure of an institution’s rating
      and requires the Office of Thrift Supervision to provide a written evaluation
      of
      an association’s Community Reinvestment Act performance utilizing a four-tiered
      descriptive rating system.





Naugatuck
      Valley Savings received a “Satisfactory” rating as a result of its most recent
      Community Reinvestment Act assessment.





**Federal
      Reserve System**





The
      Federal Reserve Board regulations require savings institutions to maintain
      non-interest earning reserves against their transaction accounts (primarily
      Negotiable Order of Withdrawal (NOW) and regular checking accounts). The
      regulations generally provided that reserves be maintained against aggregate
      transaction accounts as follows: a 3% reserve ratio is assessed on net
      transaction accounts up to and including $48.3 million; a 10% reserve ratio
      is
      applied above $48.3 million. The first $8.0 million of otherwise reservable
      balances (subject to adjustments by the Federal Reserve Board) are exempted
      from
      the reserve requirements. The amounts are adjusted annually. Naugatuck Valley
      Savings complies with the foregoing requirements.





**Holding
      Company Regulation**





***General.*** ****** Naugatuck
      Valley Financial and Naugatuck Valley Mutual are savings and loan holding
      companies within the meaning of federal law. As such, they are registered with
      the Office of Thrift Supervision and are subject to Office of Thrift Supervision
      regulations, examinations, supervision, reporting requirements and regulations
      concerning corporate governance and activities. In addition, the Office of
      Thrift Supervision has enforcement authority over Naugatuck Valley Financial
      and
      Naugatuck Valley Mutual and their non-savings institution subsidiaries. Among
      other things, this authority permits the Office of Thrift Supervision to
      restrict or prohibit activities that are determined to be a serious risk to
      Naugatuck Valley Savings and Loan.


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***Restrictions
      Applicable to Mutual Holding Companies.*** ****** According
      to federal law and Office of Thrift Supervision regulations, a mutual holding
      company, such as Naugatuck Valley Mutual, may generally engage in the following
      activities: (1) investing in the stock of insured depository institutions
      and acquiring them by means of a merger or acquisition; (2) investing in a
      corporation the capital stock of which may be lawfully purchased by a savings
      association under federal law; (3) furnishing or performing management
      services for a savings association subsidiary of a savings and loan holding
      company; (4) conducting an insurance agency or escrow business;
      (5) holding, managing or liquidating assets owned or acquired from a
      savings association subsidiary of the savings and loan holding company;
      (6) holding or managing properties used or occupied by a savings
      association subsidiary of the savings and loan holding company; (7) acting
      as trustee under deed or trust; (8) any activity permitted for multiple
      savings and loan holding companies by Office of Thrift Supervision regulations;
      (9) any activity permitted by the Board of Governors of the Federal Reserve
      System for bank holding companies and financial holding companies; and
      (10) any activity permissive for service corporations. Recent legislation,
      which authorized mutual holding companies to engage in activities permitted
      for
      financial holding companies, expanded the authorized activities. Financial
      holding companies may engage in a broad array of financial services activities,
      including insurance and securities.





Federal
      law prohibits a savings and loan holding company, including a federal mutual
      holding company, from directly or indirectly, or through one or more
      subsidiaries, acquiring more than 5% of the voting stock of another savings
      institution, or its holding company, without prior written approval of the
      Office of Thrift Supervision. Federal law also prohibits a savings and loan
      holding company from acquiring or retaining control of a depository institution
      that is not insured by the Federal Deposit Insurance Corporation. In evaluating
      applications by holding companies to acquire savings institutions, the Office
      of
      Thrift Supervision must consider the financial and managerial resources and
      future prospects of the company and institution involved, the effect of the
      acquisition on the risk to the insurance funds, the convenience and needs of
      the
      community and competitive factors.





The
      Office of Thrift Supervision is prohibited from approving any acquisition that
      would result in a multiple savings and loan holding company controlling savings
      institutions in more than one state, except: (1) the approval of interstate
      supervisory acquisitions by savings and loan holding companies, and (2) the
      acquisition of a savings institution in another state if the laws of the state
      of the target savings institution specifically permit such acquisitions. The
      states vary in the extent to which they permit interstate savings and loan
      holding company acquisitions.





If
      the
      savings institution subsidiary of a savings and loan holding company fails
      to
      meet the qualified thrift lender test set, the holding company must register
      with the Federal Reserve Board as a bank holding company within one year of
      the
      savings institution’s failure to so qualify.





***Stock
      Holding Company Subsidiary Regulation.*** ****** The
      Office of Thrift Supervision has adopted regulations governing the two-tier
      mutual holding company form of organization and subsidiary stock holding
      companies that are controlled by mutual holding companies. We have this two-tier
      form of organization. Naugatuck Valley Financial is the stock holding company
      subsidiary of Naugatuck Valley Mutual. Naugatuck Valley Financial is only
      permitted to engage in activities that are permitted for Naugatuck Valley Mutual
      subject to the same restrictions and conditions.





***Waivers
      of Dividends by Naugatuck Valley Mutual.*** Office
      of
      Thrift Supervision regulations require Naugatuck Valley Mutual to notify the
      Office of Thrift Supervision if it proposes to waive receipt of our dividends
      from Naugatuck Valley Financial. The Office of Thrift Supervision reviews
      dividend waiver notices on a case-by-case basis, and, in general, does not
      object to any such waiver if: (i) the waiver would not be detrimental to
      the safe and sound operation of the savings association; and (ii) the
      mutual holding company’s Board of Directors determines that such waiver is
      consistent with such directors’ fiduciary duties to the mutual holding company’s
      members. We anticipate that Naugatuck Valley Mutual will waive dividends that
      Naugatuck Valley Financial may pay, if any.




***Conversion
      of Naugatuck Valley Mutual to Stock Form.***Office of Thrift
      Supervision regulations permit Naugatuck Valley Mutual to convert from the
      mutual form of organization to the capital stock form of organization. There
      can
      be no assurance when, if ever, a conversion transaction will occur, and the
      Board of Directors has no current intention or plan to undertake a conversion
      transaction. In a conversion transaction a new holding company would be formed
      as our successor, Naugatuck Valley Mutual’s corporate existence would end, and


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certain depositors
      of Naugatuck Valley Savings and Loan would receive the right to subscribe for
      additional shares of the new holding company. In a conversion transaction,
      each
      share of common stock held by stockholders other than Naugatuck Valley Mutual
      would be automatically converted into a number of shares of common stock of
      the
      new holding company based on an exchange ratio determined at the time of
      conversion that ensures that stockholders other than Naugatuck Valley Mutual
      own
      the same percentage of common stock in the new holding company as they owned
      in
      us immediately before conversion. Under Office of Thrift Supervision
      regulations, stockholders other than Naugatuck Valley Mutual would not be
      diluted because of any dividends waived by Naugatuck Valley Mutual (and waived
      dividends would not be considered in determining an appropriate exchange ratio),
      in the event Naugatuck Valley Mutual converts to stock form. The total number
      of
      shares held by stockholders other than Naugatuck Valley Mutual after a
      conversion transaction also would be increased by any purchases by stockholders
      other than Naugatuck Valley Mutual in the stock offering conducted as part
      of
      the conversion transaction.





***Acquisition
      of Control.*** ****** Under
      the
      federal Change in Bank Control Act, a notice must be submitted to the Office
      of
      Thrift Supervision if any person (including a company), or group acting in
      concert, seeks to acquire “control” of a savings and loan holding company or
      savings association. An acquisition of “control” can occur upon the acquisition
      of 10% or more of the voting stock of a savings and loan holding company or
      savings institution or as otherwise defined by the Office of Thrift Supervision.
      Under the Change in Bank Control Act, the Office of Thrift Supervision has
      60
      days from the filing of a complete notice to act, taking into consideration
      certain factors, including the financial and managerial resources of the
      acquirer and the anti-trust effects of the acquisition. Any company that so
      acquires control would then be subject to regulation as a savings and loan
      holding company.





***Remutualization
      Transactions*** **.** **** Current
      Office of Thrift Supervision regulations permit a mutual holding company to
      be
      acquired by a mutual institution in a remutualization transaction. However,
      the
      Office of Thrift Supervision has issued a policy statement indicating that
      it
      views remutualization transactions as raising significant issues concerning
      disparate treatment of minority stockholders and mutual members of the target
      entity and as raising issues concerning the effect on the mutual members of
      the
      acquiring entity. Under certain circumstances, the Office of Thrift Supervision
      intends to give these issues special scrutiny and reject applications for the
      remutualization of a mutual holding company unless the applicant can clearly
      demonstrate that the Office of Thrift Supervision’s concerns are not warranted
      in the particular case.





**Federal
      Securities Laws**





Naugatuck
      Valley Financial’s common stock is registered with the Securities and Exchange
      Commission under the Securities Exchange Act of 1934. Naugatuck Valley Financial
      is subject to the information, proxy solicitation, insider trading restrictions
      and other requirements under the Securities Exchange Act of 1934.





**Sarbanes-Oxley
      Act of 2002**





The
      Sarbanes-Oxley Act of 2002 implemented legislative reforms intended to address
      corporate and accounting fraud. The Sarbanes-Oxley Act restricts the scope
      of
      services that may be provided by accounting firms to their public company audit
      clients and any non-audit services being provided to a public company audit
      client will require preapproval by the company’s audit committee. In addition,
      the Sarbanes-Oxley Act requires chief executive officers and chief financial
      officers, or their equivalent, to certify to the accuracy of periodic reports
      filed with the Securities and Exchange Commission, subject to civil and criminal
      penalties if they knowingly or willingly violate this certification
      requirement.





Under
      the
      Sarbanes-Oxley Act, bonuses issued to top executives before restatement of
      a
      company’s financial statements are now subject to disgorgement if such
      restatement was due to corporate misconduct. Executives are also prohibited
      from
      insider trading during retirement plan “blackout” periods, and loans to company
      executives (other than loans by financial institutions permitted by federal
      rules and regulations) are restricted. The legislation
      accelerates the time frame for disclosures by public companies and changes
      in
      ownership in a company’s securities by directors and executive
      officers. 
 The
        Sarbanes-Oxley Act also increases the oversight of, and codifies certain
        requirements relating to audit committees of public companies and how they
        interact with the company’s “registered public accounting
        firm.”


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Among
      other requirements, companies must disclose whether at least one member of
      the
      committee is a “financial expert” (as such term is defined by the Securities and
      Exchange Commission) and if not, why not.





Although
      we anticipate that we will incur additional expense in complying with the
      provisions of the Sarbanes-Oxley Act and the resulting regulations, management
      does not expect that such compliance will have a material impact on our results
      of operations or financial condition.





**Privacy
      Requirements of the GLBA**





The
      Gramm-Leach-Bliley Act of 1999 provided for sweeping financial modernization
      for
      commercial banks, savings banks, securities firms, insurance companies, and
      other financial institutions operating in the United States. Among other
      provisions, the Gramm-Leach-Bliley Act places limitations on the sharing of
      consumer financial information with unaffiliated third parties. Specifically,
      the Gramm-Leach-Bliley Act requires all financial institutions offering
      financial products or services to retail customers to provide such customers
      with the financial institution’s privacy policy and provide such customers the
      opportunity to “opt out” of the sharing of personal financial information with
      unaffiliated third parties.





**Anti-Money
      Laundering**





The
      Uniting and Strengthening America by Providing Appropriate Tools Required to
      Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT
      Act”) significantly expands the responsibilities of financial institutions,
      including savings and loan associations, in preventing the use of the U.S.
      financial system to fund terrorist activities. Title III of the USA PATRIOT
      Act
      provides for a significant overhaul of the U.S. anti-money laundering regime.
      Among other provisions, it requires financial institutions operating in the
      United States to develop new anti-money laundering compliance programs, due
      diligence policies and controls to ensure the detection and reporting of money
      laundering. Such required compliance programs are intended to supplement
      existing compliance requirements, also applicable to financial institutions,
      under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations.
      We have established policies and procedures to ensure compliance with the USA
      PATRIOT Act’s provisions, and the impact of the USA PATRIOT Act on our
      operations has not been material.





**Other
      Regulations**





Interest
      and other charges collected or contracted for by Naugatuck Valley Savings and
      Loan are subject to state usury laws and federal laws concerning interest rates.
      Naugatuck Valley Savings and Loan’s loan operations are also subject to federal
      laws applicable to credit transactions, such as the:





•
            Truth-In-Lending
                Act, governing disclosures of credit terms to consumer
                borrowers;





•
            Home
                Mortgage Disclosure Act of 1975, requiring financial institutions
                to
                provide information to enable the public and public officials to
                determine
                whether a financial institution is fulfilling its obligation to help
                meet
                the housing needs of the community it
                serves;





•
            Equal
                Credit Opportunity Act, prohibiting discrimination on the basis of
                race,
                creed or other prohibited factors in extending
                credit;





•
            Fair
                Credit Reporting Act of 1978, governing the use and provision of
                information to credit reporting agencies; of identity theft and provide
                for accuracy, privacy, limits on information sharing and new consumer
                rights to disclosure.





•
            Fair
                and Accurate Credit Transaction Act of 2003, intended to help consumers
                fight the growing crime of identity theft and provide for accuracy,
                privacy, limits on information sharing and new consumer rights to
                disclosure.




•
            Fair
                Debt Collection Act, governing the manner in which consumer debts
                may be
                collected by collection agencies;
                and


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 15




•
            rules
                and regulations of the various federal agencies charged with the
                responsibility of implementing such federal
                laws.





The
      deposit operations of Naugatuck Valley Savings and Loan also are subject to
      the:





•
            Right
                to Financial Privacy Act, which imposes a duty to maintain confidentiality
                of consumer financial records and prescribes procedures for complying
                with
                administrative subpoenas of financial
                records;





•
            Electronic
                Funds Transfer Act and Regulation E promulgated thereunder, which
                governs
                automatic deposits to and withdrawals from deposit accounts and customers’
                rights and liabilities arising from the use of automated teller machines
                and other electronic banking services;
                and





•
            Check
                Clearing for the 21stCentury Act (also known as “Check 21"), which gives “substitute
                checks,” such as digital check images and copies made from that image, the
                same legal standing as the original paper
                check.





**Federal
      and State Taxation**





**Federal
      Income Taxation**





***General*** **.**  We
      report
      our income on a fiscal year basis using the accrual method of accounting. The
      federal income tax laws apply to us in the same manner as to other corporations
      with some exceptions, including particularly our reserve for bad debts discussed
      below. The following discussion of tax matters is intended only as a summary
      and
      does not purport to be a comprehensive description of the tax rules applicable
      to us. Our federal income tax returns have been either audited or closed under
      the statute of limitations through tax year 2000. For its 2005 year, Naugatuck
      Valley Savings and Loan’s maximum federal income tax rate was 34%.





***Bad
      Debt Reserves*** **.** **** For
      fiscal years beginning before June 30, 1996, thrift institutions that
      qualified under certain definitional tests and other conditions of the Internal
      Revenue Code were permitted to use certain favorable provisions to calculate
      their deductions from taxable income for annual additions to their bad debt
      reserve. A reserve could be established for bad debts on qualifying real
      property loans, generally secured by interests in real property improved or
      to
      be improved, under the percentage of taxable income method or the experience
      method. The reserve for nonqualifying loans was computed using the experience
      method. Federal legislation enacted in 1996 repealed the reserve method of
      accounting for bad debts and the percentage of taxable income method for tax
      years beginning after 1995 and require savings institutions to recapture or
      take
      into income certain portions of their accumulated bad debt reserves.
      Approximately $1.4 million of our accumulated bad debt reserves would not be
      recaptured into taxable income unless Naugatuck Valley Savings and Loan makes
      a
“non-dividend distribution” to Naugatuck Valley Savings and Loan as described
      below.





***Distributions*** **.**  If
      Naugatuck Valley Savings and Loan makes “non-dividend distributions” to us, the
      distributions will be considered to have been made from Naugatuck Valley Savings
      and Loan’s unrecaptured tax bad debt reserves, including the balance of its
      reserves as of December 31, 1987, to the extent of the “non-dividend
      distributions,” and then from Naugatuck Valley Savings and Loan’s supplemental
      reserve for losses on loans, to the extent of those reserves, and an amount
      based on the amount distributed, but not more than the amount of those reserves,
      will be included in Naugatuck Valley Savings and Loan’s taxable income.
      Non-dividend distributions include distributions in excess of Naugatuck Valley
      Savings and Loan’s current and accumulated earnings and profits, as calculated
      for federal income tax purposes, distributions in redemption of stock, and
      distributions in partial
      or complete liquidation. Dividends paid out of Naugatuck Valley Savings and
      Loan’s current or accumulated earnings and profits will not be so included in
      Naugatuck Valley Savings and Loan’s taxable income. 
 The
        amount of additional taxable income triggered by a non-dividend is an amount
        that, when reduced by the tax attributable to the income, is equal to the
        amount
        of the distribution. Therefore, if Naugatuck Valley Savings and Loan makes
        a
        non-dividend distribution to us, approximately one and one-half times the
        amount
        of the distribution not in excess of the amount of the reserves would be
        includable in income for federal income tax


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purposes,
      assuming a 34% federal corporate income tax rate. Naugatuck Valley Savings
      and
      Loan does not intend to pay dividends that would result in a recapture of any
      portion of its bad debt reserves.





**State
      Taxation**





Naugatuck
      Valley Mutual, Naugatuck Valley Financial and its subsidiaries **** are
      subject to the Connecticut corporation business tax. Naugatuck Valley Mutual,
      Naugatuck Valley Financial and its subsidiaries will be eligible to file a
      combined Connecticut income tax return and will pay the larger of the regular
      corporation business tax (income tax) or a capital stock tax, but no less than
      a
      nominal minimum tax.





The
      Connecticut corporation business tax is based on the federal taxable income
      before net operating loss and special deductions of Naugatuck Valley Mutual,
      Naugatuck Valley Financial and its subsidiaries and makes certain modifications
      to federal taxable income to arrive at Connecticut taxable income. Connecticut
      taxable income is multiplied by the effective state tax rate **** (7.5%
      for
      2005) to arrive at Connecticut income tax.





In
      May 1998, the State of Connecticut enacted legislation permitting the
      formation of passive investment company subsidiaries by financial institutions.
      This legislation exempts qualifying passive investment companies from the
      Connecticut corporation business tax and excludes dividends paid from a passive
      investment company from the taxable income of the parent financial institution.
      Naugatuck Valley Savings and Loan’s formation of a passive investment company in
      September 1999 is expected to substantially eliminate the state income tax
      expense of Naugatuck Valley Mutual, Naugatuck Valley Financial and its
      subsidiaries. However, we will remain liable for the capital stock tax. The
      State of Connecticut continues to be under pressure to find new sources of
      revenue, and therefore could propose legislation to eliminate the passive
      investment company exemption. If such legislation were enacted, we would be
      subject to state income taxes in Connecticut.





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**Executive
      Officers of the Registrant**





The
      executive officers of Naugatuck Valley Financial, Naugatuck Valley Mutual
      Holding Company and Naugatuck Valley Savings are elected annually by the Board
      of Directors and serve at the Board’s discretion. The executive officers of
      Naugatuck Valley Financial, Naugatuck Valley Mutual Holding Company and
      Naugatuck Valley Savings are:




**Name**
              
              **Position**John
                  C. Roman
              
              President
                  and Chief Executive Officer of Naugatuck Valley Financial, Naugatuck
                  Valley Mutual and Naugatuck Valley Savings and LoanDominic
                  J. Alegi, Jr.
              
              Executive
                  Vice President of Naugatuck Valley Financial, Naugatuck Valley
                  Mutual and
                  Naugatuck Valley Savings and LoanJane
                  H. Walsh
              
              Senior
                  Vice President of Naugatuck Valley Financial, Naugatuck Valley
                  Mutual and
                  Naugatuck Valley Savings and LoanWilliam
                  C. Nimons
              
              Senior
                  Vice President of Naugatuck Valley Financial, Naugatuck Valley
                  Mutual and
                  Naugatuck Valley Savings and LoanMark
                  S. Graveline
              
              Senior
                  Vice President of Naugatuck Valley Financial and Naugatuck Valley
                  Mutual,
                  Senior Vice President and Chief Lending Officer of Naugatuck Valley
                  Savings and LoanLee
                  R. Schlesinger
              
              Vice
                  President and Treasurer of Naugatuck Valley Financial, Naugatuck
                  Valley
                  Mutual and Naugatuck Valley Savings and
                  Loan





Below
      is
      information regarding the executive officers who are not also directors. Unless
      otherwise stated, each executive officer has held his or her current position
      for at least the last five years. Ages presented are as of December 31,
      2005.





***Dominic
      J. Alegi, Jr*** .
      has
      served as Executive Vice President of Naugatuck Valley Financial and Naugatuck
      Valley Mutual since September 2004 and has been Executive Vice President of
      Naugatuck Valley Savings and Loan since 1989. Mr. Alegi has served with
      Naugatuck Valley Savings and Loan since 1970. Age 59.





***William
      C. Nimons*** has
      served as Senior Vice President of Naugatuck Valley Financial and Naugatuck
      Valley Mutual since September 2004 and has been Senior Vice President of
      Naugatuck Valley Savings and Loan since 2001. Mr. Nimons previously was the
      Manager-Network Management of Prudential Real Estate and Relocation, a real
      estate and relocation firm and was an Executive Vice President at Shelton
      Savings Bank. Age 59.





***Mark
      S. Graveline*** has
      served as Senior Vice President of Naugatuck Valley Financial and Naugatuck
      Valley Mutual and as Senior Vice President and Chief Lending Officer of
      Naugatuck Valley Savings and Loan since February 2005. Mr. Graveline previously
      was a Vice President of Banknorth-Connecticut and a Vice President of North
      American Bank and Trust. Age 49.




***Lee
      R. Schlesinger*** has
      served as Vice President and Treasurer of Naugatuck Valley Financial and
      Naugatuck Valley Mutual since September 2004 and has been Vice President and
      Treasurer of Naugatuck Valley Savings since August 2004. Mr. Schlesinger
      served as Vice President and Controller of Naugatuck Valley Savings and Loan
      from 2003 to 2004 and as Assistant Vice President and Controller of Naugatuck
      Valley Savings and Loan from 2000 to 2003. Mr. Schlesinger has served with
      Naugatuck Valley Savings and Loan since 1983. Age 45.





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**ITEM
      1A.****RISK
      FACTORS.**





**Rising
      interest rates may hurt our profits and asset value.**





Interest
      rates were recently at historically low levels. However, between June 30, 2004
      and December 31, 2005, the U.S. Federal Reserve has increased its target for
      the
      federal funds rate thirteen times to 4.25%. These increases have led to a
“flattening” of the yield curve where there is relatively little differential
      between short-term and long-term interest rates. If short-term interest rates
      continue to rise, causing the rates on our deposits and borrowings to reprice
      upwards faster than the rates on our loans and investments, we would experience
      continued compression of our interest rate spread and net interest margin,
      which
      would have a negative effect on our profitability.





**If
      we do not achieve profitability on new branches, the new branches may negatively
      impact our earnings.**





We
      opened
      a new branch in Seymour, Connecticut in January 2005. We also expect to open
      a
      new branch in Southbury, Connecticut in the third quarter of 2006. **** We
      intend to continue to pursue opportunities to pursue expansion of our branch
      network, as well as to upgrade our current branch facilities. We cannot assure
      you that our branch expansion strategy and our branch upgrading will be
      accretive to our earnings, or that it will be accretive to earnings within
      a
      reasonable period of time. Numerous factors contribute to the performance of
      a
      new branch, such as a suitable location, qualified personnel and an effective
      marketing strategy. Additionally, it takes time for a new branch to generate
      significant deposits and make sufficient loans to produce enough income to
      offset expenses, some of which, like salaries and occupancy expense, are
      relatively fixed costs. In addition to branch employees, we will hire lending
      and other employees to support our expanded infrastructure.





**Our
      increased emphasis on commercial and construction lending and the unseasoned
      nature of these loans may expose us to increased lending risks and could impact
      the level of our allowance for loan losses.**





Since
      December 31, 2001, our commercial real estate, commercial business and
      residential construction loan portfolio has increased $53.7 million, or 368.5%,
      and at December 31, 2005, $68.3 million, or 25.9%, **** of
      our
      loan portfolio consisted of these real estate, construction and commercial
      business loans. We intend to continue to emphasize these types of lending.
      These
      types of loans generally expose a lender to greater risk of non-payment and
      loss
      than one- to four-family residential mortgage loans because repayment of the
      loans often depends on the successful operation of the property, the income
      stream of the borrowers for commercial business loans and for construction
      loans, the accuracy of the estimate of the property’s value at completion of
      construction and the estimated cost of construction. These factors can be
      impacted by many variables including economic events beyond the borrowers’
control. Such loans typically involve larger loan balances to single borrowers
      or groups of related borrowers compared to one- to four-family residential
      mortgage loans. Also, many of our commercial and construction borrowers have
      more than one loan outstanding with us. Consequently, an adverse development
      with respect to one loan or one credit relationship can expose us to a
      significantly greater risk of loss compared to an adverse development with
      respect to a one- to four-family residential mortgage loan.





Because
      of our planned continued emphasis on commercial and construction lending and
      the
      unseasoned nature of many of these loans, we may determine it necessary to
      increase the level of our allowance for loan losses. We make various judgments
      about the collectibility of our loans, including the creditworthiness of our
      borrowers and the value of the real estate and other assets serving as
      collateral for our loans. In determining the amount of the allowance for loan
      losses, we review our loans and our loan loss and delinquency experience, and
      we
      evaluate economic conditions. However, as a result of our recent expansion,
      a
      significant portion of our commercial and construction loans are unseasoned,
      with the risk that these loans may not have had sufficient time to perform
      to
      properly indicate the potential magnitude of losses. If our judgments are
      incorrect, our allowance for loan losses may not be sufficient to cover future
      losses, which will result in additions to our allowance through increased
      provisions for loan losses. In addition, bank regulators periodically review
      our
      allowance for loan losses and may require us to increase our provision for
      loan
      losses or recognize further loan charge-offs. Increased provisions for loan
      losses would increase our expenses and reduce our profits. Finally, during
      our
      recent expansion, we have also experienced a historically low interest rate
      environment. Our unseasoned adjustable rate loans have not, therefore, been
      subject to a rising interest rate environment which could cause them to adjust
      to their maximum interest rate


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level.
      Such an increase could increase collection risks resulting from potentially
      higher payment obligations by the borrower.





**A
      decline in our return on equity as a result of the capital we raised in our
      2004
      stock offering may negatively impact our stock price.**





Return
      on
      equity, which equals net income divided by average equity, is a ratio used
      by
      many investors to compare the performance of a particular company with other
      companies. Our return on equity for the year ended December 31, 2005 was 3.66%.
      Over time, we intend to use the net proceeds from our 2004 stock offering to
      increase earnings per share and book value per share, without assuming undue
      risk, with the goal of achieving a return on equity that is competitive with
      other publicly held subsidiaries of mutual holding companies. This goal could
      take a number of years to achieve, and we cannot assure you that it will be
      attained. Consequently, you should not expect a competitive return on equity
      in
      the near future. Failure to achieve a competitive return on equity might make
      an
      investment in our common stock unattractive to some investors and might cause
      our common stock to trade at lower prices than comparable companies with higher
      returns on equity.





**Expenses
      from operating as a public company and from new stock-based benefit plans will
      continue to adversely affect our profitability.**





Our
      noninterest expenses are impacted as a result of the financial accounting,
      legal
      and various other additional expenses usually associated with operating as
      a
      public company. We also recognize additional annual employee compensation and
      benefit expenses stemming from the shares that are purchased or granted to
      employees and executives under new benefit plans. These additional expenses
      adversely affect our profitability. We recognize expenses for our employee
      stock
      ownership plan when shares are committed to be released to participants’
accounts and recognize expenses for restricted stock awards and stock options
      over the vesting period of awards made to recipients.





**Naugatuck
      Valley Mutual’s majority control of our common stock enables it to exercise
      voting control over most matters put to a vote of stockholders, including
      preventing sale or merger transactions you may like or a second-step conversion
      by Naugatuck Valley Mutual.**





Naugatuck
      Valley Mutual owns a majority of our common stock and, through its Board of
      Directors, is able to exercise voting control over most matters put to a vote
      of
      stockholders. The same directors and officers manage Naugatuck Valley Financial,
      Naugatuck Valley Savings and Naugatuck Valley Mutual. As a federally chartered
      mutual holding company, the Board of Directors of Naugatuck Valley Mutual must
      ensure that the interests of depositors of Naugatuck Valley Savings are
      represented and considered in matters put to a vote of stockholders of Naugatuck
      Valley Financial. Therefore, the votes cast by Naugatuck Valley Mutual may
      not
      be in your personal best interests as a stockholder. For example, Naugatuck
      Valley Mutual may exercise its voting control to defeat a stockholder nominee
      for election to the board of directors of Naugatuck Valley Financial. In
      addition, stockholders will not be able to force a merger or second-step
      conversion transaction without the consent of Naugatuck Valley Mutual. Some
      stockholders may desire a sale or merger transaction, since stockholders
      typically receive a premium for their shares, or a second-step conversion
      transaction, since fully converted institutions tend to trade at higher
      multiples than mutual holding companies.





**Office
      of Thrift Supervision policy on remutualization transactions could prohibit
      the
      merger or an acquisition of us, which may lower our stock
      price.**





Current
      Office of Thrift Supervision regulations permit a mutual holding company to
      be
      acquired by a mutual institution in a remutualization transaction. The
      possibility of a remutualization transaction has recently resulted in a degree
      of takeover speculation for mutual holding companies which is reflected in
      the
      stock prices of mutual holding companies. However, the Office of Thrift
      Supervision has issued a policy statement indicating that it views
      remutualization transactions as raising significant issues concerning disparate
      treatment of minority stockholders and mutual members of the target entity
      and
      as raising issues concerning the effect on the mutual members of the acquiring
      entity. Under certain circumstances, the Office of Thrift Supervision intends
      to
      give these issues special scrutiny and reject applications for the
      remutualization of a mutual holding company unless the applicant can clearly
      demonstrate that the Office of Thrift Supervision’s concerns are not warranted
      in the particular case. Should the Office of Thrift Supervision prohibit or
      otherwise restrict these transactions in the future, our stock


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 20


price
      may
      be adversely affected. We have no current plans to undertake a remutualization
      transaction. In addition, Office of Thrift Supervision regulations prohibit,
      for
      three years following the completion of a stock offering by a company such
      as
      Naugatuck Valley Financial, the acquisition of more than 10% of any class of
      equity security of the company without the prior approval of the Office of
      Thrift Supervision.





**Strong
      competition within our market area could hurt our profits and slow
      growth.**





Although
      we consider ourselves competitive in the Greater Naugatuck Valley, which we
      consider our market area, we face intense competition both in making loans
      and
      attracting deposits. Price competition for loans and deposits might result
      in us
      earning less on our loans and paying more on our deposits, which reduces net
      interest income. Some of the institutions with which we compete have
      substantially greater resources and lending limits than we have and may offer
      services that we do not provide. We expect competition to increase in the future
      as a result of legislative, regulatory and technological changes and the
      continuing trend of consolidation in the financial services industry. Our
      profitability depends upon our continued ability to compete successfully in
      our
      market area.





**We
      operate in a highly regulated environment and we may be adversely affected
      by
      changes in laws and regulations.**





We
      are
      subject to extensive government regulation, supervision and examination. Such
      regulation, supervision and examination govern the activities in which we may
      engage, and is intended primarily for the protection of the deposit insurance
      fund and our depositors. Regulatory authorities have extensive discretion in
      their supervisory and enforcement activities, including the imposition of
      restrictions on our operations, the classification of our assets and
      determination of the level of our allowance for loan losses. Any change in
      such
      regulation and oversight, whether in the form of regulatory policy, regulations,
      legislation or supervisory action, may have a material impact on our
      operations.





**ITEM
      1B.** **UNRESOLVED
      STAFF COMMENTS.**





None.





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 21


**ITEM
      2.** **PROPERTIES.**





We
      conduct our business through our main office and branch offices. The following
      table sets forth certain information relating to these facilities as of December
      31, 2005.





**Location**
            
            **Year**
              **Opened/**
              **Acquired**
            
            **Net
                Book Value at**
              **December
                31, 2005**
            
            **Square**
              **Footage**
            
            **Owned/**
              **Leased**
            
            **Date
                of**
              **Lease**
              **Expiration****(Dollars
                in thousands)****Main
                Office:**333
                Church Street
              Naugatuck,
                CT 06770
            
            1996
            
            $2,845
            
            23,000
            
            Owned
            
            —**Branches:**1009
                New Haven Road
              Naugatuck,
                CT 06770
            
            2001
            
            1,319
            
            3,300
            
            Owned
            
            —127
                South Main Street
              Beacon
                Falls, CT 06403
            
            1997
            
            201
            
            960
            
            Owned
            
            —49
                Pershing Drive
              Derby,
                CT 06418
            
            2003
            
            215
            
            1,950
            
            Leased
            
            2013
                (1)249
                West Street (2)
              Seymour,
                CT 06483
            
            2002
            
            2,280
            
            9,500
            
            Owned
            
            —504
                Bridgeport Avenue (3)
              Shelton,
                CT 06484
            
            2004
            
            599
            
            3,000
            
            Leased
            
            2020
                (4)**Other
                Properties:**1007
                New Haven Road
              Naugatuck,
                CT 06770
            
            1974
            
            35
            
            1,725
            
            Leased
            
            2014
                (5)135
                South Main Street (6)
              Beacon
                Falls, CT 06403
            
            2003
            
            147
            
            N/A
            
            Owned
            
            —15
                Quaker Farms Road (7)
              Southbury,
                CT 06488
            
            2004
            
            381
            
            N/A
            
            Owned
            
            —


_________________________


(1)
            We
                have an option to renew this lease for three additional five-year
                periods.


(2)
            This
                branch opened in January 2005. This branch occupies 3,500 square
                feet of
                this office along with 6,000 square feet of rentable space, none
                of which
                was rented as of this date.


(3)
            We
                relocated our previous Shelton branch to this location in July 2005.


(4)
            We
                have the option to renew this lease for five additional five-year
                periods.


(5)
            Former
                branch site. We have an option to renew this lease for two additional
                ten-year periods. This property has been leased to a subtenant under
                a
                lease that expires in 2006. The tenant has an option to renew this
                lease
                for one additional five-year
                period.


(6)
            This
                property is designated for future parking, additional access and
                possible
                future expansions of our Beacon Falls branch. Based on current estimates,
                we expect the total cost of this project to be approximately $36,000,
                $11,000 of which had been incurred at December 31,
                2005.


(7)
            We
                expect to open a branch at this location in the third quarter of
                2006.








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 22


**ITEM
      3.**   **LEGAL
      PROCEEDINGS.**





Periodically,
      there have been various claims and lawsuits against us, such as claims to
      enforce liens, condemnation proceedings on properties in which we hold security
      interests, claims involving the making and servicing of real property loans
      and
      other issues incident to our business. We are not a party to any pending legal
      proceedings that we believe would have a material adverse effect on our
      financial condition, results of operations or cash flows.




**ITEM
      4.**   **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS.**





None.


**PART
      II**





**ITEM
                5.**
            
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES.**





The
      information regarding the market for Naugatuck Valley Financial’s common equity
      and related stockholder matters is incorporated herein by reference to Naugatuck
      Valley Financial’s 2005 Annual Report to Stockholders at “Investor and Corporate
      Information.”





Naugatuck
      Valley Financial did not repurchase any of its common stock during the three
      months ended December 31, 2005.





**ITEM
                6.**
            
            **SELECTED
                FINANCIAL DATA.**





The
      information required by this item is incorporated herein by reference to the
      Section captioned “Selected Consolidated Financial Information” in the 2005
      Annual Report to Stockholders.





**ITEM
                7.**
            
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION.**





The
      information regarding management’s discussion and analysis of financial
      condition and results of operation is incorporated herein by reference to
      Naugatuck Valley Financial’s 2005 Annual Report to Stockholders at “Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.”





**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**





The
      information required by this item is incorporated herein by reference to the
      Section captioned “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations” in the 2005 Annual Report to
      Stockholders.





**ITEM
      8.**   **FINANCIAL
      STATEMENTS AND SUPPLEMENTAL DATA.**





The
      information regarding financial statements is incorporated herein by reference
      to Naugatuck Valley Financial’s 2005 Annual Report to Stockholders in the
      Consolidated Financial Statements and the Notes thereto.





**ITEM
                9.**
            
            **CHANGE
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE.**





Not
      applicable.





**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES.**





The
      Company’s management, including the Company’s principal executive officer and
      principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”). Based upon their evaluation, the principal executive officer
      and principal financial officer concluded that, as of the end of the period
      covered by this report, the Company’s disclosure controls and procedures were
      effective for


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 23


the
      purpose of ensuring that the information required to be disclosed in the reports
      that the Company files or submits under the Exchange Act with the Securities
      and
      Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and forms, and (2)
      is accumulated and communicated to the Company’s management, including its
      principal executive and principal financial officers, as appropriate to allow
      timely decisions regarding required disclosure.





**ITEM
      9B.**  **OTHER
      INFORMATION.**





Not
      applicable.





**PART
      III**





**ITEM
      10.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT.**





The
      information relating to the directors and officers of Naugatuck Valley Financial
      and information regarding compliance with Section 16(a) of the Exchange Act
      is
      incorporated herein by reference to Naugatuck Valley Financial’s Proxy Statement
      for the 2006 Annual Meeting of Stockholders and to Part I, Item 1, “Description
      of Business — Executive Officers of the Registrant.”





Naugatuck
      Valley Financial has adopted a Code of Ethics and Business Conduct. See the
      Exhibits to this Annual Report on Form 10-K.





**ITEM
      11.**  **EXECUTIVE
      COMPENSATION.**





The
      information regarding executive compensation is incorporated herein by reference
      to Naugatuck Valley Financial’s Proxy Statement for the 2006 Annual Meeting of
      Stockholders.





**ITEM
      12.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
      MATTERS.**





(a)  Security
      Ownership of Certain Beneficial Owners





Information
                required by this item is incorporated herein by reference to the
                section
                captioned “Stock Ownership” in Naugatuck Valley Financial’s Proxy
                Statement for the 2006 Annual Meeting of
                Stockholders.





(b)  Security
      Ownership of Management





Information
      required by this item is incorporated herein by reference to the section
      captioned “Stock Ownership” in Naugatuck Valley Financial’s Proxy Statement for
      the 2006 Annual Meeting of Stockholders.





(c)  Changes
      in Control





Management
      of Naugatuck Valley Financial knows of no arrangements, including any pledge
      by
      any person or securities of Naugatuck Valley Financial, the operation of which
      may at a subsequent date result in a change in control of the
      registrant.





(d)  Equity
      Compensation Plan Information





The
                following table sets forth information as of December 31, 2005 about
                Company common stock that may be issued under the Naugatuck Valley
                Financial Corporation 2005 Equity Incentive Plan. The plan was approved
                by
                the Company’s stockholders.




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 24




**PLAN
                  CATEGORY**
              
              **Number
                  of securities**
                **to
                  be issued upon**
                **the
                  exercise of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Weighted-average**
                **exercise
                  price of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Number
                  of securities**
                **remaining
                  available**
                **for
                  future issuance**
                **under
                  equity**
                **compensation
                  plans**
                **(excluding
                  securities**
                **reflected
                  in the first**
                **column)**Equity
                  compensation plans
                approved
                  by security holders
              
              352,430
              
              $11.10
              
              29,517Equity
                  compensation plans
                not
                  approved by security holders
              
              n/a
              
              n/a
              
              n/aTotal
              
              352,430
              
              $11.10
              
              29,517


**ITEM
      13.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.**





The
      information relating to certain relationships and related transactions is
      incorporated herein by reference to Naugatuck Valley Financial’s Proxy Statement
      for the 2006 Annual Meeting of Stockholders.





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND EXPENSES.**





The
      information relating to the principal accountant fees and expenses is
      incorporated herein by reference to Naugatuck Valley Financial’s Proxy Statement
      for the 2006 Annual Meeting of Stockholders.





**PART
      IV**





**ITEM
      15.**  **EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES.**





(1)
            The
                following are filed as a part of this report by means of incorporation
                to
                Naugatuck Valley Financial’s 2005 Annual Report to
                Stockholders:





●  Report
      of
      Independent Registered Public Accounting Firm





●
            Consolidated
                Statements of Financial Condition as of December 31, 2005 and
                2004





●
            Consolidated
                Statements of Income for the Years Ended December 31, 2005, 2004
                and
                2003





●
            Consolidated
                Statements of Changes in Capital Accounts for the Years Ended December
                31,
                2005, 2004 and 2003





●
            Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2005, 2004
                and
                2003





●
            Notes
                to Consolidated Financial
                Statements





(2)
            All
                financial statement schedules are omitted because they are not required
                or
                applicable, or the required information is shown in the consolidated
                financial statements or the notes
                thereto.





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 25


(3)  Exhibits




Exhibit No.  Description





3.1
            Charter
                of Naugatuck Valley Financial Corporation
                (1)


3.2
            Bylaws
                of Naugatuck Valley Financial Corporation
                (1)


4.0
            Specimen
                Stock Certificate of Naugatuck Valley Financial Corporation
                (2)


10.1
            Naugatuck
                Valley Financial Corporation and Naugatuck Valley Savings and Loan
                Employment Agreement with John C. Roman
                (1)*


10.2
            Naugatuck
                Valley Savings and Loan Change in Control Agreement with Jane H.
                Walsh
                (1)*


10.3
            Naugatuck
                Valley Savings and Loan Change in Control Agreement with Dominic
                J. Alegi,
                Jr. (4)*


10.4
            Naugatuck
                Valley Savings and Loan Directors’ Retirement Plan
                (2)*


10.5
            Form
                of Naugatuck Valley Savings and Loan Employee Severance Compensation
                Plan
                (2)*


10.6
            Naugatuck
                Valley Savings and Loan Death Benefit Agreement with John C.
                Roman,


as
                amended (4)*


10.7
            Naugatuck
                Valley Savings and Loan Death Benefit Agreement with Dominic J. Alegi,
                Jr.
                (2)*


10.8
            Naugatuck
                Valley Financial Corporation 2005 Equity Incentive Plan
                (3)*


10.9
            Naugatuck
                Valley Savings and Loan Change in Control Agreement with William
                C.
                Nimons*


13.0
            Annual
                Report to Stockholders


14.0
            Code
                of Ethics and Business Conduct (4)


21.0
            List
                of Subsidiaries (4)


23.0
            Consent
                of Whittlesey & Hadley, P.C.


31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive
                Officer


31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial
                Officer


32.0
            Section
                1350 Certification of Chief Executive Officer and Chief Financial
Officer




______________________________


*Management
      contract or compensation plan arrangement


(1)
            Incorporated
                by reference to the Company’s Form 10-Q for the three months ended
                September 30, 2004.


(2)
            Incorporated
                by reference to the Company’s Registration Statement on Form S-1, as
                amended, initially filed on June 18,
                2004.


(3)
            Incorporated
                by reference to Appendix C to the Proxy Statement for the 2005 Annual
                Meeting of Stockholders filed on April 1,
                2005.


(4)
            Incorporated
                by reference to the Company’s Form 10-K for the fiscal year ended December
                31, 2004.







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 26





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





NAUGATUCK
                VALLEY FINANCIAL CORPORATIONDate:
                March 28, 2006
            By:/s/
                John C. RomanJohn
                C.
                RomanPresident
                and
                Chief Executive Officer








Pursuant
      to the requirements of the Exchange Act, this report has been signed below
      by
      the following persons on behalf of the Registrant and in the capacities and
      on
      the dates indicated.





Name
            
            Title
            
            Date/s/
                John C. Roman
            
            President,
                Chief Executive Officer
            
            March
                28, 2006John
                C. Roman
            
            and Director(principal
                executive officer)/s/
                Lee R. Schlesinger
            
            Vice
                President and Treasurer
            
            March
                28, 2006Lee
                R. Schlesinger
            
            (principal
                accounting andfinancial officer)/s/
                Ronald D. Lengyel
            
            Director
            
            March
                28, 2006Ronald
                D. Lengyel/s/
                Carlos S. Batista
            
            Director
            
            March
                28, 2006Carlos
                S. Batista/s/
                Richard M. Famiglietti
            
            Director
            
            March
                28, 2006Richard
                M. Famiglietti/s/
                James A. Mengacci
            
            Director
            
            March
                28, 2006James
                A. Mengacci/s/
                Michael S. Plude
            
            Director
            
            March
                28, 2006Michael
                S. Plude/s/
                Camilo P. Vieira
            
            Director
            
            March
                28, 2006Camilo
                P. Vieira/s/
                Jane H. Walsh
            
            Director
            
            March
                28, 2006Jane
                H. Walsh




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